Business News Europe
Bogdan Preda in Bucharest
September 11, 2013
A controversial mining project backed by a Canadian company and a handful of billionaires to extract gold and silver from an old quarry in Romania’s Transylvania region is causing splits in the governing coalition.
A parliamentary vote scheduled for this week that was expected to give the 2016 start date for the 15-year-old project a further boost will probably now be being postponed or if it is held, rejected by lawmakers. The unexpected turn occurred as tens of thousands Romanians protesting against the project prompted one of the two governing coalition leaders to speak openly against the project to extract more than 300 tonnes of gold and 1,600 tonnes of silver, which plans to use cyanide to separate a gram of gold from a ton of rock.
As many as 8,000 mostly young people took to the streets of the Romanian capital Bucharest on September 8 to protest against the project. They were joined by another 6,000 protesters in the city of Cluj in the Transylvania region, plus thousands more in other major cities. Protesters refused on several occasions to speak to Romanian media representatives, claiming that too many newspapers and television outlets were flooded with paid-for advertising by Gabriel Resources in favour of the project. They carried banners reading, “The Romanian press is full of lies!”
Local authorities in Alba county, where the project is located, also staged their own show of force on a stadium near Rosia Montana, where they organized dances and open-air picnics in order to underscore the project’s importance for the future of the community.
Protesters claim that the use of cyanide poses a huge risk to the environment, a danger they claim nobody has seriously assessed thus far, while charging politicians with hidden financial interests in the project. Leading Romanian business daily Ziarul Financiar repeatedly reported that behind Gabriel’s project in Rosia Montana stand international billionaires such as John Paulson, Beny Steinmetz and Thomas Kaplan.
Similar environmental fears have prompted official protests from neighbouring Hungary.
As if that weren't a big enough headache for the government, the project’s developer, Gabriel Resources, vowed in a statement on September 9 to “commence litigation for multiple breaches of international investment treaties,” if the draft legislation were to be rejected before debate by the parliament’s two chambers. Gabriel Resources' share price has taken hammering following the twists and turns in Romania. On September 9, the shares plummeted to end the day down 54%.
The brouhaha kicked off when, following a weekend of protests over the project, Crin Antonescu, head of the Senate, made a statement on September 9 in his own name declaring that, “the Rosia Montana mining project cannot be sustained… It should either be withdrawn or be rejected.” He explained that the project could only be considered if additional studies show it poses absolutely no threat to the environment.
Antonescu’s statement took the government by surprise, coming as it did just as parliament was preparing to debate draft legislation for the project issued by the government on August 27. This would open the way for a revival of the project after years of litigation and arguments over the project’s permits, which the authorities have so far been reluctant to award.
The current government is led by Victor Ponta, head of the Social Democratic Party, which together with Antonescu’s National Liberal Party forms the Social-Liberal Union. The coalition has a 70% majority in the country’s parliament. Visibly riled by the comments made by his coalition co-leader Antonescu even before any vote could take place, Ponta stated on television that “the project is closed”. “A decision on such a controversial project must be reached by the country’s supreme institution, the parliament, and that’s why I sent it to parliament to decide,” Ponta explained. “But taking into account the fact that a parliament’s majority is against it, the project shall be rejected.”
Ponta previously also indicated he would vote against the project, but explained that his government had opted to have parliament decide in order to avoid facing legal action by Gabriel Resources.
A day later, on September 10, a Senate commission rejected the gold mining project, raising even more question marks over its fate. The same day, Antonescu followed up on his previous statements by publicly asking Ponta in a live broadcast on Antena 3 channel: “We all and the public opinion should know about what kind of damages we’re talking about if this project won’t happen… Who and when has engaged the Romanian state to the extent that we don’t have the power to decide today in our country and over our resources under the threat of having to pay damages?”
In his turn, Ponta said he knew that Gabriel Resources and its partners might seek damages totaling as much as €2bn if Romania doesn’t allow the project. Although he accepted that Romania might be sued internationally if it doesn’t approve the project, he also said, “it’s out of question that Romania would accept (to pay) such amounts.”
What lies ahead
Ironically, Antonescu’s move to speak out against the project that has caused at least its postponement, could give Gabriel Resources yet another chance to revive the project if a proper public debate is organized.
The minister for water, forests and fisheries, Lucia Varga, also spoke openly against the project, saying she would not award a permit to the project under the current circumstances, with no clear proof that procedures and standards planned to be used in the gold and silver mining in Rosia Montana are in line with those of the EU.
In a similar statement, Romanian Academy President Ionel Haiduc said that such mining should only take place if all environmental hazards that could be caused by cyanide are totally excluded. Moreover, he claimed that the gold extraction royalties the Romanian state is entitled to in the project, currently set at 6% of the total amount of gold and silver that would be extracted, should be considerably higher. Haiduc said Romania should rather wait until it can secure a better deal or start the mining for precious metals in the region itself without the use of cyanide.
Various mining experts in Romania have suggested the project could still be possible if the gold- and silver-rich ore excavated from Rosia Montana is transported to another site or country for cyanide-treatment in order to avoid any environmental impacts. Others argue that would increase the costs to an extent it would make the project unviable.