IFC drops Rosia Montana

Facing pressure from environmental groups and non-governmental organizations, International Finance Corp., the World Bank’s private lending arm, has decided to drop its plan to financially support the Rosia Montana gold mine project in Romania.

The IFC said in a prepared statement that it had, “concluded that it is in everybody’s best interest that we do not pursue discussions with the company regarding IFC’s involvement in the project.”

In a press release, Toronto-based Gabriel Resources (GBU-T) said IFC’s departure came amid concerns that its involvement would lead to delays in the project’s development.

Gabriel notes that other sources of equity and debt financing should be sufficient to pick up the slack created by IFC’s departure. According to a report in the Wall Street Journal, IFC’s involvement wouldn’t have exceeded US$100 million. The IFC had also been providing social and environmental advice on the project.

Earlier this year, Gabriel tabled an optimization study by SNC Lavalin detailing the mining of 13 million tonnes per year over 16 years and annual production of 500,000 oz. at a total production cost of US$157 per oz. The initial capital cost of the mine would be US$253 million; another US$126 would cover sustaining capital.

The project hosts a massive, low-grade reserve of 208 million tonnes grading 1.56 grams gold and 7.8 grams silver per tonne (or 10.4 million contained ounces gold and 52 million contained ounces silver).

Environmentalist have long-argued against the required relocation of the town of Rosia Montana, and a planned 4-sq.-km reservoir to contain tailings from the operation.

The company notes that its plans at Rosia Montana include a cyanide destruction circuit designed to reduce the cyanide content in the tailings facility to less than 1 part per million, well below current World Bank guidelines and European Union and Romanian laws.

Local support for the project remains strong owing to the region’s high unemployment and mining heritage.

So far, Gabriel has spent about US$1.9 million on relocation compensation payments, and 66 property owners have already been moved. The company is currently in talks with more than 600 property owners, and needs to move about 500 properties, including 150 houses, before construction can begin. In all, Gabriel will have to acquire 1,500 properties, about half of those houses, during the operation’s 17-year life span.

Gabriel says its expects to deliver its Environmental and Social Impact Analysis, the next key step in the permitting regime, to Romanian governmental authorities during the first quarter of 2003.

The company already has in hand all necessary local, state and federal approvals for the detailed industrial development plan, which outlines the location and size of all proposed open pits, plant and process facilities, waste dumps, tailings management facility and all associated infrastructure and access corridors.

Gabriel is currently updating the project’s resource and reserve estimate to include about 23,000 metres of infill and grade-control drilling sunk during 2002. Perth, Australia-based RSG Global is charged with updating the reserve, which is expected by the end of November. Tuscon, Arizona-headquartered IMC will prepare final mine plans based on the update.

Basic engineering, being carried out by SNC Lavalin, is expected to wrap up by yearend.