TORONTO (miningweekly.com) – Toronto-based Gabriel Resources is hopeful that upcoming national elections in Romania will bode well for its flagship Rosia Montana gold project, which is currently on ice until legal and permitting disputes with the government are resolved.

Besides other things, the company is challenging a decision made last year by Romania's Ministry of Environment and Sustainable Development to suspend the review of the environmental-impact assessment for the project.

The Minister halted the review process in September, based on a court challenge by a nongovernmental organisation to the validity of an urbanism certificate, and, although Gabriel maintains the suspension of the review was illegal, the company said two months later that it would retrench up to two-thirds of the full-time staff at the project, and halt activities including land acquisition and engineering and procurement, until the permitting process resumed.

However, Gabriel president and CEO Alan Hill said on Monday that the global financial crisis is putting pressure on the Romanian economy, which has enjoyed a period of buoyancy, but is now experiencing slowing growth, a weakening currency, cooling real estate markets and more cautious financial sector.

Major projects are being delayed or put on hold and the new economic situation “puts the Rosia Montana project in a new perspective”, Hill said during a conference call with analysts and Investors.

The project is expected to result in more than €2,5-billion of economic activity being injected into the Romanian economy, he said.

Further, Hill pointed to what he views as a “new appreciation” of the importance of resource development in Europe.

“I believe that ...we will see a Romanian political climate that will recognise the critical importance of resource development to economic growth, and see our Rosia Montana project as central to that development.

“Regardless of the form it takes in the months following the elections, we believe that the new government will be supportive of a fair and transparent review process,” he continued.

Gabriel holds an 80% stake in the Rosia Montana Gold Corporation, and Romanian State-owned enterprise Minvest SA owns 19,3%.

The mineral resource at Rosia Montana is estimated at 14,6-million ounces of gold, according to the firm's website.

The project has faced opposition in part because of Gabriel's plans to use cyanide mining, but the company maintains that its mine plan will strictly adhere to EU guidelines on the use of cyanide, which were adopted as domestic law in Romania in August this year.

PROJECT FUNDING

Capital costs for the Rosia Montana project were estimated at $638-million in 2006, but the company is updating both construction and operating cost forecasts, and expects to publish the updated figures during the first quarter of next year, said CFO Richard Young.

The firm has also restarted project finance discussions with its advisers, although it will not begin talks with potential lenders until the EIA has been approved.

Still, although the conventional debt and bond markets are "effectively closed", Gabriel's advisers are confidant that the company will be able to fund the project through multilateral agencies and "nontraditional" lenders, Young said.

However, financing may take longer to arrange, and the project schedule may need to be revised.

In the meantime, Gabriel, which posted a C$2,8-million loss for the third quarter, will continue to review all spending to conserve cash.

Shares in the company rose 19,85% by 13:06 in Toronto on Tuesday, to C$1,63 a share.

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