Billionaire hedge fund investor John Paulson, backer of Gabriel Resources Ltd. (TSE:GBU) could seek $4 billion in damages if the Romanian government blocks its gold mine project in the country. Gabriel Resources Ltd. (TSE:GBU) chief Jonathan Henry told Thomas Biesheuvel & Irina Savu of Bloomberg that his company has a solid case.
Hedge fund investor John Paulson owns a 16 percent stake in the company. Seth Klarman’s Baupost Group owns a 12 percent stake in the Canadian gold mine. Despite incurring heavy losses on gold, John Paulson is still bullish on the yellow metal. Other major backers of Gabriel Resources Ltd. (TSE:GBU) include BSG Resources Ltd. and Newmont Mining Corp (NYSE:NEM), according to FactSet. Gabriel Resources Ltd. (TSE:GBU) has been trying to get approval for the Rosia Montana project since late 1990s.
Gabriel Resources Ltd. (TSE:GBU) continued to persuade the Romanian state. Finally, prime minister Victor Ponta’s government showed some seriousness on the project by approving a draft law that outlined the potential development of the mine. But protesters in Romania took to the streets, demanding the project be closed. Campaigners have opposed the project due to the use of cyanide (one of the deadliest chemical compounds) to extract gold.
On Monday, Romanian prime minister Victor Ponta took a U-turn, reversing the draft law. Shares of Gabriel Resources Ltd. (TSE:GBU) plunged as much as 54 percent on Monday, after Ponta said that the project should be abandoned due to rising opposition. But shares are soaring today after reports that the company would seek $4 billion in damages should Romania halt the project.
Romania to defend itself against Gabriel Resources
Jonathan Henry said halting the project will be a big setback for Romania, which significantly lacks foreign direct investment. He said Gabriel Resources Ltd. (TSE:GBU) will consider all the possible options, including a lawsuit. In response, Ponta said that Romania will defend itself in the court instead of paying anything.
Gabriel Resources Ltd. (TSE:GBU) estimates that the Rosia Montana mine has more than 17 million ounces of gold reserves. The region has been producing yellow metal for almost 2,000 years. Gabriel Resources Ltd. (TSE:GBU) was planning to raise $1.4 billion to develop the mine.
Gabriel Resources Ltd. (TSE:GBU) shares were up 16.92 percent to 0.76 Canadian dollar at 11:44 EDT.
