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TABLE OF CONTENTS Oct 17 - 23, 2011 Volume 97 Number 35 - 0 comments

Gabriel gathers new momentum at Rosia Montana

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By: Anthony Vaccaro
Vail, Colorado 2011-10-17

The trials and tribulations of Gabriel Resources (GBU-T) and its Rosia Montana gold project in Romania’s Transylvania region have been well-documented in these pages since the late 1990s. 

Tapping the project’s incredible mineral wealth has been a cumbersome process for the company. Non-governmental organizations, local opposition and shifting moods in the halls of government have stalled the large deposit’s development. 

But the company looks to have  gathered positive momentum with Jonathan Henry’s arrival as chief executive in mid-2010, and the key environmental permit that the company needs to forge ahead may not be as far away as some believe.

“It’s all about permitting right now. And to get it done, we must show the Romanian government how good this project is for both them and for the people,” Henry told an audience at the Precious Metals Summit in Vail, Colo. “I have to say that over the last little while, I believe they are getting that message.” 

His confidence in government offices and the general populace leads him to predict that the permit could come in three to six months. 

If that happens, Rosia Montana and the surrounding area are likely set to be among Europe’s busiest mining districts.

Evidence for that can be found in the project’s proven and probable reserves of 215 million tonnes grading 1.46 grams gold and 6.88 grams silver, for 10.1 million oz. gold and 47.6 million oz. silver. 

Reserves are part of a larger measured and indicated resource of 350 million tonnes grading 1.3 grams gold and 6 grams silver, for 14.6 million oz. gold and 64.9 million oz. silver. 

Those numbers come out of a 2009 technical report. And while they show Rosia Montana to be a world-class project, Henry says there are many more easy ounces to be had. 

“This project isn’t a 15-million oz. project, it’s a 30-million oz. project,” he says. “And that’s because the cut-off grade can be lowered from the 0.6 gram gold and 10.50 grams silver used in the last estimate. And that estimate used a gold price of just US$735 per oz.”

The company has conceived a mine that would cost $1 billion to build and would turn out 500,000 oz. gold per year, with cash costs of US$335 per oz. and an initial 16-year mine life. Henry believes, however, that the mine life will go up to 25 years by the time all is said and done.

The projected cash costs put the project into the lowest quartile of gold development projects, and would help it generate free cash flows of $500 million a year over 16 years.

A future mine would comprise four open pits. The company already has archeological discharge permits for three.

Henry says it hasn’t pushed to get the clearance on the fourth pit, because it wouldn’t be mined until the ninth year of production. 

Mining would consist of a  straightforward truck and shovel operation, with ore processed in a standard carbon-in-leach facility that would have 80% gold recoveries and 60% silver recoveries.

But a lot of work can be done on those recovery numbers, Henry says. The metallurgical work comes out of a report from 2005. 

“I believe we can improve recoveries with Nelson concentrators, and we’re doing better on the gravity circuit,” he says. “We’re looking at that internally.” 

But while all of the metrics point to a robust project, investors have been slow to warm to the story because of uncertainty on the permitting front. 

Such market opinion comes in spite of the company’s positive momentum. 

Archeological discharge permits were issued in July, and there’s been a measured improvement in public opinion regarding the project — only 19% of the Romanian public approved of the project in 2008, and now that number is above 50%. Perhaps most important of all, there is a renewed willingness on the part of the government to get the project into production. 

Henry credits the last change to the Romanian government coming in as a shareholder in the project. 

“Previously, it was thought of as a foreign company developing a mine,” he explains. “The Romanian-ization of this project is the reason why we have been successful of late.”

The Romanian government has a 20% stake in the project, with Gabriel retaining 80%. 

There is also little doubt that an improved impression of the project is supported by the country’s economic conditions. 

Henry points out that in order to join the European Union (EU) Romania was forced to shut down most of its underperforming mines. The situation resulted in layoffs of experienced miners. 

The unemployment rate in the Rosia Montana area is a staggering 80%. And given the circumstances, more people are coming to see mining as way to help kick-start the Romanian economy. 

That doesn’t mean it’s all smooth sailing from here.

“There’s talk about increasing the royalty and a renegotiation of our contract,” Henry concedes. “It’s not easy. But the important thing is that the government wants to make this mine happen, and that in and of itself represents a sea change.”

A mine at the site would also represent the first time modern mining techniques are used in Romania. Henry says the company plans to build a model mine for all of Europe. 

To do that, it will use the best techniques that are outlined by EU guidelines, or better. The tailings dam, for instance, is being designed to meet higher standards than what the EU calls for. 

Other key efforts to promote sustainable development are evident in the work it has done to reinvigorate heritage buildings in the nearby community, and its commitment to plant four hectares of forest for every hectare that is taken down for mine construction. 

In all, Henry says, Gabriel has already spent $500 million developing the project.

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The Cirnic pit at Gabriel Resources' Rosia Montana gold-silver project in Romania. Gabriel Resources
The Cirnic pit at Gabriel Resources' Rosia Montana gold...

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