The river runs red in Rosia Montana. The rouge-coloured run-off of zinc, iron, arsenic and other sulphides from nearly 2,000 years of gold mining make the waterway in Romania’s Transylvanian mountains live up to the area’s name, which means red mountain in Romanian.
Rosia Montana, Romania – If not deadly, a mouthful or two would certainly not be a good idea but the clean-up plan for this waterway has become a focal point of an epic planning battle over the future of the largest gold mine in Europe.
The mine, first exploited by the Romans in 131AD, has a reserve of 10m ounces of gold, putting it in the top 10 of worldwide undeveloped gold assets. Even with the recent drop in the gold price to $1,680 an ounce, that makes its potential highly lucrative, with an estimated production cost of $350 per ounce.
For Gabriel Resources, the Canadian mining group expected to mount a £1bn share listing in London to fund the project, getting it to production means moving hundreds of Romanians and demolishing dozens of houses, two churches and cutting down 1,000 hectares of forestry.
That area will be replaced by a dam and a huge pile of mining waste that opponents say would destroy one of the most beautiful areas of Europe and wreak further environmental damage by using cyanide to extract the gold.
A decision on the site’s crucial environment impact report – one of two key regulatory clearances outstanding – is expected imminently.
This is a battle that has everything: a chief executive who believes gold could eventually trade at a staggering $10,000 an ounce, shareholders including the fund of billionaire hedge fund manager John Paulson, and opponents who have included Hungarian-born financier George Soros and a roster of environmental pressure groups including Greenpeace and Friends of the Earth.
Last month, a “solidarity camp” was set up in the village by 500 activists opposing the mine’s development by the Rosia Montana Gold Corporation (RMGC), a group in which Gabriel has an 80.7pc stake. Protesters have also applied to make the village and surrounding area a World Heritage Site to frustrate the plan.
Backers of the plan say the mine will create 3,200 jobs in an area that has 80pc unemployment and has seen no gold mining since the last of the state-owned and subsidised mines were closed in 2007 as a condition of Romania’s entry to the European Union.
In the five years leading to EU accession, more than 500 mines were closed in Romania with the loss of more than 200,000 jobs.
Gabriel has a history of controversy, having been originally founded to exploit the mine by Frank Timis, the Romanian-born entrepreneur whose later venture Regal Petroleum attracted a record £600,000 fine from the Financial Services Authority for issuing a series of misleading statements about its reserves between 2003 and 2005.
Its links to Mr Timis have long been severed but it has plenty of other matters on its plate, with The Cultural Foundation of Rosia Montana, a pressure group that has received funding from the Soros Foundation, setting up shop next door to RMGC’s offices in the centre of the village, where its posters opposing the development are cheek-by-jowl with pro-development publicity.
“This would be devastating for Rosia Montana,” says Sorin Jurca, the group’s co-founder and vice-president. “This is where I was born and it is where I live and where I want to continue to live. I own three properties here and I am not going to sell ever.
“I do not accept this company or anyone else destroying a world cultural heritage site, we don’t accept the environment being destroyed and I don’t accept the loss of my church.”
Jonathan Henry, the Irish-born chief executive of Toronto-listed Gabriel, argues that the mine will bring great opportunities to the region. He also points out that much of the area is already scarred by mining developments.
“It’s a beautiful view,” he says, from the top of a peak overlooking the terrain. “But only if you look in one direction. If you look the other way, it’s a terrible scar on the landscape.”
Much of RMGC’s case for development is that its plan would pour in billions of pounds of investment to remedy some of the environmental problems caused by the thousands of tunnels dug under the area during the past 2,000 years.
A water treatment plant would collect and treat historical pollution to meet international clean water standards, while controlling further run-offs and discharges.
The current amount of zinc in the river, for example, is 110 times the maximum concentration levels that will be allowed. Iron levels in the water are 64 times higher than RMGC is planning to achieve. In addition, some 1,000 hectares of new forests would be planted.
RMGC, which now owns 233 of the 327 houses in Rosia Montana, has already relocated 125 families to a town 80km away and is also restoring 35 historical buildings in the village’s centre.
It has opened a mining museum to show off some of the Roman artefacts found in the ground and has researched more than 140km of mining tunnels, including 7km from the Roman period. It also plans to reopen some of them to tourists, giving a further economic boost to the area, which has no industry and little farming.
The potential riches are there for all to see. A study by Oxford Policy Management has forecast that RMGC’s plan to produce 626,000 ounces of gold a year will generate $7.5bn in revenues from sales of gold and silver.
Of this, it says $2.4bn would go into the Romanian economy to suppliers of goods and services, with another $1.8bn flowing into state and local government budgets through taxes.
For the rest of this article, please go to The Telegraph website: http://www.telegraph.co.uk/finance/personalfinance/investing/gold/8829191/Mining-giant-sparks-Europes-new-gold-rush.html