Clare Nuttall in Bucharest -
The attempt to relaunch a controversial project to build Europe’s largest gold mine puts the Romanian government – already weakened by Prime Minister Victor Ponta’s defeat in the 2014 presidential elections – in a difficult position. Approval of the Rosia Montana project is virtually certain to reinvigorate an environmental opposition movement that mobilised tens of thousands of people in 2013, but failure to give the project the green light could result in Bucharest losing a costly arbitration case.
Gabriel Resources, the majority shareholder in project developer Rosia Montana Gold Corporation, sent a letter to newly inaugurated President Klaus Iohannis, Ponta and other top government officials in January in an attempt to reach a new agreement on the project, which has been frozen since mid-2014.
While the company said in a January 20 statement that it has not yet initiated any arbitration claim, and is seeking an “amicable resolution” to the dispute, it added that it has “not been afforded the treatment by the Romanian authorities that is stipulated by investment protection treaties signed by Romania.”
“The idea of the letter is to bring the two parties to the table to progress discussions which have stalled over the last couple of years,” a Gabriel spokesperson tells bne IntelliNews. “Effectively this starts the clock ticking. There will be a period of three to six months for the Romanians to respond. If this does not happen, we will move on to the next steps. The ball is firmly in the government’s hands.”
Gabriel has been trying for some 15 years to move forward with plans to develop what could become the largest gold mine in Europe. The Rosia Montana area in Transylvania’s Apuseni mountains is part of a region known as the “golden quadrilateral” that has been mined since the late Stone Age. It became one of the Roman Empire’s most important sources of the metal and has been mined sporadically over the last two centuries, mostly on a small scale until Romania’s communist authorities built an open-cast mine in the 1970s. 30 years later production in the Rosia Montana area was shut down as Romania prepared to enter the EU, as operations were no longer economically viable and had been kept going only with hefty state subsidies.
Relaunching production would boost Romania’s gold output, which has dwindled dramatically over the last two decades. It would also create new jobs in a region where the mine closures have resulted in high unemployment. Gabriel, citing research from consultancy Oxford Policy Management, says that based on a gold price of $900 per ounce the project will directly and indirectly boost the Romanian economy by $19bn, rising to more than $24bn at a gold price of $1,200 per ounce.
However, fears about the impact on the region’s environment sparked Romania’s largest-ever environmental campaign led by local NGO Alburnus Maior. Over 20,000 people joined demonstrations in cities across Romania in September 2013, shortly before a critical parliament vote on the issue. Hundreds of diaspora Romanians also protested in London and other foreign cities.
Their chief concerns were over plans to use cyanide to extract gold and silver at Rosia Montana, warning of a “cyanide lake” that would be created in a mountain valley near the mine. Irina Bandrabur of Greenpeace Romania tells bne IntelliNews that 215mn tonnes of toxic sludge would be produced during the mine’s life, and that insufficient precautions are planned to protect underground and surface waters. “Romania will end up having an ecological disaster in the area... and a tailing pond of hundreds of hectares contaminated by cyanide. This would be a burden for generations to come,” Bandrabur says.
Environmentalists have also pointed to the precedent set by the Baia Mare disaster back in 2000, where 100,000 cubic metres of cyanide-contaminated water burst through a dam contaminating large swathes of farmland and leaking into the Tisza and Danube rivers to affect Hungary and Serbia as well as Romania.
Efforts to block development of Rosia Montana were stepped up in 2013, after the Romanian government struck a new agreement with Gabriel. Most likely in an attempt to spread blame for allowing the controversial project to go ahead, the government decided to draft a law on the agreement and have it approved by the parliament. After MPs voted down the bill almost unanimously in June 2014, Prime Minister Ponta said the project would be frozen until it received sufficient political support.
Ponta’s decision to put Rosia Montana’s development on hold, just five months before the presidential election, was seen as an attempt to disassociate his government from the increasingly unpopular project. The view of the government’s position as politically motivated is shared by Gabriel. “The project is no longer the subject of routine, regulatory analysis by the competent administrative bodies charged with its assessment; instead it has become hostage to conflicts between rival political factions and misinformation,” said the company’s January 20 statement.
Iohannis, who defeated Ponta in the November 2014 presidential election, has also been reluctant to become involved in a decision on Rosia Montana. While no official response to Gabriel’s letter has yet been made, Iohannis commented in a January 22 interview with Realitatea TV that the current approach to the issue was “inappropriate”. Like his predecessor Traian Basescu, Iohannis put the burden of responsibility onto the government – rather than the presidency – recommending that ministers resume negotiations with Gabriel.
Any move by Bucharest to move forward with the project would lead to a resurgence of popular opposition. Greenpeace’s Bandrabur says that further action this year “depends on the development of the project.” She says that in addition to the permits that Gabriel needs to receive, legislative changes would also be required. “Allowing this project to start would be illegal, as it contradicts the legislation, both on environmental issues and on cultural heritage issues.”
This puts Ponta’s government in the position of choosing between enraging the thousands of Romanians opposed the project or risking that Gabriel will go to international arbitration to obtain compensation – which a former minister of large projects estimated in 2013 could be as much as $2bn. It is already uncertain whether the coalition led by Ponta’s Party of Social Democrats will survive until the 2016 parliamentary elections. Iohannis’ National Liberal Party, currently in opposition, is increasing the pressure on the government, and the Democratic Union of Hungarians in Romania defected from the coalition shortly after 2014 election. Reviving one of Romania’s most divisive issues is unlikely to help keep the increasingly shaky government in power.
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