Gabriel Resources banks on November elections (September 29, 2008)

The results of upcoming elections in Romania will be critical to the future of the stalled Rosia Montana gold project, executives of Gabriel Resources (GBU-T, GBRRF-o) told the Denver Gold Forum in September.

“We think we will need a change in government to get this permitting process back under way,” Richard Young, the company’s chief financial officer, told investors and analysts at the gold conference. “Elections will occur at the end of November and at that point we are hoping the obstructions we are facing will be lifted.”

The Romanian government suspended a review of the environmental impact assessment (EIA) of the Rosia Montana project in September 2007. Romanian courts have also annulled a key archeological permit needed to develop the mine and the case is now before the Supreme Court for the third time. (Gabriel says it is confident it will win the case before the end of the year, but says if it doesn’t, it will simply file for the permit again.)

Gabriel has long fought political opposition to its gold project, which includes foreign-funded NGOs. Last fall, after the ruling coalition suspended its review of the project’s EIA, Gabriel launched a lawsuit against the Environment Ministry and minister, and the Secretary of State.

“There has to be a new government,” Alan Hill, Gabriel’s chief executive officer, declared during his presentation on the first day of the conference. “The opposition to us is on a political basis, nothing else. Both major parties in Romania support mining development. We look forward to elections and to a new government in the new year.”

In a recent telephone interview with The Northern Miner, Kathy Sipos, vice-president investor relations and corporate communications, notes that political infighting following Romania’s accession to the European Union on January 1, 2007, resulted in a change in government. The new government is a coalition of the PNL (Liberal Party), and the UDMR (Hungarian Nationalists), who support the interests of Romania’s 2 million Hungarians.

Together the two parties, through their ruling minority coalition, control about 23% of parliament. Last spring, the Democrats and Conservatives dropped out of the coalition, allowing the UDMR to take over key ministries, including the Ministry of Environment.

The next government is most likely to be a coalition too, but one with different players that are, in Gabriel’s view, more pro-mining. One possibility is a coalition of the Democrats and the Liberals, the second would be a coalition of the Democrats and the PS-D (Social Democrats); and the third a coalition of the Liberals and the PS-D, any one of which should restart the environmental review of the Rosia Montana project, Sipos argues.

“Mining can drive Romania’s economic growth into the future and I think all politicians are aware of that,” she adds.

The resource-rich country is home to more than 300,000 unemployed miners, many of whom lost their jobs when Romania was forced to close more than 500 subsidized mines as a prerequisite to joining the EU, she notes.

Mining in this Eastern European nation has taken place for two millennia. But because mining practices under former communist regimes paid no heed to the environment, Romanians “only see the scars and environmental devastation left behind,” Sipos says. A major cyanide spill in 2000 didn’t help the industry’s reputation.

“Romanians have every right to be skeptical,” Hill declared during his presentation. “This is a nation that has never seen responsible mining.”

The challenge is to get Romanians to understand the difference between old mining practices and modern mining methods, Sipos notes.

“Our mine is a mine to clean up the mess,” Hill said. “Our EIA is second to none. I’ve never had the opportunity to build a mine to such high standards.”

While a new government won’t be up and running until well into January 2009, once the government review process begins, it should only take about six months to complete the EIA, purchase the remaining properties, nail down construction permits, update cost estimates and complete financing plans, according to Young. Construction would then take about 24 months.

So far, Gabriel has spent about US$150 million on the project. The mine was estimated to cost US$750 million to build in a 2006 feasibility study.

Management says it has restarted financing talks.

Rosia Montana has a gold reserve of more than 10 million oz., making it among the top 10 undeveloped gold deposits in the world.

At presstime, Gabriel Resources traded at about $2.20 per share, down from its 52-week high of $3.12 but above its 52-week low of $1.23.

The Toronto-based junior has 255.4 million shares outstanding.