Gabriel Resources hits another snag at Rosia Montana

The Romanian government has suspended its environmental impact assessment review of Gabriel Resources (GBU-T) gold mine project at Rosia Montana, after two NGOs launched a court challenge to the process.

Alburnus Maior, an NGO based in Rosia Montana founded by local property owners opposed to the project, and the Open Society Institute, backed by billionaire philanthropist George Soros, are challenging the validity of an urbanism certificate used in the EIA documentation.

The certificate is required to obtain a construction permit.

Gabriel Resources says the certificate is merely an information document listing all the documents needed to apply for the construction permit.

Anyone is entitled to ask for an urbanism certificate and the relevant local council is obligated to provide a copy to anyone who asks, Gabriel Resources states in a press release. It is not a permit or approval and does not authorize the undertaking of any activities.

The new court challenge will further delay the Canadian companys ten-year battle to develop its 80%-owned gold mine property in Rosia Montana a rural Transylvanian town.

Gabriel Resources says the mine would pump more than $2 billion into the countrys economy and provide hundreds of much-needed jobs.

But protestors have long challenged the project on environmental and historical grounds. Opposition to the gold mine has also erupted in neighbouring Hungary, which has criticized the projects plan to use cyanide. (Transylvania used to be part of Hungary.)

Gabriel Resources had hoped to receive EIA approval this summer. But it says the timetable will have to be pushed back by three months. Now it hopes to have construction permits and all other approvals in place by the first quarter of 2008, with the first pour of gold in the first quarter of 2010.

Its been a long process. Gabriel Resources submitted its 5,000-page, ten-chapter EIA study in May 2006.

Alan Hill, president and chief executive of Gabriel Resources, was travelling in Romania and unavailable for comment.

Controversy over the Rosia Montana project has heated up over the last year with the release of two new documentary films.

In Mine Your Own Business, Irish filmaker and former Financial Times journalist Phelim McAleer, interviews villagers near the Rosia Montana project site who say the mine will bring renewed prosperity to their economically depressed village and clean up the environmental mess left over from hundreds of years of previous mining projects.

In another film, Gold Futures, aired on PBS in late August, Hungarian filmaker Tibor Kocsis interviews villagers who appear divided over the benefits of the proposed project.

Mine Your Own Business received most of its funding from Gabriel Resources, while Gold Futures, according to WSJ.com, listed as its partners Greenpeace, the Hungarian Ministry of Environment, and the George Soros-backed Energy Club of Hungary. (Soros was born in Budapest, Hungary.)

Gabriel Resources estimates the cost of developing the Rosia Montana project including capital, interest, financing and corporate costs — will be in the order of about US$750 million. The company says it will finance the cost with about 20% equity and 80% debt.

Headquartered in Toronto, Gabriel Resources posted a $6.0 million loss in its second quarter. More than half of that figure was due to unrealized foreign exchange losses on U.S. dollar cash balances held to finance future U.S. dollar development activities.

On the TSX in Toronto, news of the court challenge sent shares of Gabriel Resources down 21.35%, or 0.76 a share, to $2.80 on a trading volume of 8.3 million shares.