Vancouver — “Overlooked,” “under-explored,” and “under-estimated” are words often used to describe the Carpathian Arc, a prospective belt of rocks in Eastern Europe that some have likened to the Pacific Rim’s famous “Ring of Fire.”
The region has a rich mining heritage yet hasn’t always reaped the economic benefits other jurisdictions expect from resource development. This could change if several companies succeed in their efforts to find and build modern, large-scale mines capable of ushering in a new era of prosperity.
A mining renaissance hasn’t happened yet, but experts say potential for one clearly exists within the belt of Tertiary-age volcanics stretching from southern Poland through the Slovak Republic, Hungary, Romania, Bulgaria, parts of the Ukraine and former Yugoslavia, and into Turkey.
“We think the whole of the Carpathian Arc is enormously prospective, particularly for epithermal gold,” says mining consultant Brian Felske of Toronto-based LMD Financial Services.
Having evaluated the belt’s potential for various clients, Felske notes the increased presence of major mining companies, even in areas with geopolitical risk, such as Serbia. Yet despite the lure of good geology, the number of foreign companies working in the Carpathian Arc is small, relative to prospective belts elsewhere in the world.
One problem, according to Damien Reynolds, president of
Other factors are the region’s turbulent history, which poses a variety of social, political and environmental challenges for foreign companies, and the slower-than-expected pace of market reforms.
Patrick Mars, director of
Another important development, Mars says, is that European government officials are now endorsing a controversial Romanian project poised to become the largest gold producer in Europe.
That’s good news for Toronto-based
On the technical front, Rosia Montana is a solid success. Measured and indicated resources stand at 352 million tonnes grading 1.3 grams gold and 4 grams silver per tonne — equivalent to 14.6 million oz. gold and 67.3 million oz. silver — plus 48 million tonnes grading 1 gram gold and 4 grams silver in the inferred category.
The first phase of the proposed open-pit operation would cost US$437 million to build. Mining at an annual rate of 13.3 million tonnes would produce an average of 533,000 oz. gold yearly, at a total production cost of US$221 per oz., for at least 16.4 years.
Rosia Montana seems an economic godsend for Romania, which badly needs foreign capital and expertise to help its decade-long struggle from a planned to a market economy. Initial expectations were that the mine would be approved quickly so as to provide badly needed jobs and capital investment. Instead, Gabriel faced opposition from various parties opposed to the project, and to mining in general. History also reared its head, and with it came nationalist fears that the mine would benefit a few foreigners, as had been the case for many centuries since the Romans invaded the region in 106 A.D.
Like many other districts in neighbouring nations, Rosia Montana had once been the site of a large mining complex controlled and exploited by the Romans. Next, kings and conquerors came and went, and rarely empty-handed. More recently, state planners with marching orders from Moscow exploited resources more for the benefit of the Communist Party than for local people. As a result, some Eastern Europeans (particularly urban dwellers) view mining with ambivalence, which is not surprising given that they were taught to view foreign capitalists with suspicion.
Changing hearts and minds takes time, money and patience. The good news is Gabriel seems to be delivering on all fronts, particularly since Oyvind Hushovd (formerly president of Falconbridge) came aboard as chairman and chief executive officer. The company also strengthened its management team on the ground in Romania.
The company’s credibility was further enhanced late last year when
The challenges remaining at Rosia Montana are largely social and environmental. The company must acquire surface rights for the mine and related facilities, which means buying farms and other properties from local villagers. Almost 40% of the properties have been acquired to date. Unemployment is high in the region, and so the relocation and resettlement offer is expected to be accepted, eventually.
Environmental permitting is also progressing, albeit slowly. Late last year, Gabriel initiated the environmental permitting process by submitting the project presentation report (PPR) for the proposed mine to government authorities. The government will now determine whether or not an environmental impact assessment (EIA) is required. Gabriel expects that an EIA will indeed be necessary, and is preparing for the process, which involves public consultation with local communities.
Opposition groups, meanwhile, are preparing to block the project by means fair and foul. Some critics claim the mine will destroy the region’s heritage. Others cite the Baia Mare tailings-dam spill of 2000 as proof of the dangers inherent in mining. One group warns citizens that mining involves “blasting and pulverizing the landscape” and then exposing the rubble to “hazardous cyanide compounds” to extract the invisible gold and silver. “The scenery would be devastated, hills transformed into massive craters in a toxic, sterile desert.”
Most of this is propaganda, not science (though that’s not clear to people who know nothing about mining), and yet the claims are taken to heart by a sympathetic media and concerned citizens. Gabriel counters that its modern mine will be “the driving force behind Romania’s transition to modern mining,” and that its environmental practices will meet the highest standards.
The company’s efforts received a major boost recently when the Parliamentary Assembly of the Council of Europe scolded groups for opposing a mine desperately needed in the region.
The council’s report refuted the notion that the mine would threaten the cultural heritage of the region. On the contrary, the authors suggested that the project “would appear to provide an economic basis for sustainable development of the whole area, with positive benefits on environmental and social, as well as cultural, grounds. From the point of view of cultural heritage, it might be seen as an exemplary project of responsible development.”
While the authors described opposition to the project as substantial, they noted it is mostly fueled by outside bodies, “presumably well-meaning, but possibly counter-productive.”
The report backed Gabriel’s position that the mine would help clean up pollution caused in the past, notably by state-owned companies during the communist era. And contrary to claims by
opposition groups that support for the project is marginal, the authors found that 75% of local residents favour development of Rosia Montana. The report concluded that failure to approve the project would “remove any chance of local development for quite some time.”
While a few state-owned mines still operate in Romania, most are inefficient, unprofitable and unsafe. The Council of Europe’s report is a wake-up call that all sides must heed if mining in Romania is to last beyond the past 2,000 years.
Gabriel’s success at Rosia Montana has lured other juniors to Romania’s historic mining camps, particularly the Golden Quadrilateral. Among them is London-based
is the company’s 80%-owned Certej project, now at the prefeasibility stage.
At last report, Certej hosted an indicated resource of 34.7 million tonnes grading 2.1 grams gold and 10 grams silver, or about 2.5 million oz. gold-equivalent. Recent drilling has shown potential to expand the open pit being evaluated in the prefeasibility study (due for completion in the second quarter).
Early this year, the company secured an exploration permit for the Cainel Perimeter property. Situated 10 km northwest of Certej, it was first worked in the mid-1800s, but only at depth, with the top 200 metres still preserved. Gold was recovered by simple gravity methods. State-owned companies explored the vein systems between 1958 and the late 1970s, and reported the average grade as being between 3.4 and 3.9 grams gold (based on gravimetric assays only).
The mineralized systems are believed to occur over a strike length of 1,000 metres and a discontinuous width of 250 metres. The company notes that previous operators never tested the extensive wall-rock alteration and brecciation around the veining. Grab sampling has returned encouraging values, and more work is planned. Gold values were also obtained from sampling of waste dumps and tailings.
The company plans to carry out drilling, trenching, and channel sampling of outcrop and underground workings this year.
Carpathian Gold (formerly Ore-Leave Capital) has several active exploration projects in Romania, as well as in neighbouring Hungary. Chief among these is the Oravita exploration licence, in southwestern Romania, between the Golden Quadrilateral region and the porphyry copper-gold complexes of neighbouring Serbia.
The Oravita licence covers two large gold and gold-copper prospects and is believed to be prospective for large, porphyry-related, sediment-hosted gold deposits.
Carpathian’s other active project is the advanced Baia Mare joint venture, in northern Romania. The project area covers a 30-km-long belt of historic, epithermal gold and base metal deposits (but does not include the Baia Mare tailings).
Mars says the company has already outlined resources that could provide feed to a nearby central mill operated by state-owned mining companies. “The base-metal mines in the region are operating at a loss, and the central mill badly needs feed, so we think there’s potential for a profitable, low-cost operation.”
Australian-listed
Eurogold also holds exploration ground in Romania, obtained through its predecessor company, Esmeralda Exploration. Eurogold also bears the burden of Esmeralda’s involvement in the Baia Mare tailings spill of 2000, which galvanized many groups opposed to mining in Europe.
The project, then held equally by Esmeralda and a state-owned mining company, garnered international attention when a break in a dam encircling a tailings pond triggered a spill of liquid and suspended waste containing cyanide, copper, and other heavy metals.
The break was blamed on design defects, unexpected operating conditions, and unusually heavy rains and rapidly melting snows. Subsequent investigations found that reports of vast fish kills and environmental destruction in Romania, and into neighbouring nations, were often exaggerated, and in some cases may not have been caused by the spill.
A report by an environmental agency of the United Nations found that many parts of the affected region had been severely damaged before the spill by decades of chronic pollution. “The region has many poorly maintained and operated industrial plants and ponds containing cyanide and/or heavy metals, many of which are leaking continuously,” the report states. “Chronic pollution from sewage and agriculture is also high. Pollution of surface water, groundwater and soils is thus likely to re-occur.”
Even though experts maintain that the heavy rains and snowmelts unleashed a chain reaction of environmental devastation, environmental activists are not convinced mining is not solely to blame. Groups have vowed to continue their battle to “stop Western companies from using Central and Eastern Europe as their dumping ground for hazardous technologies.”
Eurogold also inherited legal claims brought against Esmeralda. The company says some claims have been settled, while others are no longer being “vigorously pursued.” The situation is legally complex because at the time of the incident, the state-owned company and Esmeralda were operating in line with government permits (subsequently described by investigators as “inadequate”), and because chronic pollution in the region pre-dates the spill and Esmeralda’s involvement.
Bulgaria
Like Romania, Bulgaria has a mining history which dates back many thousands of years, and yet the country remains under-explored. Companies working there have found that state archives are a treasure trove of geological information useful today for finding gold and base metals.
The highest-profile, western-operated project in Bulgaria is run by
Gabriela Sanchez, vice-president of investor relations, says local support is strong, as Chelopech is situated in a district with other producing mines. “People are used to mining, and want to see it continue.”
Recently delineation drilling underground has confirmed sufficient resources to extend and expand the life of the Chelopech mine. Combined measured and indicated resources stand at 24.9 million tonnes at 4.0 grams gold per tonne and 1.5% copper, or containing 3.2 million oz. gold and 374,000 tonnes copper.
The company intends to develop a long-term mining plan and a feasibility study for a second-phase expansion. The goal is to ensure that existing resources will support a bulk-mining operation based on a targeted rate of 1.5 million tonnes annually.
Dundee is the largest landholder in Bulgaria. In addition to work at Chelopech, the company is advancing the Ada Tepe gold deposit in southern Bulgaria (part of the Krumovgrad project) and exploring other properties.
Ada Tepe is situated in a poor region without any mines, so the use of cyanide became an issue. To counter that, Dundee launched outreach programs to keep local authorities and communities informed of its progress, and to address concerns raised by environmental groups. The company even took a group to see a modern, producing gold mine in Spain, which assured residents mining could co-exist with agriculture and other human activities.
“These programs made a difference,” says Sanchez. “People were able to put a face to the company and, before long, concerns changed from cyanide to more manageable issues that we’re working to address.”
The Europea
n Bank for Reconstruction and Development (EBRD) has backed Dundee’s efforts, and says the company’s involvement will help strengthen badly needed foreign investment in Bulgaria, “and in the Balkans as a whole.”
The EBRD adds that the Chelopech project will promote the industry’s restructuring “by introducing the highest efficiency and environmental standards currently available through the upgrading of the existing mine, mill and tailings-dam facilities.”
London-based
Slovak Republic
The investment climate in both the Czech and Slovak Republics is highly favourable, though not always favourable to mining. The privatization efforts of the Czech government in the early 1990s have not been forgotten by the companies that won tenders for projects that were subsequently stalled by “permitting problems.”
The Slovak Republic is perceived as more mining-friendly, and companies such as Tournigan Gold are advancing properties toward production.
Tournigan is seeking to revive the Kremnica gold mine, 190 km from Vienna, Austria. The Vancouver-based junior recently inked a deal to acquire the mine from
Mining began in the 14th century and continued through to 1971, with more than 1.5 million oz. of production recorded over the centuries. Historical recoveries were low (estimated average: 30%), which suggests the deposit originally hosted almost 6 million oz gold.
Kremnica is a low-sulphidation, epithermal gold system. Historical production was from glory holes, as well as from underground development of an extensive quartz-vein system focused on an area now known as Sturec.
Sturec was mined to a depth of 300 metres to such an extent that a substantial surface collapse redistributed low-grade mineralized material back into the mine voids. As a result, mineralization now consists of veins, quartz stockwork, and hydrothermal breccias.
During the communist era, the state carried out drilling and underground development to outline sufficient resources for an open-pit operation. Insufficient resources and the collapse of communism stalled these efforts, and Kremnica was eventually privatized.
After acquiring the project, Argosy drilled 79 holes totalling 12,300 metres to boost and upgrade resources and identify new targets. The company also compiled and evaluated historical data to increase the technical and geologic precision of the project.
At an 0.5-gram cutoff grade, total resources at Kremnica stand at 22.2 million tonnes grading 1.54 grams gold and 12.5 grams silver per tonne, or 1.2 million oz. gold-equivalent. At a 1-gram cutoff, resources total 15.6 million tonnes at 1.91 grams gold and 15 grams silver.
Hungary
Hungary covers part of the Carpathian Arc and is considered prospective for gold and gold-copper deposits. Although the government has welcomed foreign investment in most sectors of the economy, it has not shown much interest in revitalizing its languishing mining industry. On the contrary, Hungary has even opposed mining developments in Romania, including the Rosia Montana gold project. The government also has an outstanding lawsuit relating to alleged environmental damage caused by the Baia Mare tailings spill.
Among the few pioneering junior companies active in Hungary is Carpathian, which holds several exploration properties in the nation’s historic mining districts.
Gold-bearing veins exploited since medieval times are the main target at properties in the Tokaj Mountains. The company also has ground in the Matra Mountains of north-central Hungary. This region hosts the state-owned Recsk porphyry copper-gold deposit (770 million tonnes grading 0.65% copper). Recsk also has skarn mineralization, and is overlain by epithermal gold deposits.
Serbia
More and more mining companies are interested in Serbia, part of the former Yugoslavia, the main attraction being gold and copper in districts with geology similar to that of Romania.
“There could be a land rush there, if the government sends the right signals,” says mining consultant Brian Felske. “It needs to open up the concession system so that it’s transparent, and security of tenure is protected.”
The government of Serbia is revising its mining code and concession system, and being advised by Western agencies and governments to help streamline the process.
Several companies have already signed agreements to explore and develop existing projects in the region, while others are kicking rocks known to be prospective for various deposit types, including high-sulphidation epithermal gold, porphyry and skarn copper-gold, and disseminated, sediment-hosted gold.
Like its neighbours to the north, Serbia’s mining industry dates back to Roman and Celtic times. Coal is the main commodity mined today, though the favoured exploration destinations are regions that historically have been mined for gold and copper. One important mining region is the Bor district, which consists of 29 deposits that have produced more than 100 million tonnes of copper at grades of 1-2%, and 5.1 million oz. gold at an average grade of 3.2 grams, plus quantities of molybdenum, platinum and palladium.
Felske says several major mining companies have opened offices and are evaluating the potential of various regions. Juniors are present too, including
Hereward Ventures also has several exploration permits in Serbia, including one covering the prospective Timok copper-gold district, which hosts several past-producing mines. Exploration efforts are aimed at finding large, porphyry copper-gold systems similar to the nearby Bor mining operations. Work to date has identified several prospective areas that will be tested in ongoing programs.
Ukraine
Parts of the Ukraine are prospective for mineral deposits (other than coal, which dominates the mining sector), but the investment climate is bleak at best. Instead of attracting foreign investment, the nation has done much to deter it through a privatization process that was badly bungled and notoriously corrupt.
The democratic uprising that swept reformer Victor Yushchenko to power earlier this year has revived hopes that the nation will take steps to reduce corruption and embrace laws and policies to attract much-needed foreign investment. Others caution that Yushchenko and political partner Yulia Timoshenko are nationalists who may not continue privatization efforts launched by the previous administration.
Indeed, the new government recently served notice that it will be “getting to the bottom of mining companies” that acquired strategic assets either illegally or at rock-bottom prices. The threat of re-privatization is also a warning shot fired at Russian oligarchs, who benefited from their cozy relationships with the previous regime.
When, and if, a legal framework is in place to provide security of tenure, Ukraine’s geological potential is certain to attract the interest of foreign mining companies. One of the more famous deposits in western Ukraine is Beregovo, which has a reserves of 300 million tonnes grading 1.5 grams gold and 15 grams silver per tonne, plus 1.5% lead and 2.1% zinc. Similar deposits are found in neighbouring Hungary, in central Slovakia, and in Romania’s Baia Mare and Apuseni districts.
Eurogold is one of the few junior
s to have secured a foothold in the Ukraine. The company has a 75% interest in the Saulyak gold project, 60 km from its Baia Mare plant in Romania. The deposit has a resource of 2.1 million tonnes grading 8.4 grams gold per tonne, and has been developed with more than 9 km of underground workings. Initial metallurgical tests have shown that recoveries of more than 90% can be achieved if ores are processed at the existing plant at Baia Mare.
Turkey a ‘trail-blazer’
The Carpathian Arc extends into northern Turkey, which is enjoying a modest mining renaissance, albeit one that did not come easily, or without a major investment of time, money and energy.
The Ovacik gold mine, in a historic mining district of western Turkey, is a case in point. The modern mine poured its first gold in the spring of 2001, after a decade of exploration, permitting and construction by Normandy Mining (now owned by Newmont Mining). Newmont subsequently tried to sell the mine to a junior company, but the proposed sale was deferred, subject to various governmental, legal and regulatory approvals. The mine was closed in the summer of 2004 (and remains closed), based on a court decision that ordered additional permitting requirements, including an updated environmental impact assessment. Newmont expects the operating permits to be re-instated eventually.
Despite this and other bumps on the road, major companies continue to show interest in Turkey’s mineral potential. On the operations front, Toronto-based
Vancouver-based
Another company with a large presence in Turkey is
Meanwhile, gold-mining giant
Barrick will spend $2 million on exploration over four years, and has rights to earn half-interests in “designated projects” by spending a further US$5 million. The first project to be defined as a “designated project” is the Sisorta project, a high-sulphidation, volcanic-hosted gold system on the arid side of the Pontide Mountains in north-central Turkey.
Leap of faith
Eastern Europe has obvious potential for new, modern mines, though exploring and developing them is not for the faint of heart. Many projects have significant environmental liabilities — a fact not lost on Europe’s powerful ‘green’ parties, mindful of the many coal, uranium and copper projects that operated with minimal environmental safeguards from the 1950s through to the late 1990s.
That communist legacy of environmental and social neglect could haunt Eastern Europe for years to come, and even stall industrial development across a range of industries, if fear is allowed to triumph over hope in this star-crossed, resource-rich region.
A mining renaissance may still happen, but only if progressive mining companies are given the opportunity to demonstrate that resource extraction can be carried out in an environmentally and socially responsible manner. That will require a leap a faith on the part of some local citizens and authorities — one that may even propel them to a long-awaited era of prosperity.
— The author is a freelance reporter and script writer based in Vancouver, and a former editor of The Northern Miner.
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