Gabriel pushes forward at Rosia Montana gold project

Gabriel Resources (TSX: GBU) is intent on proving the naysayers wrong and the latest word out of Romania indicates it may well be on its way to doing just that.

Despite holding one of the world’s top notch gold assets, Rosia Montana in Romania, the company has been stifled for almost a decade in its development as environmentalist from around the world have waged a consistent battle against the mine — much of the time with rhetoric that was far removed from reality.

It appears the Romanian Government is on its way to elevating itself above such rabble and get behind the responsible development of a project that would help the country’s economy and the environment in the historic mining district that Rosia Montana is situated in.

With the approval of a draft legislation on the development of Rosia Montana, all that is left is for Romanian Parliament to give its approval and Gabriel can at last begin development in earnest.

The Parliament begins its next session on September 2 and it will, no doubt, be a rousing debate over the legislation, as the project has touched many nerves in the country over the years.

Should it get approved, it will set the framework to accelerate the development of Europe’s largest gold mine at long last.

The key details of the legislation, as currently configured, include the government getting both a larger share of the project and a higher royalty.

On the equity interest side, Gabriel would transfer an additional 5.69% of its share in the joint venture (JV) that controls the project to the Romanian state. The state is currently a minority shareholder in the project and the additional transfer would result in the project being held 75% by Gabriel and 25% by the state.

As for the mining royalty it would increase to 6% of revenues from the current level of 4% and the state would have the option of taking payment in the form of gold bullion.

BMO Capital Markets analyst, John Hayes, estimated the impact of those changes in a research note.

“At current gold prices BMO Research analysis suggests the impact from changes of this scale could reduce our 10% net asset value (NAV) estimates by about 6%,” he wrote before going on to say that the company’s shares currently trade at a 40% discount to BMO’s 10% NAV estimate of US$2.68 per share.

In Toronto on August 28th the company’s shares were off 2%, or 3¢, to $1.67 on 3.16 million shares traded.

BMO has Gabriel rated as “underperform” but called the latest news “potentially positive”.

The legislation also touched upon some other key aspects of the development.

It outlines how both Gabriel and the JV will preserve cultural heritage, ensure environmental protection and eliminate historical pollution, and it will declare the project as being one of public utility and overriding national public interest — language that should elevate the status of the project in the eyes of many Romanians.

With the project set to create 2,300 jobs in the construction phase, 900 in the operational phase and delivering considerable cash flows into the government coffers, it’s expected to garner broad support.

The drafting of the law was foreshadowed in July of this year when the project was included in the National Plan for Strategic Investment and Job Creation.

Gabriel also said the draft considers a “significant” extension to the mining licence, and other long-term legal and fiscal conditions that it wants to see in place.

The last key aspect to the legislation is the road map it lays out for achieving production.

“Importantly, the draft law seeks to provide clarity to the permitting process by putting in place a schedule of the permitting milestones that would see gold production begin in November 2016,” Hayes wrote in his report.

Rosia Montana has measured and indicated resources of 512.7 million tonnes grading 1.04 grams gold and 5 grams silver for 17.14 million oz. of contained gold and 81.12 million oz. of silver.

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