Romania: Gold fever hits Bucharest
15 September 2011
As the economic crisis drives up the value of gold on world markets, the Romanian state intends to hitch a ride by reopening the mine fields at Roşia Montană in association with a Canadian firm. So far, the project has dug up more controversy than gold.
Every miner’s house in Roşia Montană, the story had it, has a tunnel that winds back to quarries of gold. Whether that was ever true can no longer be said, because Romania Gold Corporation has bought up all the houses.
Before the gold of Roşia Montană can be mined, this joint venture between the Canadian company Gabriel Resources and the state-owned Romanian Minivest awaits only an environmental certificate.
The hard core of opposition to reopening the mine, which was closed in 2006, argues that the project would wipe the Cârnic massif off the map, reduce to rubble a cultural heritage that dates back to antiquity, when the Romans exploited the gold in the region, and that the region could be seriously contaminated by the dangers of cyanide extraction technology. For its part, Gold Corporation argues that it will safeguard the archaeological heritage...
The financial crisis has boosted the price of gold to dizzying heights, and the analysts are expecting a steady growth in the payout for the precious metal. We are witnessing here a classic battle between industrial civilisation and the representatives of the post-industrial age who are opposed to the brutal exploitation of nature.
300 tons of gold under its rock and grass
The battle is being fought over an area heavily influenced by its mining history, where the environmental impacts have left behind a legacy difficult to manage. Stream waters near the mines run red because of the cyanide pollution, and the scarred hills seem to have been blown over by a cataclysm. During the Age of Gold [the Ceauşescu dictatorship], reducing pollution was not a priority of the communist regime. The quality of people’s lives meant nothing. And they have every reason to be frightened.
One of the main problems of the Roşia Montană project is the lack of trust that permeates it. The who’s-who of the major shareholders in Gabriel Resources [the parent company of Romania Gold Corporation] listed on the Toronto Stock Exchange is typical: billionaires, with a big appetite for financial speculation. Among them are Paulson & Co. and Electrum Strategic Holdings, investment funds specialising in gold, and Newmont Mining Corp. (USA), one of the world’s leading gold producers, whose shareholders include billionaire George Soros.
The Romanian state, through Minivest, is the largest single shareholder in the joint venture, holding 19 percent of the shares. But its participation seems undervalued. To be sitting on a mountain estimated to hide up to 300 tons of gold under its rock and grass ought to encourage a more substantial involvement.
Not enough to attract tourists
However, the contract detailing the participation of the Romanian state in the project is kept secret. Romania seems to be getting the banana republic treatment from shady investors. If the Canadian investor is thrown out of the deal, though, it could demand staggering compensation from the Romanian state.
Elsewhere in Europe, however, Sweden and Norway are actively going after their gold. The Swedish government has granted concessions on its gold deposits and is limiting itself to skimming off money in taxes and royalties. No apparent or underlying emotions have bubbled to the surface. In a country where the mining industry represents 0.3 percent of GDP, the issue is being treated as a simple matter of generating profit, and strict controls are in place to ensure standards are respected. Here in Romania, this sort of thing is absent.
The rush for gold remains the challenge. While the Roşia Montană project promises to dig up more than $16 billion’s worth of the metal over 16 years, Roşia Montană itself is likely to end up a ghost town, as 80 percent of the buildings have been bought up by Gold Corporation.
The archaeological remains, in locations that are hard to get to, are not enough to attract tourists. The local population has few opportunities in the labour market and no money to sink into tourism. The few hostels in the region are far from being profitable, and, what with the controversy, the town has not become any more attractive.