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2016 Annual Results and Fourth Quarter Report

LONDON, ENGLAND / ACCESSWIRE / March 29, 2017 / Gabriel Resources Ltd. ("Gabriel" or the "Company") announces the publication of its Annual Results and Fourth Quarter Management's Discussion and Analysis Report for the period ended December 31, 2016.

Summary

  • The Company's core focus is the progression of its arbitration case against Romania before the World Bank's International Centre for Settlement of Investment Disputes ("ICSID") under applicable treaties for the promotion and protection of foreign investment to which Romania is a party ("ICSID Arbitration").
  • The tribunal appointed to hear and determine the ICSID Arbitration ("Tribunal") has now determined that Gabriel shall file its memorial on the merits and quantum of its claims ("Memorial") no later than June 30, 2017.
  • As previously reported, Gabriel's Romanian subsidiary, Roșia Montană Gold Corporation S.A. ("RMGC"), remains subject to a value added tax inspection which commenced on October 12, 2016. RMGC also remains subject to an investigation by the Romanian National Agency for Fiscal Administration ("ANAF") which Gabriel considers is abusive in nature and has been initiated by the Romanian authorities in retaliation for the filing of the ICSID Arbitration.
  • As at December 31, 2016, the Company held $60.3 million of cash and cash equivalents.
  • The net loss for the fourth quarter of 2016 was $13.2 million, and for the year ended December 31, 2016 was $71.5 million, or $0.19 per share.

Jonathan Henry, Gabriel's President and Chief Executive Officer, stated:

"The Romanian State's complete disregard for the benefits of the Rosia Montana Project, including job creation and the economic stimulus for the country, continues. The Company has been left with no alternative but to deploy significant resources to pursue the ICSID Arbitration claim against Romania whilst the Romanian State, through its agencies and authorities, is continuing to commit discriminatory, abusive and arbitrary acts against the Company and its investments. The Company remains fully committed to safeguarding its rights and investments in Romania and will continue to focus its efforts and resources on the progression of the ICSID Arbitration."

Further information and commentary on the operations and results in the fourth quarter of 2016 and the full financial year is given below. The Company has filed its Annual Audited Consolidated Financial Statements and Management's Discussion & Analysis on SEDAR at www.sedar.com and each is available for review on the Company's website at www.gabrielresources.com.

For information on this press release, please contact:

Jonathan Henry
President & Chief Executive Officer
Mobile: +44 7798 801783
jh@gabrielresources.com

Max Vaughan
Chief Financial Officer
Mobile: +44 7823 885503
max.vaughan@gabrielresources.com

Richard Brown
Chief Commercial Officer
Mobile: +44 7748 760276
richard.brown@gabrielresources.com

Further Information

Status of the ICSID Arbitration

  • The ICSID Arbitration seeks compensation for all of the loss and damage suffered by the Company and its wholly-owned subsidiary, Gabriel Resources (Jersey) Ltd. (together "Claimants"), resulting from the Romanian State's wrongful conduct and its breaches of certain bilateral investment treaties which the Romanian Government has entered into, including protections against expropriation, unfair and inequitable treatment and discrimination in respect of the Rosia Montana gold and silver project ("Project") and the related licenses.
  • On September 23, 2016 the Tribunal held a hearing to consider requests for certain provisional measures submitted to the Tribunal by the Claimants (the "PM Hearing"). Since the PM Hearing, the Tribunal has issued a decision on one aspect of the provisional measures requests and a further three Procedural Orders as follows:
  • Procedural Order No.2 issued on October 29, 2016; a direction to the Claimants and Romania to report back to the Tribunal on the issues discussed at the PM Hearing;
  • Procedural Order No.3 issued on November 14, 2016; establishing what documentation will be classified and confidential and how such documents should be protected and exchanged between the parties; and
  • Procedural Order No.4 issued on January 10, 2017; being the procedural calendar with specific dates for the filing of submissions by the parties and other necessary procedural matters ("Procedural Calendar").
  • In accordance with Procedural Order No.4, the Claimants are required to submit their Memorial no later than June 30, 2017, wherein the factual and legal arguments supporting the claims against Romania will be detailed. The Memorial will also include details of the claimed quantum of the damages sustained due to Romania's treaty breaches.
  • A hearing on the merits of the claims before the Tribunal is scheduled to occur in Washington D.C. from September 9 to 20, 2019, which date should be considered indicative and subject to change in the future should the Tribunal determine amendment to be appropriate in the circumstances.
  • Gabriel will continue to protect its rights and interests in Romania, including support to RMGC in respect of any further abusive, illegal, and retaliatory behavior of the Romanian authorities and, so far as reasonably practical and desirable, ensuring that existing licenses and permits remain in good standing.

RMGC Investigations

  • As previously announced by the Company, ANAF raised an assessment against RMGC in July 2016 demanding the repayment of value added tax ("VAT") deductions claimed by RMGC in the period 2011 to 2016 which, together with interest and penalties, totaled RON 42.9 million (approximately $13.7m). In late September 2016 the General Directorate for the Settlement of Challenges, a division of ANAF partially quashed that assessment and directed the VAT inspection to be re-run for the same period but using a new inspection team. On October 12, 2016 ANAF commenced a new VAT inspection.
  • A separate directorate of ANAF has also continued to pursue an ad hoc investigation of a broad range of operational activities and transactions of RMGC and a number of its consultants and advisors over an extensive period spanning 1997 to 2016 (the "ANAF Investigation"). To date, ANAF has demanded that RMGC provide voluminous amounts of information and explanations in respect of, amongst other matters, transactions with its suppliers and financing transactions of RMGC. Although RMGC is co-operating in good faith with the ANAF Investigation, Gabriel believes that there is no justification for the ANAF Investigation, that the breadth and depth of ANAF's demands are intentionally abusive, and that it has been initiated in an attempt to intimidate and harm RMGC and the Claimants in view of the dispute with the Romanian State and the Claimants' filing of the ICSID Arbitration. As at the date of this MD&A, neither the Company nor RMGC has received any feedback on the status of the ANAF Investigation.

Long Lead-Time Equipment

  • Long lead-time equipment comprised of crushing and milling equipment was originally procured by the Group between 2007 and 2009. Since delivery, the long lead-time equipment has been stored in various warehouse locations which, with non-material exceptions, are outside of Romania and are held in accordance with both the original manufacturers' and current insurer's recommended storage requirements.
  • During Q3 2016, the Group sold a gyratory crusher for gross proceeds of US$2.0 million (approx. $2.6 million) and, after sales commission, recorded a net gain on disposal of $0.6 million.
  • Due to the combined status of the Project permitting and the ICSID Arbitration, the Company recognized an additional impairment of the long lead-time equipment of $3.9 million at December 31, 2016 (2015: $33.0 million), with the remaining book value recorded as assets held for sale. The Company continues, through its agents, to procure the sale of the remaining long lead-time equipment.

Liquidity and Capital Resources

Liquidity

  • Excluding cash flows from fundraising activities and those from the sale of long lead-time equipment, the Company's average monthly cash usage during Q4 2016 was $2.1 million, including costs in respect of the ICSID Arbitration.

Capital Resources

  • Cash and cash equivalents at December 31, 2016 amounted to $60.3 million.

Financial Performance

  • As in the prior year, as at December 31, 2016, the Company assessed the Project for asset impairment and concluded that, despite its continued efforts to develop the Project and to seek an amicable resolution of the dispute in arbitration, an impairment should be recorded. Accordingly, as at December 31, 2016, the Company recorded an additional non-cash write-down of certain residual assets owned by RMGC in the Project area of $4.2 million (2015: $631.2 million relating to all mineral property and a material proportion of its other property, plant and equipment (the "2015 Impairment")).
  • Given the nature of the assessed impairment indicators that gave rise to the 2015 Impairment, since January 1, 2016 the Company has determined that, absent any positive, material permitting developments, none of the Company's continuing expenditures meet the criteria for capitalization in the statement of financial position and all have been expensed to the income statement.
  • The net loss for the fourth quarter of 2016 was $13.2 million, and for the year ended December 31, 2016 was $71.5 million, or $0.19 per share.
  • The net loss for 2016 was significantly impacted by $6.6 million of expenditures which would previously have been capitalized, but in 2016 have been expensed, and the aggregate $8.1 million non-cash impairment charges relating to long lead-time equipment and other Project assets noted above, together with a one-off, non-cash, loss recognition of $34.4 million recorded in the Q3 2016 results (in compliance with technical accounting rules applied to the private placement completed in July 2016).

Parliamentary Elections

  • Parliamentary elections were held in Romania on December 11, 2016, where the Social Democrat Party (PSD) obtained 45 percent of the vote, enabling it to form a coalition government with the Liberal Democratic Alliance (ALDE). Together, the PSD and ALDE account for 250 of the combined 465 parliamentary seats in the two-house assembly. The PSD-ALDE coalition government led by Prime Minister Sorin Grindeanu was approved by the Parliament on January 4, 2017.

SOURCE: Gabriel Resources Ltd.