TORONTO, CANADA--(Marketwire - Aug. 3, 2012) - Gabriel Resources Ltd. (News - Market indicators) ("Gabriel" or the "Company") announces the publication of its Second Quarter Financial Statements and Management's Discussion and Analysis Report for the period ended June 30, 2012.
- The political landscape in Romania changed significantly on April 27, 2012 when the Romanian Government at the time, an alliance formed primarily between the Liberal Democratic Party ("PDL") and a Hungarian-ethnic party alliance ("UDMR"), lost a vote of no confidence. This vote led to the appointment on May 7, 2012 of a new Prime Minister, Mr. Victor Ponta, who is the third to have served Romania in this role in the last six months (a fourth served as interim PM for less than 24 hours). Mr. Ponta is President of the Social Democrat Party ("PSD") and leads a "USL" coalition government, predominantly formed by the PSD and the Liberal Party ("PNL").
- The new Romanian Government 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.
- Since its appointment in May 2012, the new Government has stated that it will not make any key decisions on the Project until after the national elections, currently anticipated to be held in November 2012.
- Permitting for the Project remains the core focus of the Company, however Gabriel is still awaiting formal confirmation from the Technical Analysis Committee ("TAC"), through its review of the Environmental Impact Assessment ("EIA"), that all technical aspects have been clarified to its satisfaction.
- The Company will seek clarification from the new Government and the TAC as to the next steps in its EIA 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 Government.
- Media statements by the Prime Minister and other ministers in the new Government since May 2012 cite key issues for resolution with the Company including environmental protection, publication of the Mining Licence, completion of the TAC/EIA process, Project ownership and royalty rates. To date, there has been no direct correspondence on any such issues. It remains the Company's firm commitment to engage in dialogue with the new Government in regard to any and all of its issues and concerns regarding the Project.
- The Company's 80.69% owned Romanian subsidiary, Rosia Montana Gold Corporation S.A. ("RMGC"), recently achieved the 16th court victory for the Project from 17 hearings since 2010, most notably the Romanian courts have confirmed that the urbanism plans currently in place for the Project remain legal and valid and have been since their approval in 2002. However NGOs 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.
- $100.6 million of cash and cash equivalents was held at June 30, 2012. The Company is currently implementing the conclusion of its review of 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:
"The timeline of permitting the Project remains uncertain, and is likely to remain so until the next general election is concluded later this year. In the interim, the Company is looking forward to having an open and transparent hearing with the respective Romanian ministries involved in the permitting of the Project in order to discuss any and all issues in relation to its successful permitting. Gabriel believes that the substantial economic, social and environmental benefits of the Project, not only for the local area around Rosia Montana but also for Romania as a whole, remain a compelling argument for positive action by the Romanian Government now and post the elections."
Further commentary on operations and results in the second quarter of 2012, together with events anticipated in the short term, is given below. The Company has filed its Condensed 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 second quarter was $2.7 million, or $0.007 per share.
Liquidity and Capital Resources
- Cash and cash equivalents at June 30, 2012 totaled $100.6 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 June 30, 2012, Euro holdings represented 9% of cash and cash equivalents (March 31, 2012: 23%; June 30, 2011: 46%).
- The Company is currently implementing the conclusions of its review of all areas of expenditure and is reducing monthly costs substantially until such time as the new Government moves ahead with Project permitting.
- On April 27, 2012 the former 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. The President of Romania, Traian Basescu, asked Mr. Victor Ponta, leader of the Romanian Social Democratic Party, to create a new Government and the USL coalition Government was voted in by Parliament on May 7, 2012. Parliamentary elections are expected to be scheduled for November 2012.
- According to polls reported in the media, the new Government enjoys majority public support amongst the voting public, and in local elections held on June 10, 2012 a turnout of approximately 58% resulted in the USL gaining approximately 50% of the vote and securing 36 out of the total of 41 County Council Presidents. Locally, the Mayor of Rosia Montana was re-elected for a further four year term, with support for the Project being a key pillar of his election campaign.
- On July 6, 2012 Romania's Parliament voted to suspend President Basescu pending a public referendum on his removal from office. The referendum, which was held on July 29, 2012, reportedly fell short of the 50% turnout threshold required for the result to be binding, despite a majority voting for the President's dismissal. The result of the referendum has yet to be approved by the Constitutional Court of Romania.
- Since the May 2012 investiture of the new Government led by Mr. Ponta, the local elections together with proceedings to remove the President from office and other political actions undertaken by the new Government have limited significantly the level of engagement at a ministerial level on the Project. A number of such actions undertaken by the Government in the last two months have been noted publicly as a cause for concern inside and outside of Romania with pronouncements from the EU and European governments.
- The Project remains a high profile issue in Romania, with wide coverage in television debates, on the internet and in print media, as well as being the subject of comment from leaders of all major political parties in Romania. However, with the uncertainty of recent political change, together with the local elections and a Government focused on internal domestic (as well as EU related) matters, the Company has scaled back considerably its media communication efforts.
- In its latest combined political programme the new Government has stated it will re-analyze the 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. In recent media coverage the Prime Minister and others in the new Government are reported to be keen to ensure that the Project benefits from the existence of environmental protection guarantees, de-classification of the mining licence as a state secret so it can be made public, a renegotiation of the Romanian State's participation and a decoupling of the Project from political lobbying.
- The Company is looking forward to having an open dialogue with the new Government to understand and discuss any and all issues and concerns in relation to the Project and will continue to pursue a strategy of engagement with all stakeholders, to explain the critical importance of the Project as part of the sustained economic development for Romania, and its commitment to adhere to the highest standards on engineering, environmental, cultural and social matters.
Project Ownership and Royalty Rates
- The Company has previously reported its understanding that the previous Government was reviewing the royalty regime for extractive industries and that on March 30, 2012, the then Government confirmed that there has been no adoption of any legislative change in royalty rate for mineral resources although the royalty regime should be reviewed further in the short-term.
- On July 31, 2012 it was reported that Mr. Ponta had requested a resumption of the legislative approval process of proposed amendments to the royalty rates applicable to certain resources including precious metals.
- There have been no discussions with the new Government installed in early May 2012 on the issues of Project ownership and royalty rates. The Company will provide further updates as and when matters are progressed.
- As a consequence of the recent political changes, the Company awaits further clarification from the new Government and the TAC as to whether further meetings or documentation will be requested and the next steps in its review process. 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.
- As result of the ongoing delays to the permitting process, one of the 19 endorsements to the Company's amended industrial zonal urbanism plan ("Industrial Area PUZ"), which designates an industrial zone under the footprint of the proposed new mine at Rosia Montana, has expired and a further endorsement is approaching expiry in August 2012. The equivalent endorsement for the zonal urbanism plan for the Rosia Montana historical protected area ("Historical Area PUZ") has also expired. In due course the Company plans to submit the necessary documents to obtain new endorsements.
- The validity of the existing General Urbanism Plans ("PUGs") for Rosia Montana and Abrud has recently been extended, pursuant to local council decisions, through to July 2014 in both cases. Furthermore, RMGC has recently obtained an extension to the validity of its urbanism certificate, UC-87, for a period until April 2013.
Archaeology and Preservation of Cultural Heritage
- The Company has continued maintenance work on 160 houses located in the historical center of the village of Rosia Montana ("Protected Area"), with the aim of preventing their deterioration. During 2012, the restoration of several of these houses has been completed and these are now in use. Whilst these village houses are not designated as historic, the restoration will contribute to maintaining the character of the village.
- To date, the design work for the first phase of more than 50 houses within the Protected Area has been completed and the design work for the second phase of approximately 60 houses is at a final draft stage. The permitting process for obtaining construction and restoration authorizations continued in Q2 2012 and is now in its final stages.
- 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 initiatives. The restoration of the former town hall is scheduled for completion during Q3 2012. The remaining restoration works are planned to be scaled back until such time as the new Government moves ahead with Project permitting.
- RMGC has continued further detailed archaeological work in the old underground Roman mining galleries that lie under the Protected Area. This work has focused on restoring previously unexplored galleries 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 and opened to the public.
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.
- 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.
- In the second quarter of 2011, the Company commenced the construction of a church at the Recea resettlement site. This church program achieved practical completion during Q2 2012, with internal finishing scheduled after an appropriate drying out period. The construction of three new houses at the Recea site was also completed in Q2 2012.
- A definitive review of the Recea expansion project is nearing completion and a feasibility study is also in progress for a further resettlement village to be built close to Rosia Montana for the remaining homeowners who have chosen, or may choose, to be resettled in the Rosia Montana area.
- Over the years certain foreign and domestically-funded non-governmental organizations ("NGOs") have initiated a multitude of legal challenges against licenses, permits, authorizations and approvals obtained for the exploration and development of the Project.
- The publicly stated objective of the NGOs in initiating and maintaining these legal challenges is to use the Romanian court system not only to delay as much as possible, but to ultimately stop 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 16th court victory for the Project from 17 legal challenges since 2010.
- Cases concluded during the second quarter of 2012 include:
- On April 17, 2012, the Cluj Tribunal rejected the NGOs' claim for the annulment of the urbanism certificate UC-87. This judgment can no longer be appealed and is thus irrevocable.
- On April 4, 2012, the Alba Iulia Court of Appeal ("AICA") upheld the ruling of a lower court that a 2009 decision of the local council of Rosia Montana ("LCD 1/2009") had been illegally adopted by the local council of Rosia Montana and was invalid (the "AICA Decision"). However, in a written judgment delivered on May 17, 2012, the AICA confirmed that the 2002 urbanism plan approvals remained in full force and effect. Thus, the Romanian courts have confirmed that the urbanism plans currently in place for the Project remain legal and valid and have been since their approval in 2002.
- A second legal challenge which also sought the suspension of LCD 1/2009 was irrevocably dismissed by the Cluj Tribunal on June 6, 2012 on the basis that the subject matter of the claim had been ruled upon by the AICA. A third case relating to LCD 1/2009 was initiated by two other NGOs but the action was suspended in October 2011 pending the above-mentioned case being irrevocably settled by the AICA. The NGOs may request the continuance of the cancellation action in due course.
- On June 19, 2012 RMGC obtained a favorable ruling in an appeal before the High Court of Cassation and Justice, the supreme court of Romania, on the legal challenge originally commenced by RMGC in November 16, 2007 to compel the Ministry of Environment to resume the EIA review. The Company awaits the written ruling of the High Court of Cassation and Justice in order to determine its next steps in these legal proceedings. As part of the proceedings before the High Court of Cassation and Justice, RMGC sought to discontinue its related claim for monetary damages against the Ministry of Environment and its former officials. RMGC awaits confirmation of the consent to the discontinuance of this claim.
- Upcoming hearings in the third quarter of 2012 include:
- A claim seeking the cancellation of the Strategic Environmental Assessment endorsement ("SEA"), which was issued by the Regional Agency for Environmental Protection of Sibiu in March 2011, is scheduled to be heard on September 14, 2012. The SEA is a key endorsement in respect of the Industrial Area PUZ.
- A second case seeking the suspension of the SEA, initiated by an NGO through the Cluj Tribunal, is also scheduled to be heard on September 14, 2012.
- On September 10, 2012 a request filed by three NGOs with the Cluj Tribunal for the cancellation of the ADC issued in July 2011 for the Carnic open-pit is scheduled to be heard. 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 of that case is scheduled for September 14, 2012.
- An action initiated by an individual who is seeking a declaration of ownership title over 37 hectares of land under the footprint of the Project which is the subject of a concession agreement between the Abrud city administration and RMGC.
- Due to the inherent uncertainties of the judicial process, the Company is unable to predict the ultimate outcome or impact, if any, with respect to matters challenged in the Romanian courts. In all circumstances, the Company and/or RMGC will vigorously maintain its legal rights and will continue to work with local, county and federal authorities to ensure the Project receives a fair and timely evaluation in accordance with Romanian and EU laws. However, there can be no assurance that the Company and/or RMGC (as the case may be) will prevail in these matters. If any claims are not resolved in the Company's or RMGC's favour, then such a negative ruling may have a material adverse effect on the timing and/or outcome of the permitting process for the Project and the Company's financial condition. The implications of a negative court ruling will only be known once such a decision is issued and the position of the Government is assessed.
- The Company's key objectives in the short term include to:
- Reduce substantially monthly costs until such time as the new Government moves ahead with Project permitting;
- Continue efforts to increase the Romanian public and Government awareness of the Project benefits, economic and otherwise, and support for the permitting of the Project;
- Complete the revised estimate of capital and operating costs of developing the Project, such that a new NI 43-101 technical report can be issued;
- Obtain approval of the EP and all other required permits that allow construction activities to commence; and
- Maximize shareholder value, while optimizing the Project benefits to those in the community and the surrounding area.
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.
Gabriel Resources Ltd.
President and Chief Executive Officer
Mobile: +44 7798 801783
Gabriel Resources Ltd.
Chief Financial Officer
Mobile: +44 7823 885503
+44 207 466 5000 or Mobile: +44 7802 875227