Cold winds in Romania for Gabriel

The fallout from the Romanian government’s suspension of the environmental impact assessment for Gabriel Resources (GBU-T) Rosia Montana project is now known.

The company is slashing jobs and ending its land acquisition program at Europe’s largest undeveloped gold project as it is becoming clearer that the current government has little interest in letting the project go forward.

The best hope for Rosia Montana is that the ruling coalition which Gabriel accuses of not playing by the rules in its suspension of the EIA process will be ousted in or before elections next November.

“We need a government that will follow the rule of law,” says Gabriel’s spokesperson Kathy Sipos. “There are a lot of political games being played and we need to ride out these waves.”

The current ruling coalition is composed of the Liberal party and an ethnic Hungarian party ethnic Hungarians make up roughly 7% of the total Romanian population and controls about 23% of the seats in parliament.

Sipos says the Democratic party of the country, who recently won an election to choose the Romanian representative for the European Union, has expressed support for the project.

Still, however fragile the current government’s hold on power is, it has been enough to thwart Gabriel and in the process deter other materials investors.

“Our project is the bellwether for future foreign investment in the country and by not having it go forward they’re really cutting off the mining industry in the country,” Sipos says.

It’s a sentiment that Carpathian Gold‘s (CPN-T) chief executive Dino Titaro backs up.

“In terms of the market the perception is you cannot mine in Romania, and that is a strong market conception right now and it’s making it a very difficult period for Gabriel and ourselves.” Titaro says.

While Titaro explains that since Carpathian is still in the exploration stage it hasn’t yet had to go through the permitting processes that have stopped Gabriel, Carpathian has still had to watch as its share price fell by over 110% — from $1.16 in early September to its Dec. 10 close of 55.

In that same period Gabriel’s shares fell over $2 from $3.59 at the beginning of September to just $1.49 on Dec. 10.

The dire situation has left Gabriel to continue minimal operations on a skeleton staff. It had to cut roughly two-thirds of the 325 full-time jobs at the project. It has also stopped its land acquisition program after buying 73% of the properties within the project area.

“Provided the rule of law comes back into play,” Sipos says, “there’s no question in our minds that this mine will get built and we look forward to hiring these people back”

Gabriel has also filed a lawsuit against the Ministry of Environment with the Bucharest Court of Appeal in an effort to re-start the EIA process. The company’s lawyers have told Gabriel that a decision from the court could come in three to four months, but that such a time frame wasn’t assured.

For the EIA process to go forward the Ministry of Environment has to reconvene the Technical Advisory Committee so it can finish the review of the EIA.

But even if Gabriel wins its court case it still may have to contend with a complete banning of cyanide in the country a fact that would make the mine uneconomical. Aspects of the Romanian government are currently pushing for such a ban both within Romania and for all of the European Union.

To be successful, it would have to reverse conclusions found in a six year E.U. study on mine waste. The Council of Europe and the European parliament issued a mine waste directive for the use of cyanide which Gabriel would fall well within the Council called for a cyanide limit of 50 parts per million (ppm) while Gabriel says its tailings dam would come in at 10 ppm.

Sipos says those pushing for the outright ban currently have 50 of the 390 votes they would need to pass it.

But fears of environmental damage at the hands of a cyanide leak are only part of the opposition to the project. Hungarians consider the area that Rosia Montana sits in, to be rightfully theirs, hence the opposition to the project from the ethnic Hungarian party within Romania. And others complain that drilling at the mine would destroy ancient Roman mine sites in the region.

Such sites may, however, be in more jeopardy now as along with the job cuts Gabriel says it will have to cut its archaeological rescue program aimed at preserving such historic workings.

Gabriel, which has spent roughly $300 million developing the project, says it will continue with its educational and youth partnership programs. The company still has roughly $177 million in the bank, enough Sipos says, to give it staying power.

“We’re okay on the financial side,” she says, “we’re not planning on going away.”

Gabriel has an 80% stake with the government holding 19% — in Rosia Montana. The project has roughly 350 million tonnes of ore in the measured and indicated category with an average grade of 1.3 grams gold per tonne for 14.6 million oz. of gold and 65 million oz. of silver.