Eldorado Gold to take legal action against Greece over mine halt

Eldorado Gold to take legal action against Greece over mine halt

Skouries main adit. (Image courtesy of Eldorado Gold)

Canada’s Eldorado Gold  (TSX:ELD) (NYSE:EGO) has threatened legal action against the Greek government after the country’s energy ministry halted production at the company’s Skouries gold and copper mine in northern Greece.

In a statement late Wednesday, the Vancouver-based firm confirmed its subsidiary Hellenic Gold had been accused of violating the terms of certain required technical studies. However, the miner says such tests were indeed conducted, but at a facility in Finland, not on-site, as the Greek authorities demand.

We are most disappointed and perplexed by this entirely inappropriate decision of the Ministry of Energy, which puts 5,000 direct and indirect jobs in Greece at risk,” Eldorado chief executive officer, Paul Wright, said in the statement.

“ … We will once more take legal action against a decision of the Ministry in order to safeguard the rights of Eldorado, Hellas Gold, our Greek employees and the communities and stakeholders that support our projects in Halkidiki.”

The mine has been a bone of contention ever since Hellenic Gold was granted approval to mine in the northern peninsula, back in 2011.

Some claim the operation, owned 95% by Eldorado, may hurt tourism and the environment, while others believe it is good news for Greece, as it will generate new jobs and bring hundreds of millions into the struggling economy.

Test case

Skouries was the flagship project of the previous government’s foreign investment drive and, for many, remains a test case that would reveal whether Greece could protect foreign investors despite local opposition.

Eldorado has invested more than $450 million since 2012 on construction and development of the Skouries and Olympias mines in Greece, and million this year to advance construction at Skouries.

In April, one of Greece's top courts handed a key victory to the Canadian gold miner, rejecting a decision that blocked its plans to build a key processing plant at Skouries.

Eldorado shares were hit hard by the news Wednesday, trading 10% lower to $4.90 at 10:01 a.m. in Toronto, the steepest intraday fall since Jan. 30.