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ROME — After almost two decades of false starts and a running battle with some of the savviest environmental groups on the planet, it’s make-or-break time for Europe’s biggest and most politically sensitive gold project. In early November, the Romanian government will, like a Roman emperor at a gladiator fight, give the thumbs up or thumbs down to Gabriel Resources Ltd.’s $1.4-billion (U.S.) Rosia Montana mine in Dracula’s legendary homeland, Transylvania.
The vote could go either way, though the share price says the odds are against the Toronto-listed company. Gabriel’s stock collapsed early last month, falling from $1.47 (Canadian) to as low as 41 cents, when Romanian Prime Minister Victor Ponta said parliament would likely reject a draft mining law that would allow the project to go ahead. (It’s now at 93 cents.) Gabriel’s response was to threaten the government with a $4-billion (U.S.) lawsuit if the law were to die. That threat still stands. Rosia Montana’s future lies in the hands of lawmakers and lawyers, not engineers and financiers.
Gabriel says a lot about what’s right and what’s wrong with Canadian gold miners, which dominate the industry. About half of the top names are Canadian, among them Barrick, Goldcorp, Yamana, Kinross and Eldorado. They are big risk takers, superb at engineering and financing and occasionally capable of impressive value creation.
They have created tens of thousands of jobs in both the developed and developing world and turned the Toronto Stock Exchange into the world’s premier mining bourse. In some ways, they are Canada’s corporate ambassadors, a role thrust upon them when Inco, Falconbridge and other base-metal miners with global scale were eradicated in the takeover battles of the past decade.
But they are also prone to spectacular gaffes, such as paying absurd, top-of-the-market prices for gold deposits in areas you wouldn’t chose for your honeymoon, then clobbering investors with massive writedowns. They are guilty of environmental messes now and again, though nothing like the bad old days, and, far too often, of pleasing shareholders at the expense of other stakeholders, such as local communities. (The Vatican recently held a mining conference, which was attended some of the industry’s top CEOs, on this very topic.)
Gabriel’s sin was a bigfoot approach that cast it in Romania as the uncaring, imperial miner. Launched in the mid-1990s, the company’s plan was to make a lot of money quickly by building a four-pit monster, one that would blow up two mountainsides, displace about 2,000 villagers and fill an entire valley with waste-rock and cyanide-laced sludge.
Covering nearly 300 hectares, the so-called tailings pond would rise from an initial height of 70 metres to 180 metres – one third the height of Toronto’s CN Tower – and eventually hold 215-million tonnes of waste.
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