Gabriel Resources Ltd. is facing a potentially crippling blow in its long battle to bring the Rosia Montana gold mine into production after Romania's prime minister suggested the project would not get approval amid protests over its planned use of cyanide.
The Toronto-based company said it was "urgently seeking confirmation" about what was actually said and advised "caution in the trading of its shares" after media reports cited the Romanian prime minister and other ministers saying the government will use an emergency procedure to halt debate of draft legislation in the two houses of parliament.
Shares in Gabriel plunged to their lowest in more than a year Monday, trading as low as 41 cents before regaining some ground to trade down 76 cents or 52 per cent at 71 cents on the Toronto Stock Exchange. The stock's previous 52-week low was $1.11.
Thousands of people demonstrated in Romania's capital of Bucharest on Sunday, joining environmentalists and historians in urging lawmakers not to pass legislation that would approve the mine as a "special national interest" creating foreign investment and jobs in a deprived area.
They later blocked a main road in the city.
Gabriel Resources has been waiting for 14 years for permits for the mine and has promised to develop the mine in a sustainable way.
But opponents say it poses too much of an environmental risk because it uses cyanide in the extraction process and will raze four mountains to make way for an open pit mine. Protesters also suggest the project would hand over Romania's assets to the Canadian company, with the country earning too little from the deal.
Romanian miners near the Rosia Montana project protested in a favour of the project and the Parliament seemed set to push through approval, but yesterday's opposition protests had Romanian Prime Minister Victor Ponta saying the mine would not go ahead.
'Notwithstanding that the government approved the draft legislation in its meeting on August 27, and recent polls illustrate a majority of support for progression of the project across Romania, it appears that the government has instituted emergency procedures to halt any debate in parliament' — Gabriel Resources statement
Analyst John Ing, who is president of Maison Placements in Toronto, said permits for Rosia Montana has always been the project's "gordian knot."
"This one has always been a difficult project," he said. "It's fraught with politics."
"It looked like the logjam was broken, but the demonstrations (worked against it). It always has been a political football, from day one."
The company suggested the latest move was a surprise, as it followed a positive turn in its long road to get approval for the project.
"Notwithstanding that the government approved the draft legislation in its meeting on August 27, and recent polls illustrate a majority of support for progression of the project across Romania, it appears that the government has instituted emergency procedures to halt any debate in parliament," Gabriel Resources said in a statement.
"If the draft legislation is rejected then the company will assess all possible actions open to it, including the formal notification of its intentions to commence litigation for multiple breaches of international investment treaties."
Romanian politicians withdraw support for mine
Ponta said Monday he would look for other ways to find jobs in the area and said he would oppose the mine to avoid "undermining the national economy."
For the mine to go ahead, parliament must pass legislation that would approve the mine in Rosia Montana, a town in a mining area of the country's northwest, as a "special national interest".
The leaders of two main political parties said Monday they oppose the project, but no date has been set for parliament's vote.
President Traian Basescu, who once strongly supported the project, last week announced that he would take a neutral stance on the legislation.
Rosia Montana has reported resources of 17.1 million ounces of gold and 81.1 million ounces of silver, and is held by Rosia Montana Gold Corp., a Romanian company in which Gabriel owns an 81 per cent stake.
Gabriel says the mine will bring more than $24 billion US to Romania as potential direct and indirect contribution to gross domestic product.