A Hill tackles a mountain

It’s been trendy these last few years for people trying to overcome unexpectedly enduring problems to say, “It’s not a sprint; it’s a marathon.”

For Gabriel Resources’ shareholders, the company’s tumultuous, eight-year attempt to develop the sixteen-million-ounce Rosia Montana gold project in Romania has evolved from a marathon into a kind of a relay race, with exhausted senior management teams passing the baton to a new group every few years.

Frank Timis, an emigre from Ceaucescu’s Romania, founded Gabriel Resources in 1997. He was instrumental in securing the title to Rosia Montana, and helped fund and advance the project during the late-1990s’ bear market for gold.

However, as Gabriel’s chairman, Timis was not the best face for the company: he had been convicted in Australia in 1990 and 1994 on two counts of heroin possession, in sufficient quantities to be deemed likely for sale.

In the fall of 2002, as Gabriel was preparing to seek senior project debt to build a mine at Rosia Montana, the company’s board commissioned an independent investigation into Timis’s history in relation to Gabriel’s interest in its Romanian subsidiary, Rosia Montana Gold (RMG). Gabriel has an 80% interest in RMG (and funds all development costs), state-owned miner Minvest holds 19.3%, and three Romanian companies own the remaining 0.7%.

The board concluded that the “prior conduct of Mr. Timis has not had any material adverse effect on the company and, in particular, the validity of its interest in the project.”

But that wasn’t the end of it: the board commissioned a second investigation in January 2003 after Gabriel President and CEO Robin Hickson (who had only been with the company since July 2002, replacing Clifford Davis) made allegations of improper corporate governance and management practices, including alleged illegal and unethical conduct by Gabriel and RMG. In particular, Hickson wanted Timis removed as chairman.

In similar fashion, the board concluded that Gabriel’s “business and affairs have been and are being conducted in accordance with applicable laws in all material respects and that the allegations of illegalities are unfounded.”

By the time the dust had settled, Gabriel had spent more than $1 million on the two investigations and subsequent legal fees.

In March 2003, the squeaky clean Oyvind Hushovd, the well-regarded former president of Falconbridge, became Gabriel chairman and CEO after serving on the board since November 2002. Timis resigned, withdrew from the board and moved into an advisory role as a significant shareholder.

Within weeks of Hushovd’s appointment, four key officers — Hickson, Andrew Kaczmarek, Bruce Marsh and Michael Steyn — simultaneously tendered their resignations, all citing “personal reasons.” Chief Financial Officer Paul Martin also resigned but later rejoined the company.

In June 2003, Gabriel bulked up its board with three heavyweight independent directors: former Rio Algom President Michael Parrett, Quest Investment President Murray Sinclair Jr., and former Falco executive Michael Young.

Hushovd then added former Australian Magnesium and Normandy Mining executive Richard Hill to be Gabriel’s vice-president of operations and RMG’s managing director.

Hill’s first task was to build up Gabriel’s weak Romanian management team and revamp several departments, notably those in public and community relations. It was a response to the long-standing and vociferous opposition to the project by environmentalists, anti-capitalists and nationalists, both in Romania and elsewhere in Europe.

Hushovd and Hill succeeded in pushing forward a now half-finished relocation and resettlement program that is moving some 2,000 inhabitants out of the town of Rosia Montana, which must be sacrificed in order to begin mining.

Last year was notable for the arrival of Newmont Mining as a major shareholder. The gold giant pumped $28 million into Gabriel in return for a 10% interest and warrants that could boost its stake to more than 18%, if exercised.

But progress on the ground at Rosia Montana again proved slow and frustrating, and the second quarter of 2005 saw yet another management team take the reins at Gabriel. With Hushovd retiring into a role as non-executive chairman, Alan R. Hill stepped in as president and CEO, in addition to being CEO of RMG.

Hill is a veteran mine builder with an impressive track record as executive vice-president with Barrick Gold, where he spent more than twenty years before his retirement in September 2003.

With Barrick, Hill helped build the company’s stable of large, profitable mines and advanced projects in what were often pretty tough locations: Alto Chicama and Pierina in Peru; Pascua-Lama on the Chilean-Argentine border; Veladero in Argentina; Cowal in New South Wales; Bulyanhulu in Tanzania; and Goldstrike in Nevada.

Gabriel CFO Paul Martin resigned for good this year, and was replaced by accountant Richard Young — another Barrick veteran, experienced in both mine finance and development.

Greek-American Yani Roditis, an 11-year Barrick employee, has just signed on as Gabriel’s vice-president of projects and will be based in Romania, where the company has set up new offices both in Bucharest, and at the mine site in western Romania’s Transylvanian mountains.

Hill made three key appointments to RMG: John Aston as vice-president of development and communications; Greg Duras, vice-president of finance; and Liviu Popa as vice-president community relations.

Lastly, Gabriel added Raphael Girard to its board, the Canadian ambassador to Romania from 2000 to 2003.

“This reminds me of the early days in Barrick Gold,” said Hill during a presentation in Toronto in early August. “Everybody supported one another and so we built a team that was very knowledgeable and we communicated very well with one another. Nothing was held back and that’s the only way to grow a project, and especially one like this.”

Next on Hill’s agenda at Rosia Montana is to improve community support and restart the stalled resettlement/relocation program. He also wants to update the resource estimate, tapping into working capital that is expected to fall to $20 million by year-end, assuming no warrants are exercised.

If Gabriel can obtain a construction permit within a year, then Rosia Montana could conceivably begin pouring gold in early 2009.

“I’ve always worked on an aggressive schedule, that’s why we need good forward planning,” said Hill. “We are at the beginning of growing something quite substantial. And it’s not for sale anymore; we are going to build this properly.”

The Gabriel board can pat itself on the back for putting together a strong management team this time around. If Hill and his new hires can’t make things happen at Rosia Montana and turn it into Europe’s biggest gold mine, then it’s likely no one in our industry can.