Gabriel Resources (TSX: GBU; US-OTC: GBRRF) is set to reduce its workforce by 80%, or 400 employees, at its Rosia Montana gold–silver project in Romania if the new government makes no clear move to advance the project.
Consistent delays by the Romanian government to assess and permit the project have brought it to this point, Gabriel says. As a result its subsidiaryRosia Montana Gold Corp. — which holds 80.69% of Rosia Montana — has indicated it will let go of 80% of its staff by May to conserve cash.
“All of these jobs and more will be lost unless we see a real and transparent process from the new government in the coming weeks and months to proceed with the project, which has the potential to create over 3,600 jobs,” said Gabriel’s president and CEO Jonathan Henry. A Romanian state-owned firm holds the remaining 19.31% of the project.
Gabriel has invested US$550 million in Rosia Montana over 15 years to revive the past-producing mine, an effort that has been plagued by setbacks, uncertainty and opposition from environmental groups. Activists argue the project will harm historical sites and the environment, particularly due to the company’s proposed use of cyanide to extract precious metals.
But the firm contends that Rosia Montana provides an economic benefit for the surrounding communities and the country generally. Gabriel notes it would develop the estimated US$1.5-billion project in full compliance with the Romanian and European Union legislation, using the “best available practices” while considering the area’s cultural heritage.
It was only in mid-2013 that Gabriel appeared to make progress, after former prime minister Victor Ponta added the Rosia Montana project to the country’s national investment plan to create jobs and boost the economy.
Ponta also submitted a special draft law to speed up project development to the Romanian parliament last August. The parliament put together a special committee to review the draft legislation. In November, the committee produced a list of recommendations, including that the parliament reject the draft law; create a new framework for the mining industry; and reassess the potential impact of the project on the environment.
The senate has since rejected the draft law, while the chamber of deputies has yet to vote. Gabriel believes the chamber of deputies will also dismiss the draft law, leaving the project once again in limbo.
To complicate matters, the company points to renewed political uncertainty after the break up of the old government coalition led by Ponta, and the creation of a new government alliance in early March.
The coalition government, sworn in on March 5, includes the Democratic Union of Hungarians in Romania (UDMR), a political party representing the ethnic Hungarians of Romania, which was in opposition for almost two years.
The UDMR has taken up certain ministerial roles in the government, including the ministries of Environment and Culture. “Each new UDMR minister has recently stated that they do not believe the next step to the permitting of Rosia Montana fall under their responsibility,” Gabriel reports.
“The renewed political instability and recently effected ministerial changes, together with the failed legislative initiatives of 2013, have resulted in a lack of transparency in the foreseeable process for permitting the project,” it adds.
In the meanwhile, the company is awaiting a decision on an environmental-impact assessment submitted in 2006, among other things.
Gabriel cautions it cannot say how long it will take to “address and resolve matters currently preventing the advancement of the project.”
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