Bloodletting at Gabriel Resources over latest Romania setback

Romania's finance minister Daniel Chitoiu visited Rosia Montana early June to talk to local labour unions and came back saying he was "convinced" what could be Europe's biggest mining project  will go ahead.

Better still, work on expanding and re-opening the historic gold and silver mine in the Romanian town could start this year, Chitoiu said.

But just as it looked as if  may be approaching the finish line after a dozen years of opposition and delays Romania's new prime minister pulled the rug from under its promoter Gabriel Resources. And not for the first time.

Romania Insider reports PM Victor Ponta, 39, then gave another indication of how chaotic Romanian politics and government can be saying “the economy ministry meant to say the Rosia Montana project will not start this year, but he forgot to include the ‘not’ in the sentence”:

Asked by NGOs whether he is considering firing the Economy Minister over his statement, the PM said ”it would not be a bad idea”, but that Chitoiu explained the situation and the misunderstanding to him. Victor Ponta recently attended the Green Awards gala and is known for being an ecologist. His wife Daciana Sarbu is also a public opponent of the gold mining project.

Shares in Gabriel Resources (TSE:GBU), which owns 80% of the Rosia Montana project, were hammered again  over the latest shambles, dropping 6.9% to $1.90 in mid-morning  on Thursday. Its losses for the week now top 15%.

Its market value on the Toronto bourse is $722 million, down from a peak of over $3 billion at the end of 2010 and $2.5 billion at the start of the year. Gabriel Resource stock now also has the dubious honour of being included in the S&P TSX grouping of most volatile stocks.

Gabriel Resources CEO Jonathan Henry have repeatedly touted the project's economic benefits for the country pegging it at over $30 billion, but politics in one of the continent's poorest regions have so far trumped development – Romania also backed out of a $262 million privatization sale of its Cupru Min Abrud copper mine in April.

The new review is just the latest setback for Gabriel Resources – the company has spent more than $500 million under no fewer than seven different CEOs advancing the project since the Canadian firm first obtained the concession in 1999.

It is believed to be one of the richest deposits in Europe with 314 tonnes of gold and 1,500 tonnes of silver and where mining activity dates back to the 1st Century.

The company still needs several more environmental and safety approvals and has to acquire more land to establish an open-cast mine which once in production will be Europe’s largest producing 500,000oz/year.

Over the years Rosia Montana has become a favourite target of the green movement and a political weapon for Romania's many successive governments. The Eastern European country owns the remainder of Rosia Montana Gold Corp.

Gabriel Resources is proposing four gold quarries over the mine's lifespan, which would destroy four mountaintops and wipe out three villages of the 16 that make up Rosia Montana located in the Transylvania region of Romania, while still preserving the historical centre according to Reuters.

MINING.com reported last year Romania's Environment Minister ordered Gabriel to set aside $160 million in environmental guarantees. Gabriel has also set aside $35 million for what it calls “rescue archaeology” at the site where Roman galleries can still be seen.

If Rosia Montana should go ahead, analysts say the company would become a takeover target for larger players with more financial muscle – the mine would take some $1.7 billion to build.

Three other Canadian companies – Valhalla Resources, Carpathian Gold and European Goldfields – are active in Transylvania. The world’s largest gold miner Barrick Gold Corp has a 9% stake in Carpathian it picked up in July and has an exploration deal with Valhalla.

MINING.com explored the rich history of Rosia Montana and the Gabriel Resources project in 2008 in a feature article by Dan Oancea, a geologist who worked at Rosia Montana.