Friday, June 1, 2012

Romanian mining town suffers from its gold riches

(Reuters) - Nature has carved a humbling landscape of deep river valleys and reddish peaks in a corner of the Carpathian mountains in western Romania.

Rosia Montana town, made up of 16 villages that dot the slopes along the river Rosia, has hundred-year-old churches and houses, cemeteries and ancient Roman mine galleries.

It also has gold. But for those who live here, that is more of a bane than anything else.

Canada's Gabriel Resources wants to build Europe's largest open cast gold mine in Rosia Montana, a 15-year quest that has put the area at the centre of a national debate between heritage and development.

The mine could bring billions of euros in taxes and potentially thousands of jobs to an economically depressed region. But it will also require blasting four mountain tops, relocating the community and flooding one village to create a 300-hectare pond for chemical waste held back by a 180-metre-high dam.

The mine has the support of most of the 2,800 locals, the mayor and county administration and President Traian Basescu, eyeing the bounty the investment will bring.

Those who oppose the project - a handful of residents, several church, environmental and human rights groups, the Soros Foundation and neighbor Hungary, which fears the consequences of any environmental damage - want to turn the area into a UNESCO heritage site focused on tourism and farming.

Critics are concerned that concession rights were awarded without transparency and without exploring other options.

Romania's new leftist Prime Minister Victor Ponta, a political opponent of Basescu, has openly criticized both the plan and the president's support, and the topic will be a focus of debate in the run-up to a November parliamentary election.

The issue also cuts to the heart of Romania's economic problems, as the European Union's second-poorest nation struggles to take advantage of its resources and strategic location between western Europe and the Middle East.

"Basically it's a choice between two world views set around the question of how we see Rosia Montana and Romania's future in five, 50 or 500 years," said Magor Csibi, country manager at the Romanian arm of environmental group WWF.

"It's a war of nerves," said Csibi. "Whoever lasts longest wins."


When hundreds rally against the mine in the capital Bucharest, hundreds rally in Rosia Montana in support. When Greenpeace activists stormed the ministry chaining themselves to radiators in January, mine supporters gathered outside demanding jobs days later. Countless court cases challenging the permits are pending, as are many appeals by the company.

Stuck in the middle, with no other source of employment, the community is slowly dying out. The villages lack central heating or running water and infrastructure is decaying, while previous mines have polluted the water.

Most locals hope Gabriel Resources' Romanian unit, Rosia Montana Gold Corporation (RMGC), will restore jobs and the economy.

In fact, mining is the reason there is a community here at all.

The town is in the Golden Quadrilateral, an area of about 900 sq km (350 sq miles) which holds one of Europe's largest gold reserves and is also rich in copper and silver.

The town was founded on mining before Roman times and enriched waves of foreigners who moved to the area under Austro-Hungarian rule.

Nelu Oprisa grew up here and spent 17 years at the state gold mine, working his way up to chief engineer by the time it closed and he retired. He sold his property to RMGC in 2003 and moved to a nearby town, although he still comes back often to look after to a private tourist organization.

"There used to be a time when Rosia was not necessarily thriving, but people had a routine, they worked hard at the mine ... drank a little brandy and went home," said the 52-year-old, smoking and sipping coffee on the main square.

"People had jobs. And we were a lot closer to each other."

But after the 1989 collapse of communism, Romania was left with an inefficient, heavily subsidized mining sector that employed hundreds of thousands and scarred the environment. It closed hundreds of mines and sacked workers. The government estimates it still needs 1 billion euros ($1.2 billion) for ecological repairs.

Many people left Rosia Montana. Others, like Oprisa, sold their properties to RMGC and moved to modern houses the firm built in the town of Alba Iulia, 80 km (50 miles) away.

"The Romanian state cannot sit on the largest gold reserve in Europe without investing," Oprisa said.

Eugen David, a former copper miner who moved to Rosia Montana roughly 17 years ago when he met his wife, feels differently. He owns land on top of one of RMGC's planned quarries and where it aims to build a processing plant and says he will give it up only by force.

As the head of anti-mine organization Alburnus Maior, David no longer greets the mayor or Oprisa. His alternative to the mine is farming and using Rosia Montana's notoriety to attract tourists.

"I have a fundamental right to live here," the charismatic 47-year-old said in his backyard, where he and his family run a cattle farm. "I never understood why mining is hailed as the sole development solution for this place. I mean, we haven't developed much in 2,000 years of mining."

Several thousand people visit Rosia Montana each year, most just passing through. Even with massive investment, there is little guarantee the locals will be able to earn enough from tourism.

At the moment, it is difficult to get to and has little tourism infrastructure in spite of its natural beauty and mining heritage.

"If it goes forward it will destroy this community. There will be no more mountains. The company will relocate 1,000 families. How is that good for the community?" David said.

"Not everybody will earn a living from the mine, just as not everybody will earn a living from tourism and farming. But these would be cleaner, more sustainable jobs."


RMGC, in which the Romanian state holds a 19-percent stake, started exploration work in Rosia Montana in 1997 and secured concession rights two years later. Opponents are angry that parts of the agreement are confidential under the country's natural resources legislation, while the project has discouraged any other potential investment.

RMGC estimated the mine is worth $7.5 billion overall and that the state would get more than half of that in royalties, taxes, dividends and indirect services, based on a 2007 study that used an average price of $900 per gold ounce. The economy ministry approved the study without conducting an independent survey.

Gabriel's CEO says the mine could be worth roughly $30 billion at current prices of roughly $1,600 per ounce, and the mine would make Romania the EU's largest gold producer, overtaking Finland, Sweden and Spain.

RMGC plans to dig four quarries on mountain tops, where open pits are necessary to extract the gold and silver particles embedded in the rock, and four of the 16 villages will be largely destroyed.

Cyanide will be used to separate the metals, and the waste treated, then stored in a mud pond where the concentration will be reduced to 5-7 milligrams, below the EU's legal limit.

The pond, one of the most contested issues in the project, would wipe out Corna village. This patch of chemical waste will be contained by a dam the company says can withstand massive earthquakes and rainfall.

Memories of the potential for broken dam disasters are fresh after Hungary's 2010 red sludge spill. Romania has a poor track record of its own after a dam broke in 2000 at a gold processing plant and cyanide poured into the river Tisza, affecting much of eastern Europe, including Hungary.

RMGC says it will use the safest, most up-to-date technology and plans to fix environmental damage, plant trees, completely restore the old centre and create a vast gold mining museum.

"We have addressed all the concerns related to the project and we would like the approval process to go on," said RMGC director Dragos Tanase. "Miners are not looking for favors, but it is also not fair to block important investment for years."


The project has become a political hot potato after 15 years mired in Romania's bureaucratic process. An environmental permit has still not been issued and a final decision looks distant.

It has a powerful backer in Basescu, who for more than a year has used almost every public appearance to urge politicians to support mining to create jobs and boost the economy.

His comments have often sparked small protests across the country and have drawn criticism from the new prime minister, Ponta, who before he came to power pledged to block the plan.

"Projects of this magnitude cannot be made simply because a politician really wants it, regardless of his name. I obviously mean President Basescu," Ponta said.

He and Environment Minister Rovana Plumb, who has said Romania should reject cyanide mining on principle, have softened their rhetoric since coming to power in early May.

But the November election could cause more delays. Even if RMGC gets the environment permit, the opposition will challenge the decision in courts.

Meanwhile, Rosia Montana remains in limbo. According to Mayor Eugen Furdui, RMGC already employs some 500 people and has helped halve the unemployment rate - but it is still at 40 percent.

"Politicians seem forever shy about making a decision either way, and that is perhaps what hurts Rosia Montana the most," said Oprisa.

(Editing by Sonya Hepinstall)

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