After much unrest in Romania involving some of the biggest protests since the end of communism, a specially created Romanian commission overwhelmingly rejected Gabriel Resources Ltd. (TSE:GBU) (OTCMKTS:GBRRF)’s proposed gold and silver mining project in Rosia Montana.
The company’s stock fell almost 9% on Monday as the news began filtering through. The general feeling is, despite an optimistic statement from the company, that this could be the end of the project.
Romanian government backtracks in the face of public opinion
Just moments before the commission returned its emphatic decision, Romanian president Victor Ponta said that government had changed its mind on granting permission for the mine, after 15,000 took to the streets in protest against the project. The ruling body has also been under pressure from environmental groups, farmers, celebrities such as Vanessa Redgrave, and business magnate George Soros.
The commission said that Romania stood to earn too little from the deal and recommended that the Canadian company’s license be declassified and made public.
Gabriel Resources still hopeful
Nevertheless, Gabriel Resources Ltd. (TSE:GBU) (OTCMKTS:GBRRF) CEO Jonathan Henry released an upbeat statement saying that the decision didn’t mean an end to the project. He added that the management team would look more closely at the commission’s finding before commenting in detail:
“The report of the special committee is a first step in defining the next phase of developing Rosia Montana. Gabriel will now assess the impact of the report and we look forward to participating in the creation of a modern mining industry in Romania. Our goal remains to bring the project through to a reality that will significantly benefit Romania and the people of Rosia Montana.”
ValueWalk asked if the project could realistically proceed given this week’s developments:
“The Romanian government has said it intends to introduce a general gold and silver mining bill, which would leave the door open for the Rosia Montana? project. This is a legislation issue. What they have said is that a project as complex as this project requires more general legislation.”
The long-running debacle over Rosia Montana? has lasted some 14 years and cost the firm in the region of $550 million. Indeed, back in September, CEO, Jonathan Henry told Bloomberg that Gabriel Resources Ltd. (TSE:GBU) (OTCMKTS:GBRRF) was ready to sue Romania:
“We have a very, very robust case, and we believe we have claims up to $4 billion that we can send to the Romanian state.”
Is that still an option?
“We will keep all our options open, but we remain committed to working with Romanian government on a project which is key to the revival of Romania’s mining industry, and designed to the highest environmental, and safety standards.”
The original plan proposed using cyanide to extract 284 tons of gold and 1,360 tons of silver and would have had severe environmental impacts for three mountains, creating a lake of cyanide along the way. The company could certainly look at changing the scope of the project, and perhaps put a plan in place that would minimize the environmental impact, but that may not be financially viable given the size of the investment that has already gone into the project. It seems unlikely that any legal action, even if successful, would see that money recouped.
Gabriel Resources Ltd. (TSE:GBU) (OTCMKTS:GBRRF)’s market value has fallen by around two-thirds this year as a result of the crisis. Given the money spent to date, if the project doesn’t go ahead, it could have serious repercussions for the future of the company. We asked Henry what plans the company had in the event the project could not proceed:
“Rosia Montana’s gold remains in the ground and we have the rights; that is our focus.”
With the ruling body clearly shaken by the Romanian people’s willingness to take to the streets over the matter, Gabriel Resources Ltd. (TSE:GBU) (OTCMKTS:GBRRF) will be hoping for an angel to come to their rescue.