November 8, 2002
Dear Fund Manager:
I am writing to call your attention to the controversy surrounding Gabriel Resources Ltd. and their proposed open cast gold mine in Romania. I am writing on behalf of the Halifax Initiative, a Canadian coalition of non-governmental organizations working together to monitor international financial institutions and their projects. Our members include Oxfam Canada, West Coast Environmental Law Association and Kairos Canada. We are also working closely with a coalition of people in Romania, actively opposing the proposed mine.
Your company may be considering investing in this project or may have already done so. We are writing to highlight the risks involved in making such an investment in Gabriel Resources and the Rosia Montana mine.
(1) Commercial Risk
- Three major mining companies (including American Rio Tinto and Canadian Barrick) have considered mining the Rosia Montana area; none of them have decided to pursue the project at this time, whether as single venture or joint venture with Gabriel.
- GR had been in talks with the World Bank (WB) to secure US$100 million in funding for the project through the International Finance Corporation (IFC), the private sector arm of the WB. The WB signaled last month that it would not be financing GR’s mining project.
- From an investment perspective, the mine appears attractive because of the large reserve of gold (10.5 million ounces). Yet at a grade of 1.4 grams of gold per tonne of ore, which some experts consider optimistic, the reserves are very close to the 1.2 lower limit cut-off for economically processing gold. GR is also using cyanide processing to extract the gold from the ore – a process associated with low grade ore that might otherwise be seen as uneconomical.
- Local electricity prices are also expected to increase due to pressure from the WB on the Romanian government to phase out subsidies and expose the state-owned energy sector to privatization.
- Fluctuating gold prices, a potentially low rate of return, a lack of major financing for the project, and a lack of interest from major mining companies, combine to make investing in this junior mining company a marginal and risky investment.
(2) Environmental Risk
While Gabriel has laid out plans for an extensive Social and Environmental Impact Assessment, these will not be completed until at least the spring of 2003. In addition:
- According to an expert legal opinion commissioned by Greenpeace Austria, the Project “contradicts no only European Union environmental legislation, but also the basic principles and standards of the European Convention of Human Rights”.
- The Rosia Montana project entails developing Europe’s largest open-cast gold mine. This will involve clear cutting local forests to access the mine site. In addition to the open pits, there will be impoundment for 250 million tonnes of tailings left over from the mining process. This has a long term impact on the environment as it cuts short the life of future usable land.
- While GR have abandoned plans to build a 600ha cyanide storage pond due to local pressure, extraction of the gold from the ore still requires cyanide processing. Treatment will reduce the levels of cyanide in the tailings dam to below levels lethal to animals, but not aquatic life forms.
- Appropriate risk management requires multiple controls. Romanian authorities, however, lack the facilities to monitor the safe use of the cyanide and its by-products, and cannot guarantee that the cyanide will not leak into the soil, ground water and rivers. In fact, in 2000, there were two reported incidents of dam failure in Baie Mare and Baia Borsa, Romania. In the latter case, compensation has yet to materialize but there is a pending legal action/court case because of the toxic contamination of Hungary’s river system in the length of 400 kms. The claim for the damage is 1 billon USD by the Republic of Hungary.
- The project also risks instigating environmental catastrophes through other sources of pollution, as a result of acid leakage from the waste rock, sedimentary run-off, oil spills, and other noxious emissions.
- Furthermore, the extraction and preparation technologies the company proposes to use are incompatible with current European Union directives.
(3) Social and Cultural Risk
Within Romania, there is a strong coalition opposing the proposed mine.
- In late October, fourteen representatives of the Roman Catholic, Unitarian, Calvinist and Protestant churches released a joint statement against the proposed project.
- Over 40 scholars from across Europe and North America have written letters to the Romanian government protesting the project as it will demolish the famous (unique) ancient Roman mining settlement of Alburnus Maior. In fact, Gabriel Resources have already destroyed some of the Roman galleries, walls and roads, despite the fact that this is a Romanian national heritage site and cultural treasure.
- Local NGOs are particularly concerned by the human impact of the project. None of the people in the Apuseni Region were consulted about the project. There were some consultations in April which turned into a protest, and so Gabriel’s local company, the Rosia Montana Gold Corporation, abruptly stopped the proceedings and has not conducted follow-up consultations. Yet Gabriel resources is eager to evict these people from their homes and smallholdings in the mine area. Over 1800 people are threatened with eviction, hundreds of houses and flats will be demolished, and 8 churches and their cemeteries will be relocated.
- Little of the US$400m being invested in the mine will circulate in the Romanian economy; the jobs created for Romanians are expected to be temporary in nature, with workers hired on a short term basis, working long hours without contracts and under harsh working conditions. More than 700 families will loose their farms while the mine will not provide more than 400 jobs during its operation period.
In light of this, we hope that your company will decide, as we have, that Gabriel Resources’ Rosia Montana mine represents an unacceptable financial, environmental and social risk. We ask you, therefore to desist from investing in this project and reassess all future support for it.
Coordinator, Working Group on the EDC
- Legal Opinion from GreenpeaceUniversity of Vienna, Institute of Law (commissioned by GP)
- Press release from World Bank
- Press Release re Church Coalition
- Comments on the Rosia Montana Feasibility Study