There seems to be no near-term resolution to the long saga of protests against the Rosia Montana gold mines in Romania as the parliamentary vote on the project was postponed yet again in May. In a story that appeared in Newsweek on Tuesday, May 20, Eric Reguly recounted the efforts of environmental groups as well as the billionaire investors who have lobbied to gather support in favor of the gold and silver mines.
Klarman and Paulson’s large stakes in Gabriel
These notorious gold mines have pitted heavyweights of the hedge fund industry against each other. John Paulson and Seth Klarman are investors in Gabriel Resources Ltd. (OTCMKTS:GBRRF) (TSE:GBU), which is leading the Rosia Montana project. Klarman’s Baupost Group owns 48.58 million shares of the company and John Paulson owns 38 million shares after selling 17 million shares in the first quarter of this year.
Soros backed groups oppose Rosia Montana
On the side of the anti-Gabriel groups is the legendary George Soros. His opposition to Gabriel is intriguing, mostly because the investor has partially owned other mining and oil exploration companies. In the past, Soros has held stakes in Newmont Mining Corp (NYSE:NEM), one of world’s largest miners, and currently holds Barrick Gold Corporation (USA) (NYSE:ABX) and Brazilian oil and gas major Petroleo Brasileiro Petrobras SA (ADR) (NYSE:PBR). The hedge fund mogul also initiated holding in several new gold mining stocks like Goldcorp Inc. (USA) (NYSE:GG), Yamana Gold Inc. (USA) (NYSE:AUY) in the first quarter of this year.
Soros-backed non-profit organizations, International Crisis Group (ICG) and Open Society Institute have supported environmental groups in raising protests against the Rosia Montana project. Soros is also involved in Romania through Soros Romania Foundation (SRF), which has attempted to influence Romanian politics in the past.
His anti-Gabriel motives seem more like a power play, as his portfolio is not as environmentally conscious as one would think. Back in 2007, when Newmont Mining was a large investor in Gabriel Resources, Soros wrote to the company asking it not to invest in Rosia Montana gold mines. He said in a letter to Newmont’s CEO,
“I feel it is my duty to advise you to consider carefully any further involvement with Gabriel Resources and the Rosia Montana project,” Soros wrote, “I understand that Newmont is committed to the highest standards of environmental management, employee health and community safety. An investment in a dubious project such as Rosia Montana should not be allowed to call such admirable commitments into question.”
Steinmetz stumped by allegations of fraud and corruption charges
The resistance to Gabriel’s gold mines is Europe’s longest running environmental campaign that has spanned over a decade. The billionaires who invested in Gabriel back in 2009 are still supporting the company just as staunchly. Other than Klarman and Paulson, Thomas Kaplan, chairman of New York’s Electrum Group and Beny Steinmetz, an Israeli billionaire, have put their money in Gabriel.
Newsweek reports that since 2009, Soros has distanced himself from directly opposing the mining project. However, the highly influential hedge fund guru scored another goal against Gabriel recently. A Soros-funded NGO, Global Witness, was instrumental in driving attention to Benny Steinmetz Group Resources’s (BSGR) alleged corruption in iron-ore investments in New Guinea. The concerns were investigated by the Guinean government, and two years later BSGR was stripped off of its mining concessions in last month. Adding further to Steinmetz’ plight, Rio Tinto plc (ADR) (NYSE:RIO) has filed complaints against Vale SA (ADR) (NYSE:VALE), Steinmetz and BSGR in a court in New York. Rio Tinto alleges that Steinmetz and others stole its rights over the northern half of the iron-ore deposits by committing fraud. However, Davidson Goldin, a spokesperson for BSGR, tells ValueWalk “BSGR has responded to these allegations and actions by the Guinean government by initiating proceedings in the International Court for Settlement of Investment Disputes ( ICSID ). BSGR has, since these false allegations first surfaced in the media, consistently denied any wrong doing and rejected what it considers to be an illegal process conducted by the GOG for their own ulterior motives.”
There is no end in sight to the feud between pro and anti-mining groups. Gabriel Resources has threatened to sue the Romanian government for $4 billion in damages and said that it is preparing an international arbitration case. Meanwhile, presidential elections are looming in Romania, and the gold mine is bound to have impact on the electoral campaigns.
Readers can find a recent Newsweek article on the Gabriel Resources and Beny Steinmetz saga embedded below
UPDATE 3:00 PM EST May 30th 2014 – The story has been updated to include a statement from BSGR
In Gold Blood