ROSIA MONTANA – part III

Briefly speaking the gains of the national economy are:
- The industrial valuation of a mineral resource located in an underdeveloped economic area;
- 250-500 new direct jobs (including foreign employees) as well as several new indirect job;
- Positive outsourcing: modernization of the transport infrastructure, social objectives, various additional activities;
- 2% royalties of the entire production paid to the state, that is USD 20 million;
- The land concession estimated to be USD 3 million;
- Over the entire exploitation period, the consolidated budget of the state receives about USD 300 million while the value of the deposit known so far is estimated to be over USD 3 billion.

According to different opinions I would point to different technical and economical aspects. The gold ore in the deposit, (1.4 g/t of ore, is very close to the profitability of the gold mining by the present technology that is 1.2 g/t of ore). Due to this, the Rosia Montana mine is permanently sensitive to the price fluctuation in the gold market, and it can be closed temporarily or permanently in case of unfavorable. Also after two successive updating of the feasibility studies (253 USD million the initial value and then 437 USD million the updated value) the cost of capital actually increased with about 180 USD million. This thing associated with other financial and ecological aspects caused in the last month a lower quotation at the Toronto Stock Exchange from 3.20 to 2.70 USD/share. Moreover Gabriel Resources applied for 100 USD million loan at the International Financial Corporation, but in October 2002 the same institution informed the company that they are not ready to finance the project due to the severe social and environmental problems that the project might cause. At present, the shares of the main shares holder in the Rosia Montana Gold Corporation are listed at the Toronto Stock Exchange.

The economic viability of the Project was researched in a study requested by the monitoring institutions. According to this, at an internal rate of return of 40 percent (and 44 percent by the improved study), the profitability limit is a little lower than a stock exchange price of 300 USD/gold ounce. The study also points to about 500 new jobs provided that in a excavation site that would reallocate at least 30 million tons of rock to be processed every year. According to the improved version of the study (27 February 2003) the processed rock production would be about 13 million tons meaning less possible jobs (250-300 people). As many foreign specialists would be included, the total number of jobs for the locals might be around 200 individuals.

The improvements in the Project have brought rise in the operation cost and capital expenses. On the stock exchange, it has caused that the investment become less attractive and more unlikely to be carried on. Among the reasons that have significantly influenced the quotation, there are the next ones:

a) the sodium cyanide management, is about a total amount of 250.000 tons. Moreover there is no technology or plants to remove the heavy metals (arsenium, uranium, nickel, and cadmium) from the waste sent to the settlement tank. The transportation by trucks of 250.000 tons of cyanide on the Romanian public roads is a hazardous one. In order to reduce the danger it is necessary to monitor each transport, to set clear rules. The neutralization of the residual cyanide through other means would raise the operation costs amount to 3 million USD/year, and the capital expenses would be increased by USD 9.1 million.

b) For the settlement lake, the following technological solutions should by financially evaluated:
- The protection of the settlement pond bottom with two plastic layers. The capital expenses increase by USD 8 to 10 million.
- The monitoring of the pool water infiltration into the ground (cyanide and heavy metal pollution). Although not included in the general project, such monitorisation that requires wells, channels, measurement and control instruments, etc. should receive financial support for the entire life of the lake.

c) The evaluation of the high risk cases.
The last version of the feasibility study seems not to deal with the high risk cases and risk management:
- Work accidents that, even small, may cause land sliding. The land sliding may cause higher water levels in the settlement pond and, under certain conditions; the cyanide containing water may flow into the surface waters in the area, that is an ecological catastrophe.
- The strong and frequent explosions in the area required by the current quarry operations. They may destabilize the ground weakened already by many unclosed galleries.

d) The cost of closing the mining operations:
According to the feasibility study, the above costs are estimated to be 19.53 million USD. For a similar mine in the USA, the cost was about USD 60 million. If such an underestimate is not clarified by the investment beneficiary, then it must be covered by the state budget. If the exploitation is to be closed before the stipulated term of 16.4 years due to the company’s possible bankruptcy, then the provisions set for the area rehabilitation should be used; but no mention of them is made in the feasibility study.

e) The waste stockpiles:
The feasibility study does not include comments on the acid-base balance of the waste material. Moreover, the waste stockpiles are not covered. Therefore, water and oxygen may easily penetrate the waste material and cause acid water and pollution that may alter the surface and underground waters.