Gabriel on trail of Transylvanian treasure

A junior company holding a land package with 15 known mineral deposits, three working mines and several dumps is bound to attract attention. Mike Jones of T. Hoare Canaccord is one of a growing number of mining analysts keeping a close eye on Gabriel Resources (GBU-V), a junior company holding ground covering all the known mineral deposits in Romania’s Golden Quadrilateral.

First worked by the ancient Romans, this historic mining district was Europe’s most important gold producer for much of the past 2,000 years, with estimated production of 40 million ounces. Gabriel holds six project areas — four exploitation licenses and two exploration licenses — in the Transylvanian mountains, north of the regional capital of Deva.

The land package covers several large-scale epithermal and mesothermal mineralized systems, several porphyry-related gold-silver and gold-copper deposits, as well as associated lead and zinc mineralization. (The working mines are operated by state-owned mining companies using outdated methods and inefficient technologies and are, at present, money-losing propositions.)

Gabriel’s most advanced project is Rosia Montana, which hosts a measured, indicated and inferred resource of 113 million tonnes grading 1.9 grams gold and 10 grams silver per tonne in three zones.

The earlier-stage Certej project hosts a gold resource of 45.6 million tonnes grading 1.9 grams gold and 14 grams silver, or 2.7 million oz. gold and 21.1 million oz. silver.

Jones issues a “speculative buy” recommendation for Gabriel, with the expectation that ongoing work will add to the current 10.4 million contained ounces under management at these two projects.

“The Rosia Montana project resource, which is calculated only down to the valley floor, and only in two of four broad mineralized areas, is still likely to grow, as the resource is only constrained by a paucity of data,” he notes in his research report. “We expect that the resource at Rosia Montana will eventually exceed 10 million oz., making it an attractive asset in a favourable political and logistical environment.”

Gabriel currently trades at $1.75 within a 52-week range of 35 to $1.95. It has 51.8 million shares outstanding (70.7 million fully diluted) and no long-term debt.

A prefeasibility study of Rosia Montana is nearing completion, with work focused on the Cetate and Cirnic zones. The current resource is based on 85 drill holes totalling 14,646 metres, as well as 28 km of underground channel sampling on 22 levels. It was compiled by Resources Services Group of Australia.

Once the prefeasibility is submitted, Gabriel will be able to increase its interest to 80% from its current 65% stake. The remainder is held by a state-owned mining company, with Gabriel maintaining a pre-emptive right on this interest.

Although much work remains to be done before final mining plans can be completed, Rosia Montana is expected to produce about 490,000 oz. gold annually from a large open pit at cash costs of about U$150 per oz. (net of silver). Capital costs for a mine of this scale are estimated at US$180 million.

Jones cautions that there are still “some concerns to be sorted out,” including the relocation of dwellings likely to be affected by mining and agreements ensuring state liability for past environmental damage.

On a positive note, the government is encouraging development of the projects and has allowed significant tax advantages, including a 10-year tax holiday. “Romania’s pursuit of membership to the EU and NATO should mitigate strongly against any possible reneging on the agreements so far made,” Jones notes.

Numerous majors have visited Gabriel’s Romanian properties, and analysts expect that Rosia Montana will eventually be acquired by an ounce-hungry producer, freeing Gabriel to focus on its remaining assets.

Among these is Certej, which covers numerous deposits, including both vein-hosted and disseminated deposits associated with andesetic intrusions. The gold and base metal deposits cover a 12-km strike distance. The existing resource (2.7 million oz. gold) is in the Coranda deposit. Numerous other targets have yet to be tested.

Gabriel’s other projects in Romania include Zlatna (epithermal gold deposits and copper-gold porphyry), Bolcana (porphyry copper-gold with an associated vein swarm) and Baita (gold vein-systems)

Diversified producer Teck (TEK-T) was the first to get its foot in the door with Gabriel and Rosia Montana. The company acquired 1 million Gabriel shares in 1997 and secured the right to participate in future funding to a maximum of 20%, as well as the right of first refusal should Gabriel decide to sell or joint-venture Rosia Montana and the nearby Bucium project. Bucium has five known mineral deposits hosting two main types of mineralization: epithermal gold-silver and mesothermal copper mineralization with gold and silver.