Project cost and funding mix
According to the S.C. Roşia Montană Gold Corporation S.A (n.d.), the principal company shareholders are the state-owned mining company Compania Naţională a Cuprului, Aurului şi Fierului “MINVEST” S.A. Deva (former Regia Autonomă a Cuprului Deva, until 1998), with 19.31%, Gabriel Resources Ltd. based in Canada, with 80% shares, and three minority shareholders (Cartel Bau S.A., Foricon S.A., and Comat S.A., each with 0.23%). The total capital is $ 1.97 billion, of which $ 1.40 billion is the initial capital and $ 571 million is the sustaining capital.
Demand, supply, and risks
Ekenberg et al. (2017) assert that gold deposits in Rosia Montana are 314 tons, and silver deposits are 1480 tons. Moreover, the planned average annual productivity of the mine would be about 17 tons of gold. At the same time, Romania’s profit would be more than 4 billion, that is, more than half of the estimated revenues.
The critical project risk was the use of cyanide in the gold and silver mining process. Harten (2020) notes that Romania already experienced the harmful effects of cyanide use in 2000 during the Baia Mare mining project owned by Aurul SA Corporation. The company disposed of over 100 tons of cyanide waste by breaking through the dam. It has resulted in the pollution of 100,000 square meters of freshwater, killing 1,240 tons of fish and causing substantial health problems for residents. This case has been called the worst environmental disaster in Europe since the Chornobyl disaster. Thus, the use of cyanide was highly controversial, given its environmental impact.
Initial problems with the project and final restructuring
Major construction contracts for the $ 4.3 billion ERC project were signed in 2007. Alexandrescu (2020) states that in 1999, the Canadian company Gabriel Resources obtained the right to mine gold in the Rosia Montana area. It was planned to use cyanide to dissolve and extract gold from ore. However, local eco-activists opposed it, as such a method threatens an environmental disaster. The protests and litigation that dragged on for several years led to the Romanian parliament refusing to support the Canadian company. The environmental impact assessment procedure began in 2004, but the final approval has not yet been received. Gabriel Resources never started gold mining but turned to the International Center for Settlement of Investment Disputes at the World Bank with a request for compensation of $ 4.4 billion. According to the bneIntelliNews (2021), currently, an arbitration process is underway in Washington for the payment of compensation by the Romanian state, a decision on which is expected in 2022.
Initial problems
Concern that mining will lead to the destruction of ancient Roman monuments in Rosia Montana
Alexandrescu (2020) claims that this area is home to some of the most significant Roman artifacts in the world, representing 7 km of ancient mine galleries. According to IntelliNews (2021) in 2021, UNESCO included the Rosia Montana mining cultural landscape on its World Heritage List. At the same time, the Canadian company claims that the inclusion of Rosia Montana in the UNESCO list fundamentally contradicts Romania’s obligations in connection with the investment of Gabriel Resources.
Mistrust of the Romanian population to the government
Harten (2020) notes that there is a prevailing suspicion among a large part of the Romanian population of forged documentation relating to a mining project. To the condemnation was added the indifference of the authorities and legislators to the concerns of citizens, as well as such sentiments that the political class does not pursue national interests. There is a public suspicion of political bribery and government corruption.
General distrust of a foreign company
The impression was that the country would not have enough resources due to a foreign company.
RMGC is a subsidiary established for this project
However, according to Ekenberg et al. (2017), inadequate information on transactions looked like a lack of transparency, further exacerbating the situation.
Alexandrescu (2020) affirms that the project was associated with problems such as a lack of clear support from local authorities, opposition from most Romanian NGOs, and negative pressure from the national media.
References
Alexandrescu, F. (2020). Social conflict and the making of a globalized place at Roşia Montană. Pro Universitaria.
bneIntelliNews. (2021). Romania’s historic Rosia Montana mining site added to UNESCO world heritage list. bne IntelliNews.
Ekenberg, L., Hansson, K., Danielson, M. & Cars, G. (2017). Deliberation, representation, equity research approaches, tools and algorithms for participatory processes. Open Book Publishers.
Harten, G. (2020). The trouble with foreign investor protection. OUP Oxford.
S.C. Roşia Montană Gold Corporation S.A. (n.d.). Report on environmental impact assessment study: Chapter 1. Introduction [PDF document].