Just as it looked as if Europe's biggest mining project may be approaching the finish line after a dozen years of opposition and delays Romania's prime minister designate pulls the rug from under its promoter Gabriel Resources.
Asked to form a new cabinet the country's designated PM Victor Ponta, 39, on Thursday also said a 'transparent’ review of Rosia Montana will now be sought "so that the permitting decisions take into account the national interest, environmental protection and European legislation."
Gabriel Resources (TSE:GBU), which owns 80% of the Rosia Montana project, was hammered on the Toronto exchange on the news, dropping 13.6% to $2.03 by the close on Thursday. Its losses for the year to date now total a whopping 67%.
Its market value on the Toronto bourse is now $770 million, down from a peak of over $3 billion at the end of 2010 and $2.5 billion at the start of the year.
AFP reports Gabriel Resources CEO Jonathan Henry responded on Thursday by touting the project's economic benefits: "In total we have over $30 billion of economic benefits that come out of this project and remain in Romania, this equates to somewhere between 70 and 90 percent of the total benefits."
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 the 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 need 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 and is looking to renegotiate its profit-sharing arrangement with Gabriel Resources.
Romania also backed out of a $262 million privatization sale of its Cupru Min Abrud copper mine in April.
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.