Project Description
World Bank Involvment
Environmental and Social Concerns

Project Description

If realized, the Rosia Montana project in Romania's Apuseni mountains will become Europe's largest surface gold exploitation project. Gabriel Resources, the Toronto-based project sponsor, has obtained licenses to exploit a total of 4282 hectares in a region also known as "the gold quadrilateral." Rosia Montana Gold Corporation is the operator for the first phase (1,600 hectares) of the project. It is a 80/20 joint venture between Gabriel Resources and Minvest, Romania's state mining company. Under the agreement, Gabriel Resources will deliver the base capital of US$4400 million. In exchange, the Romanian government will receive a 2% gross production royalty. Gabriel Resources estimates to achieve payback for the project in only 2.6 years. Practical completion for the plant is set for 2004.

The Rosia Montana Gold Corporation project is expected to produce 500,000 ounces of gold (and 1.7 million ounces of silver) per year at about $157 per ounce over an average mine life of 15 years. It is comprised of four large open pits, a processing plant, rock dumps, a tailings dam and related infrastructure, yielding 196.4 million tons of waste material per year alone. Plans are currently set to process the ore in an open environment using cyanide sodium of 0.8 kg/ton. After cyanide processing, the tailings (classified as "reactive-hazardous" under EU directives) will be placed in an unlined pond covering an open surface of up to 600 hectares with a capacity of storing up to 250 million tons of tailings. An earth dam reaching 180 meters in height will be built across the valley of Corna.

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World Bank Involvement

Up until October 2002, the International Finance Corporation was considering financing the project. According to Romanian press, Gabriel Resources was seeking an amount of $250 million from IFC. This sum represents well over 50% of the base capital ($440 million) and had it been disbursed, it would have been the single most important financial contribution and catalyst for the project.

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Environmental and Social Concerns

Among the expected environmental and social impacts are severe habitat destruction, massive resettlement, destruction of archaeological sites as well as attenuation, pollution of surface and groundwater, contaminated soil and methane emissions. The mine foresees the resettlement of over 2,000 people living within the nationally protected valley of Rosia Montana. This means that eight churches, nine cemeteries and numerous historically protected houses will be affected and eventually destroyed.

The mining project will also have dramatic and far-reaching impacts upon the environment. It will forever alter the landscape, destroy prime natural habitat and rich agricultural land, and pose serious threats to multiple ecosystems. Changes will occur in river ecology due to sedimentation and flow modification. Drainage and sediment run-off from mining operation sites, including acid mine drainage, pumped mine water, and sewage discharge, will cause pollution in riverbeds, endangering the life in them. Mineral processing operations will result in methane emissions.

What's more, several cyanide and heavy metal spills have occurred in Romania in recent years. The best known, the Baia Mare cyanide spill, resulted in the release of an estimated 100,000 tons of tailings into the tributaries of the Tiza and Danube rivers, annihilating all aquatic life over a distance of 300 kilometers. While Baia Mare's target production was 2 million tons annually, Gabriel Resources' production estimates Rosia Montana's are 13 million tons annually.

Rosia Montana is the oldest documented town in Romania and the valley has been declared Protected National Patrimony by a governmental decree dated April 2000. While the Roman mine galleries all along the valley are of outstanding archaeological importance, an archaeological team in the summer of 2002 discovered a circular Dacio-Roman mausoleum 10 miles south from the current gold mine's waste dump. Gabriel Resources has been foraging in an area close to the mausoleum during the month of August 2002. In its investor brochure and annual report, Gabriel Resources acknowledges the archaeological importance of the mining area. However, it only refers to transportable objects such as pots, coins, etc. that it intends to exhibit in a new museum. The question of effects on the cemeteries, the mausoleum, fortified buildings and the galleries remains unaddressed.

Among the most significant social impacts will be the resettlement of people living in the Rosia Montana and Corna valley. There are over 740 family farms that depend on the land for their livelihoods, and there exists significant opposition to forced resettlement. Under the Rosia Montana Gold Corporation resettlement plan, if locals choose to resettle, they would receive a 200 square meter bungalow offered by Rosia Montana Gold Corporation. However, the reality is that the people will be unable to pay for the maintenance of these modern-style bungalows. In addition, there is no place to keep animals and to grow vegetables, unlike the farm areas and orchards that people currently possess and need in order to survive. A significant proportion of those opposed to resettlement are older people who have lived in the area all their lives. For these people, the mining project has already generated a range of difficulties, including "soft" intimidation and feuds with family and community members. Many people argue that they will be unable to survive resettlement, let alone live in a new and unfamiliar environment.

There exists widespread concern about conflicts of interest and increasing corruption, and not without reason. The current local mayor was elected because he advocated the rejection of the gold project, but changed his position when the corporation accused him of fraudulent behavior. Gabriel Dumitrascu, the project manager, used to be the director of Romania's Environmental Protection Agency. The background of the founder and vice chair of Gabriel Resources does not look promising either. Frank Timis, whose role very recently and for obvious reasons was marginalized, has two convictions for selling and supplying nothing less than heroin.

Had the World Bank financed this project, it would have been a serious contradiction with the Bank's mission to alleviate poverty in a sustainable manner. The gold from Rosia Montana will be used for jewelry - a business that is not likely to benefit the poor or the environment.

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