Canada's Gabriel Resources sues Romania for a record C$5.7bn

29th June 2017 By: Henry Lazenby - Creamer Media Deputy Editor: North America

Canada's Gabriel Resources sues Romania for a record C$5.7bn

Gabriel Resources is suing Romania for a record C$5.8-billion before the World Bank's ICSID
Photo by: Gabriel Resources

VANCOUVER ( – Canadian project developer Gabriel Resources is suing Romania for a record C$5.7-billion before the World Bank's International Centre for Settlement of Investment Disputes (ICSID), the TSX-listed company revealed on Thursday.

The company hopes to tie up a drawn out dispute with the country’s fluid government, based on what it argues boils down to the effective expropriation, without compensation, of its flagship Roşia Montană gold/silver project – the largest undeveloped gold deposit in Europe and among the top 20 undeveloped gold projects globally.

“The ICSID arbitration seeks compensation for the loss and damage resulting from the Romanian State’s wrongful conduct and its breaches of protections against expropriation as set out under bilateral treaties, as well as its unfair and inequitable treatment and discrimination of the project and related licences,” Gabriel president and CEO Jonathan Henry told Mining Weekly Online.

Romania has signed bilateral investment treaties (BITs) with both the UK and Canada. Both treaties provide that disputes may be submitted to arbitration before the World Bank’s ICSID. Gabriel in January 2015 first served a notice of dispute to the Romanian government to seek an amicable resolution to the permitting and authorisation of the Roşia Montană gold and silver mine, which has been stalled for years while the company awaits a key environmental permit.

Gabriel plans to file its memorial on the merits of the claim, wherein factual and legal arguments supporting its claims against the State will be detailed, before Friday. The memorial will also include details of the claimed quantum of the damages sustained on the back of Romania’s alleged treaty breaches.

“Since early 2015, Romania has not responded to the company’s notice of dispute or request for arbitration. Instead it has implemented tangential investigations, penalties and harassment,” Henry alleged.

The mine has been stuck in legal limbo for years and Gabriel has spent more than $700-million on the project since getting involved in the project in 1996.

According to Henry, an initial cooperation agreement with Romania in 1996 led to an exploitation licence being awarded to a Romanian State-owned entity to continue mining operations in Roșia Montană. Gabriel’s Romanian subsidiary, Roșia Montană Gold (RMGC) was named as an affiliate, with the rights to exploit Roșia Montană.

Gabriel owns 80.69% of RMGC, and Romanian State-owned miner Minvest has a 19.31% stake in RMGC. Henry explained that the licence was granted for a 20-year term, subject to five-year extensions. After coming into force on June 21, 1999, the State, through Minvest, continued its openpit mining operations at the Cetate and Cârnic massifs, two of the four mining areas of the project, until 2006, when a lack of State funding and mounting debts forced the operations to a halt.

Meanwhile, from 2000 to 2004 RMGC proceeded to conduct extensive studies and assessments of the mineral resource, which resulted in large, progressive increases in the resource estimates, and completed a feasibility study, which addressed the technical and economic viability of a large-scale openpit mine and processing plant for the project.  

Roşia Montană currently has compliant proven and probable reserves of 215-million tonnes grading 1.46 g/t of gold and 6.88 g/t of silver, containing 10.1-million ounces of gold and 47.6-million ounces of silver. The combined measured and indicated resources total 513-million tonnes grading 1.04 g/t gold and 5 g/t of silver, containing about 17.1-million ounces of gold and 81.1-million ounces of silver.

Subsequently, RMGC launched an application for an environmental permit with the Ministry of Environment in December 2004, and submitted its environmental-impact assessment in 2006. “The environmental permit has never been issued, despite several promises and guarantees by government to move the process along,” Henry said.

“Gabriel and RMGC believe the Romanian government can no longer be relied on to issue the permits necessary to develop the Roșia Montană project.”

The project had drawn fierce opposition from civil rights and environmental groups, who argue it would destroy ancient Roman mine galleries and villages and could lead to an ecological disaster. Neighbouring Hungary has also voiced opposition to the project, which carries a hefty price tag of about $1.5-billion to build.

However, Henry was quick to point out that the Roșia Montană project was designed to use established best practice mining, processing, water and waste management methods. Proven technologies, developed by experienced and industry recognised technical experts, were incorporated into the design to enable the project to have a minimal impact on the environment.

“For over two decades, Gabriel has operated in good faith and has complied with all applicable Romanian and European Union legal and regulatory requirements to obtain the requisite permits for the projects. The company has developed and committed to a comprehensive plan of investment for the sustainable development of the Roșia Montană region and all stakeholders, including protections for cultural heritage and cleaning up the widespread environmental damage caused by historic State mining activities.

“Gabriel’s plan for Roșia Montană has always had the support of the majority of local residents,” Henry stated.

He asserted that Roșia Montană remains technically feasible and economically viable.

“By licensing and then blocking the implementation of the projects, without due process and without compensation, Romania has deprived Gabriel entirely of the use, benefit and value of its investments in Romania, including its rights to develop the projects," he added.

Gabriel’s claim is based on alleged violations by Romania of several provisions of the BITs, including the expropriation of its investments in Romania without compensation; the failure to accord to its investments fair and equitable treatment and full protection and security; and the impairment of its investments by discriminatory and unreasonable measures.

Henry also pointed out that the Apuseni region, in which Roșia Montană is situated, has suffered, and continues to suffer, severe environmental degradation caused by historic and current State-owned mining operations.

“Through the use of modern mining technologies and a commitment to invest significantly in remediating pollution left behind by the State’s past unregulated mining operations, the project would have had a positive impact on the environment in and around Roșia Montană. Gabriel has also spent and committed more funds for preservation of cultural heritage than the Romanian government has offered to this languishing region,” Henry said.

Under the ICSID schedule of proceedings, Romania will be required to file its response to the Gabriel memorial by no later than February 15, 2018. Thereafter, Gabriel will be required to file a reply to the counter-memorial by September 5, 2018 and Romania will have to file its response to that reply by February 19, 2019. A hearing on the merits of the claim before the tribunal, in Washington DC, is scheduled to be held from September 9 to 20, 2019.

Henry expects an outcome at the earliest by 2020/21.

“The Roșia Montană project represents one of the largest proposed foreign direct investments in the country, with the potential to contribute $24-billion into the Romanian economy. The government’s actions will likely be viewed with apprehension by prospective investors,” he cautioned.