Monday 19th November 2018

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Eldorado Gold’s Grexit?

As the country goes to the polls, the company issues a big fat Greek ultimatum

by Greg Klein

Eldorado Gold TSX:ELD isn’t mincing its words this time. The miner “cannot and will not continue to allocate expenditures to our projects in Greece while the Ministry of Energy is openly hostile to our activities,” declared CEO Paul Wright late August 20. The day’s top Greek story had been the government’s resignation and an impending election set for September. Now the suspension and possible termination of maybe 5,000 direct and indirect jobs add another dimension to the country’s economic crisis.

Eldorado says it acted in response to the previous day’s directive from the Ministry of Energy, which ordered suspension of pilot-scale metallurgical studies at a Finland facility. According to Eldorado, the ministry argued the tests should be conducted at a company site in Greece. Eldorado vowed to fight the decision through a court injunction.

As the country goes to the polls, the miner issues a big fat Greek ultimatum

Although Halkidiki mining dates back to antiquity, Eldorado’s
greenfield Skouries project has become a flashpoint for opposition.
(Photo: Eldorado Gold)

The ministry’s action was the latest in a number of government shots at the company. It followed court decisions just one week earlier which Eldorado said confirmed its right to forestry land and site clearing rights at the Skouries gold-copper project in northern Greece’s Halkidiki peninsula.

The region hosts three Eldorado assets, known as the Kassandra mines, within an approximately 10-kilometre radius. Activities at all three—including an active mine—are to be suspended next week. Failing satisfactory resolution of the Ministry of Energy dispute, Eldorado warns, the suspension will become a termination.

Eldorado’s 95%-held Skouries was to begin commissioning as an open pit in Q1 2017, followed by underground development. The company reckoned on a mine life of 27 years.

Its 95%-held Olympias is a past-producing underground gold operation with “significant amounts of silver, lead and zinc.” Ore processing was to begin next year, followed by ramp-up on completion of an eight-kilometre tunnel to a new mill. Eldorado estimated Olympias’ lifespan at 25 years.

Stratoni, an underground silver-lead-zinc mine, had about four years left to its life expectancy, ending a history said to date back to Alexander the Great.

As the country goes to the polls, the miner issues a big fat Greek ultimatum

Three Halkidiki projects, including an operating mine,
face suspension and possible termination.
(Map: Eldorado Gold)

North of Halkidiki lies Eldorado’s Perama Hill gold-silver deposit, a potential open pit that passed its preliminary environmental impact assessment (EIA) in 2012.

All the Halkidiki projects come under the same EIA. That’s Eldorado’s rationale for suspending all three, even though the previous day’s government directive concerned only Skouries and Olympias.

How can a country with such a long history of mining and an embattled economy turn “hostile” to the industry?

Much of the opposition focuses on Skouries, a greenfields project in Halkidiki’s wooded hill country. The governing Syriza party made its objections clear last February, one month after gaining office. That’s when the government revoked construction approval for Skouries’ processing plant. But complaints began well before Eldorado entered the region with its 2012 acquisition of European Goldfields.

Additionally, the country’s recurring anti-austerity demonstrations suggest a climate of protest that might be considered when media attributed a 2013 Thessalonika demo to 10,000 opponents of Eldorado. Only about 20,000 people live in Halkidiki, according to the company.

The region consists of 16 villages grouped within the Municipality of Aristotle, 11 of which “are openly pro-mining and so are the majority of the local residents,” Eldorado insists. Thessalonika, the country’s second-largest city, lies some distance to the west. To the east sits the semi-autonomous republic of Athos, home to several Orthodox monasteries and a site of pilgrimage.

As the country goes to the polls, the miner issues a big fat Greek ultimatum

East of the Kassandra mines, the monastic republic
of Athos draws pilgrims from around the world.
(Photo: Greg Klein)

An Agence France-Presse story posted by the Globe and Mail last April depicted one village where the controversy has set “neighbours and even family members at each others’ throats.” The article reported outbreaks of vandalism and firebombing hitting Eldorado property and a police station, as well as vandalism attacks against both supporters and opponents of the mines.

Opponents have no monopoly on demos, either. Thousands of angry employees protested in Athens last April, according to a Reuters dispatch in the Financial Post.

Although Eldorado’s August 20 decision threw thousands out of work just hours after the election was called, the company’s announcement made no mention of the election. By press time COO Paul Skayman hadn’t responded to a interview request. The company was unable to indicate when its court injunction might be heard.

While environmental concerns can never be shrugged off, the Greek economy stands to lose a great deal. Eldorado says it put over US$450 million into Skouries and Olympias since 2012. The government has so far pulled in over €50 million in payroll taxes, according to the company. Should the projects continue, the state would get another €1 billion in direct taxes over the next 20 years. The company would become one of Greece’s top exporters “with annual export revenues of approximately US$500 million per year depending on metal prices.”

Obviously the projects would benefit Eldorado too. Its Greek assets contain proven and probable reserves totalling approximately 8.9 million gold ounces, more than a third of the company’s global reserves of about 26 million ounces.

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