TORONTO, CANADA--(Marketwire - May 11, 2012) - Gabriel Resources Ltd. (GBU.TO - News) ("Gabriel" or the "Company") announces the publication of its First Quarter Management's Discussion and Analysis Report for the period ended March 31, 2012.
-- The political landscape in Romania changed significantly post quarter
end, on April 27, 2012, when the Romanian Government lost a vote of no
confidence. This vote led to the appointment of a new Prime Minister and
is the second major overhaul of Cabinet constituents in two months. The
main opposition parties which existed at the start of the year are now
in political power. Their combined political programme has stated that
it will re-analyze the Rosia Montana Project ("Project") in a
transparent manner and based on an open and democratic dialogue, so that
the decisions are in accordance with the national interest,
environmental protection and European legislation.
-- Prior to the change in Government, in the first four months of 2012
polls and statements by the President, Prime Minister and other
ministers in the Government reflected very positively on the desire to
create jobs and progress the Project under the right conditions to
encourage employment, foreign direct investment and revenue into the
-- Permitting for the Project remains the core focus of the Company.
Gabriel has concentrated its attentions throughout the quarter towards
ongoing engagement with the Technical Analysis Committee ("TAC"),
through its review of the Environmental Impact Assessment ("EIA").
-- Four TAC meetings have been held since September 2010 with the most
recent held on November 29, 2011, where the analysis of all EIA
chapters was completed, and Gabriel has since been awaiting formal
confirmation from the TAC that all technical aspects have been
clarified to its satisfaction. In recent weeks, public statements
attributed to prior Government ministers have indicated that
additional considerations may have a bearing on the TAC process,
including: Government approval for the diversion of a stream; a
decision from the Ministry of Culture ("MOC") relating to the Orlea
open pit and the archaeological discharge permit in relation to this
pit; the appointment of a new TAC chairman and the requirement of a
further industrial waste management plan, each of which may delay
the TAC process further.
-- The Company will seek clarification from the new Government and the
TAC as to the next steps in its review process. At this time Gabriel
is unable to provide guidance on the time that it might take the TAC
to vote on the EIA or to release its recommendation to the
-- RMGC recently achieved the 15th court victory for the Project from 16
hearings since 2010, however NGO's against the project have continued to
register new legal challenges in the quarter against local, regional and
national Romanian authorities that grant licenses, permits,
authorizations and approvals for many aspects of the Project.
-- Discussions with the relevant ministries of the Government have been
continuing on the proposal which has been with the Government since late
January 2012 regarding the potential for a revised ownership interest in
the Project, royalty rate amendment and the route to successful
permitting of the Project. On March 30, 2012, the previous Government
confirmed that there has been no adoption of the previously proposed
legislative increase in royalty rate for precious metals production from
4% to 8% and that the royalty regime should be reviewed further in the
short-term. The Company's intention is to engage in dialogue with the
new Government in regard to Project ownership and royalty rates.
-- $118.5 million of cash and cash equivalents held at March 31, 2012. The
Company is currently reviewing all areas of expenditure with a view to
reducing monthly costs substantially until such time as the new
Government moves ahead with Project permitting.
Jonathan Henry, Gabriel's President and Chief Executive Officer, stated:
"We continue to closely monitor the current political situation in Romania and will engage with the new Government as soon as it is willing, so that we are able to provide the market with an update on how recent developments will affect the timeline of the Project. The Company is looking forward to having an open and transparent hearing with the respective ministries involved in the permitting of the Project in order to discuss any and all issues in relation to its successful permitting. In the meantime we continue our campaign to highlight the substantial economic, social and environmental benefits of the Project, not only for the Company and its shareholders, but also for Romania itself and it is therefore encouraging to see recent polls in Romania showing a significant majority in favour of the development of mining at Rosia Montana."
Further commentary on operations and results in the first quarter of 2012, together with events anticipated in the short term, is given below. The Company has filed its Consolidated Financial Statements and Management's Discussion & Analysis on SEDAR at www.sedar.com.
Gabriel is a Canadian TSX-listed resource company focused on permitting and developing its world-class Rosia Montana gold and silver project. The Project, the largest undeveloped gold deposit in Europe, is owned through Rosia Montana Gold Corporation ("RMGC"), a Romanian company in which Gabriel holds an 80.69% stake with the 19.31% balance held by CNCAF Minvest S.A., a Romanian state-owned mining enterprise. Gabriel and RMGC are committed to responsible mining and sustainable development in the communities in which they operate. The Project is anticipated to bring US$19 billion to Romania as potential direct and indirect contribution to GDP according to 2010 estimates from UK-based Oxford Policy Management (using a gold price of US$900/oz). This contribution increases to over US$30 billion at today's gold price. The Project will generate thousands of employment opportunities. Gabriel intends to build a state-of-the-art mine using best available techniques and implementing the highest environmental standards whilst preserving local and national cultural heritage in Romania. For more information please visit the Company's website at www.gabrielresources.com.
-- The net loss for the first quarter was $2.6 million, or $0.007 per
share. The net loss for the quarter primarily reflects stock based
compensation and corporate costs of $2.9 million.
Liquidity and Capital Resources
-- Cash and cash equivalents at March 31, 2012 totaled $118.5 million.
-- In light of recent Euro instability, the Company is following a strategy
of reducing Euro balances through operational expenditure in preference
to US and Canadian dollar holdings. At March 31, 2012, Euro holdings
accounted for 21% of total cash and cash equivalents.
-- The Company is currently reviewing all areas of expenditure with a view
to reducing monthly costs substantially until such time as the new
Government moves ahead with Project permitting.
-- Throughout 2011, the Government, with support from the President,
continued to apply a general economic policy in line with the strategy
agreed with the International Monetary Fund. These austerity measures
gradually eroded the public support for the activity of the Government
and led to public protests in January 2012. The opposition PSD and PNL
party alliance ("USL") then announced its withdrawal from parliamentary
decision making and voting, for all usual activity. On February 6, 2012,
the lack of public support led to Prime Minister Emil Boc announcing his
resignation together with that of his entire Cabinet. Shortly thereafter
President Basescu asked Mihai Razvan Ungureanu, the Head of Foreign
Intelligence Service and former Minister of Foreign Affairs, to form a
new Government which was sworn in on February 9, 2012 pursuant to a
confidence vote in Parliament.
-- On April 5, 2012, following formal allegations of influence peddling and
filing false financial statements, Mr Laslo Borbely, the then Minister
of Environment resigned from office. On April 10, 2012 Mr. Atilla
Korodi, an MP representing the UDMR, accepted the position of Minister
of Environment, a role he held previously for approximately one year
spanning 2007 and 2008.
-- However, on April 27, 2012 the Government, led by then Prime Minister
Ungureanu, lost a no confidence vote brought by the opposition resulting
in its demise after only 11 weeks in power. President Basescu asked Mr.
Victor Ponta, leader of the Romanian Social Democratic Party (PSD), to
create a new Government and the USL coalition Government was voted in by
Parliament on May 7th. The next local elections are scheduled for June
10, 2012, with parliamentary elections currently scheduled for November
-- A broader understanding of the employment, economic, cultural
development and environmental issues is a key factor in the increasing
support for the Project among Romania's voting public. In April 2012 the
President, former Prime Minister and former Minister of Culture all made
encouraging statements regarding their understanding of the need for a
permitting decision in Rosia Montana and their support for any project
which adheres to environmental guidelines and brings jobs, foreign
direct investment and revenue to the Romanian budget.
-- The Company's public communication activities have been a key element
behind increased public awareness of the Project and have been
successful in many areas, evidenced by recent polls showing that a
majority of Romanians approve the development of the Project.
-- Given the critical importance of sustained economic development for
Romania, in addition to its commitment to adhere to the highest
standards on engineering, environmental, cultural and social matters,
the Company continues to draw public and political attention to the
significant economic and employment opportunities offered by the
-- In the first quarter of 2012 the Company continued to engage with
stakeholders, including directly with ministries of the Government, to
understand their issues and concerns and to explain the benefits and
impacts of the Project. This approach will be maintained with the new
Government in place.
Project Ownership and Royalty Rates
-- The Company has previously reported its understanding that the previous
Government was reviewing the royalty regime for extractive industries.
Through its website on December 27, 2011, the Government noted its
agreement of an increased royalty rate for all mineral resources
regulated by the Mining Law in Romania, and specifically that the
royalty payable to the Romanian state for precious metals production
would be increased from 4% to 8%.
-- On March 30, 2012, the previous Government confirmed that there has been
no adoption of any legislative change in royalty rate for mineral
resources and that the royalty regime should be reviewed further in the
-- In late 2011, a proposal in respect of a revised ownership interest in
the Project, royalty rates for gold and silver production and the route
to successful permitting of the Project was submitted to the Government
for consideration and a revised proposal was made by Gabriel in late
January 2012. Whilst there was a subsequent change in Government in
February 2012, the Company's discussions with relevant ministries
remained infrequent but ongoing until early April 2012. There have been
no discussions with the new Government installed in early May 2012 in
this regard. The Company will provide further updates as and when
matters are progressed.
-- Until recently, it was Management's understanding that the TAC had
concluded that all technical aspects have been clarified to its
satisfaction, although the Company has been awaiting formal feedback
from the TAC as to whether further meetings or documentation will be
requested. However, in recent weeks, public statements attributed to
Government ministers, such as those summarized below, have indicated
additional considerations may have a bearing on the TAC process and
consequently the Company will seek further clarification from the new
Government and the TAC as to the next steps in its review process:
-- whilst the Company had the required approval from the local council
of Alba Iulia for the diversion of a stream in the Corna valley,
under the Project footprint, in early March 2012, Mr. Borbely
(former Minister of Environment) noted such a diversion also
required Government approval. Government approval requires a formal
procedure in order for the Project to be made of 'public interest'.
Although the Company understands that documentation was drafted by
former Government officials to make the Project of public interest,
until the decision has been finalized there is the potential that
further progress with the TAC will be delayed.
-- that a decision from the Ministry of Culture ("MOC") relating to the
Orlea open pit and the archaeological discharge permit in relation
to this pit was required before the TAC process could be finalized.
On April 11, 2012 Mr. Hunor (the former Minister of Culture) made a
public statement noting that approval cannot be given for the entire
Project because an archeological discharge certificate has not yet
been granted for the proposed open pit at Orlea, which RMGC needs in
order to conduct archeological research. The Company's understanding
is that an archaeological discharge certificate for the Orlea
deposit is not required prior to the commencement of operations as
the Orlea deposit will not be mined until year 7 of the current mine
plan. The Company will be seeking clarification from the new
Minister of Culture.
-- Marin Anton, the chairman of the TAC, resigned from his post in the
Ministry of Environment and the Company is awaiting the appointment
of a new TAC chairman.
-- On April 25, 2012 Mr. Korodi (the former Minister of Environment)
noted publicly that dialogue with RMGC has been completed on most
technical topics, however implementation of the new EU waste
management directive required a further industrial waste management
plan to be provided, following which the TAC can require 60 days to
assess its content. The Company believes it has complied with this
requirement, having already completed an update on its waste
management plan. This plan has been reviewed by the National Agency
for Mineral Resources and has been submitted for approval to the
Ministry of Environment ("MOE"). The Company awaits further guidance
on the review process for its waste management plan.
-- On May 3, 2012 Mr. Korodi was reported in the Romanian media to have
stated that he was in receipt of a legal 'audit' that he claimed
shows that an April 4, 2012 court ruling by the Alba Iulia Court of
Appeal is an impediment to the continuation of the TAC procedure. As
noted with details on this court ruling set out below, the Company
will consider the implications of the AICA Decision once the written
reasons for the judgement are published by the court and in the
interim the Company has been advised that continuation in the
progress of the TAC review, environmental and other permitting for
the Project should not be affected by the AICA Decision.
-- Gabriel remains unable to provide guidance on the time that it might
take the TAC to vote on the EIA or to release its recommendation to the
Government. Ultimately, the environmental permit must be approved by a
Cabinet decision of the Government prior to its issuance. Gabriel
understands that such a decision process by the Cabinet could take a
period of sixty days or more from its receipt of a positive TAC
Archaeology and Preservation of Cultural Heritage
-- Significant progress was made in July 2011 with the issue of an
archeological discharge certificate for the Carnic open pit ("ADC"). In
order to end the protective archaeological regime covering the proposed
site of the Carnic pit, RMGC now awaits formal confirmation that the
Carnic massif has been removed from the List of Historical Monuments by
the National Monuments Committee and the Minister of Culture.
-- The Company has continued maintenance work on 160 houses located in the
historical center of the village of Rosia Montana, which will not be
directly affected by mining operations ("Protected Area"), with the aim
of preventing their deterioration. This emergency conservation work will
continue through a multi-year program, which will run in parallel with
the construction and the operation phases of the Project.
-- The Company has initiated the design work to prioritize the restoration
of more than 100 houses located within the Protected Area, which will
bring these back into functional use. To date, the design work for the
first phase of more than 50 houses has been completed with a view to
obtaining the necessary permits and starting construction activities in
Q2 2012, and the second phase of design work is in progress.
-- RMGC, in partnership with the local council of Rosia Montana, is
progressing the restoration of two iconic buildings (the old school
house and former town hall) in the Protected Area, along with the
rehabilitation of a number of houses, which will be used for tourism
-- RMGC has commenced further detailed archaeological work in the old
underground mining galleries that lie under the Protected Area. This
work has focused on opening up previously unexplored Roman galleries and
the commencement of archaeological rehabilitation work on underground
development adits and old mining areas that have never been restored for
public interest. These areas will be restored by RMGC with a view to
opening them as a permanent museum, a visible testimony to the 2,000
year mining history at Rosia Montana and an accessible example of
historical mining activities for parties with interests in the regional
mining sector. One such example is the Catalina Monulesti underground
mining gallery which is in the process of being successfully restored
Employment and Economic Benefits for Romania
-- Given the critical importance of sustained economic development for
Romania, the Company continues to draw public and political attention to
the significant employment and economic opportunities the Project
brings, while at the same time aiming to conform to the highest
standards on engineering, environmental, cultural and social matters.
-- The Company's communication efforts are fact-based, focusing on the
critically-needed employment and economic advantages the Project will
bring to Romania as well as the benefits to an area that has endured
significant damage to its cultural heritage and environment through many
years of mining activities and neglect.
-- RMGC currently employs approximately 500 people directly and numerous
others indirectly, with approximately 85% hired from the local Rosia
Montana community, and the Company is investing in training and skills
assessments for the construction phase of the Project.
Corporate and Social Responsibility (CSR)
-- Gabriel takes pride in its commitment to achieving the highest levels of
sustainability from workplace safety to community and environmental
responsibility. It has a clear goal of attaining business performance
through a dynamic process of continuous improvement in all aspects of
its business and respecting all stakeholders. The Company invests
significant resources into its CSR programs, which in Romania is a
multi-dimensional commitment managed by RMGC covering employee training
and safety, local communities, living traditions, direct and indirect
social impacts, educational programs, environmental protection,
community sponsorship and heritage aspects.
-- In the second quarter of 2011, the Company commenced the construction of
a church at the Recea resettlement site. This project is progressing
well and is forecast to be substantially complete in the first half of
2012. The Company is also currently working on restoring the Old Town
Hall in the centre of Rosia Montana and converting it into a hotel. Both
initiatives stands as a visible testimony to the determination of the
Company to deliver on its promises to the people of Rosia Montana.
-- Over the quarter the NGO's have continued their reported mandate to
bring forth a multitude of legal challenges against licenses, permits,
authorizations and approvals for many aspects of the development of the
Project. While a small number of these actions over many years have been
successful, most have been, and continue to be proved to be, frivolous
in the Romanian courts. RMGC recently achieved the 15th court victory
for the Project from 16 hearings since 2010.
-- On April 4, 2012, the Alba Iulia Court of Appeal upheld the ruling of
the lower court that a Rosia Montana local council decision ("LCD
1/2009") had been illegally adopted and was invalid (the "AICA
Decision"). The AICA Decision is not appealable. However, the AICA did
not rule explicitly that the original 2002 local council resolution,
which LCD 1/2009 had sought to ratify, was invalid. Further background
to the AICA Decision and the urbanism plan permitting process is
provided in the Company's new release of April 9, 2012. The AICA ruling
will be followed in the coming months by a written judgement. The
Company will need to consider the implications of the written reasons
for the judgment in due course. Until such time, the Company is advised
that the AICA ruling should not affect the TAC review of the Project's
-- Other ongoing cases of note, details of which are included in the
Company's Annual Information Form and Q1 2012 the Management's
Discussion & Analysis filed on SEDAR, include:
-- RMGC successfully intervened in an action brought by two NGOs
against Alba County Council in the Bucharest Tribunal for the
annulment and suspension of UC-87. The interested NGOs have appealed
the ruling to the Bucharest Court of Appeal, the first hearing of
which is scheduled for October 8, 2012. More recently, two NGOs
filed a claim for the annulment of UC-87 before the Cluj Tribunal.
On April 17, 2012, the Cluj Tribunal rejected the NGOs' claim. This
decision remains subject to a potential appeal by the interested
NGOs to the Cluj Court of Appeal.
-- A further case seeking both suspension and cancellation of LCD
1/2009 was initiated in the Bucharest Tribunal by two NGOs. In
October 2011, the Bucharest Tribunal, at RMGC's request, elected to
suspend such action until such time as the above-mentioned case had
been irrevocably settled by the AICA. The suspension element of that
claim has become moot because the relief sought by the NGOs has been
otherwise obtained through the AICA Decision, however, the NGOs may
request the continuance of the cancellation action in due course.
-- In September 2011, two NGOs filed a claim seeking the cancellation
of the Strategic Environmental Assessment endorsement ("SEA") which
was issued in respect of the Industrial Area PUZ in March 2011. The
first hearing is scheduled at Cluj Tribunal on June 15, 2012. A
second case seeking the suspension of the SEA has been initiated by
an NGO also through the Cluj Tribunal and the next hearing of such
claim is scheduled for June 15, 2012.
-- In late September 2011, three NGOs filed a request to the Cluj
Tribunal for the cancellation of the ADC issued in July 2011 and the
next hearing is scheduled to be heard on June 18, 2012. On January
20, 2012, the same three NGOs filed a claim in the Cluj Tribunal
seeking the suspension of the ADC and the next hearing is scheduled
to be heard on May 18, 2012.
This press release contains forward-looking information as defined in applicable securities laws relating to the Company and/or the Project (referred to herein as "forward-looking statements") that are based on management's current expectations, estimates and projections. Specifically, this press release contains forward-looking statements regarding the returns to Romania of a change in equity and royalty rates applicable to the Project. All statements other than statements of historical facts included herein, including without limitation, those incorporated by reference, those which may refer to the Company's financial position, business strategy, plans, objectives of management for future operations (including development plans and objectives relating to the Company's business) the economic impact, job creation, costs estimates, patrimony plans, future ability of the Company to finance the Project, Project delivery and estimates regarding the timing of completion of various aspects of the Projects' development or of future performance are forward-looking statements.
The words "believe", "expect", "anticipate", "contemplate", "target", "plan", "intends", "continue", "budget", "estimate", "projects", "may", "will", "schedule", and similar expressions identify forward-looking statements. Forward-looking statements are necessarily based upon a number of estimates and assumptions that are inherently subject to significant business, economic and competitive uncertainties and contingencies.
Forward-looking statements are not guarantees of future performance and are subject to known and unknown risks, uncertainties and other factors which are difficult, or may be beyond Gabriel's ability, to predict or control and that may cause the actual outcomes, level of activity, financial results, performance or achievements to differ materially from those expressed or implied by the forward-looking statements, These risks, uncertainties and other factors include, without limitation, changes in the worldwide price of precious metals; fluctuations in exchange rates; legislative, political or economic developments including changes to mining and other relevant legislation in Romania; geopolitical uncertainty, uncertain legal enforcement; changes in, and the effects of, the government policies affecting the Company's operations; uncertainties related to timelines for awaited approvals; changes in general economic conditions, and the financial markets; operating or technical difficulties in connection with exploration, development or mining; environmental risks; the risks of diminishing quantities or grades of reserves; and the Company's requirements for substantial additional funding.
Accordingly, readers should not place undue reliance on forward-looking statements. Gabriel undertakes no obligation to update publicly or otherwise revise any forward-looking statements contained herein whether as a result of new information or future events or otherwise, except as may be required by law.