Europe's Gold Miners Getting Their Hands Dirty Again

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"With the entire Eurozone feeling the pinch of austerity measures and jobs in scarce supply, put-upon politicians are looking increasingly favorably on industries that can provide employment, including mining."

There is a long tradition of mining in Europe. The Iberian Peninsula has been and still is a very prospective area.

But, for Western Europe, at least, it is a tradition that has waned in recent years. While there are still a number of mines active in the region and new ones ramping up, for a long time it made more sense for European countries to focus on importing raw materials and on selling manufactured goods, especially with a strong currency on tap.

From a politician's point of view it was easier, cheaper and more environmentally friendly, from a voters point of view, to focus on other areas. And for miners, prospects were more interesting in the new world and developing countries.

But, with the entire Eurozone feeling the pinch of austerity measures and jobs in scarce supply, put-upon politicians are looking increasingly favorably on industries that can provide employment, even ones with, in some eyes, fairly poor reputations, like mining.

And, explorers and miners are drilling for hay while the political sun shines.

Companies like Wolf Mining, Caledonian, Dalradian and Conroy have focused their attention on various parts of the British Isles, while Lydian is looking in Albania. Scandinavia too is seeing a big burst of activity in mining exploration and development.

Greece is also seeing a resurgence of interest, with Eldorado Gold at the forefront of much of the exploration there while Romania, Spain and Portugal are increasingly attracting explorers such as Astur Gold and mine developers such as Gabriel Resources—all looking to develop, or revive, gold mining on the Europeasn continent.

And, it is not only greenfield exploration that is taking place, many of the projects under investigation have been on the cards for many years.

Astur Gold for example, is hoping to succeed where Rio Narcea failed in 2005, by bringing the Salave gold deposit in Spain into production, while Gabriel Resources is looking to push ahead the Rosia Montana mine in Romania.

But, this time round, the likelihood of getting things done, somehow seems better. As Astur Gold CEO, Cary Pinkowski, told Mineweb, "There is nothing new to what we are doing. There is a 5,000 year old history of mining in Europe, while, what one could call the environmental movement, has only been going for 30 years."

He adds, "Environmental concerns are the most important factor in modern mining. You simply cannot initiate mining operations without strict adherence to laws and standards. There is really a willingness from governments to revisit mining as a source of jobs. People all want the same things; health care and education and economic prosperity; things mining can help deliver. The only way out for Europe is new industry and new business you cannot just keep borrowing money."

It is worth pointing out that the Asturias region has been successfully mined since the first century AD and, more importantly from an economic point of view, the deposit was ready to go into production at a gold price of only $400/oz before it was nixed by the Asturian government. According to Astur much of the reason behind this was that in 2005 there was absolutely no engagement with the local community. And, as Pinkowski says, the underground mine envisioned by Astur for the deposit is a far cry from the open pit operation Rio Narcea was trying to push past the Principality of Asturias.

Eldorado Gold, which recently acquired European Goldfields and is looking to develop one gold project in Thrace and two others in the Chalkidiki Peninsula of Northern Greece, also sees a lot of potential in the region.

According to CEO, Paul Wright, there has been a shift in attitudes on the part of some of the countries in the region. He says, a number of the countries that historically had a vibrant resources sector but which migrated away from it over the years for various reasons are beginning to relook at mining because it brings with it the offer of real employment, real jobs real taxes.

"In Greece there is a huge awareness of mining's potential," he says, "I have been talking to people for the last four years and, in the last four months the increase in the level of support for the mineral sector has been overwhelming

He adds, "There is a common awareness across Europe that perhaps the dependency of imported metals that has been assumed for the past few decade may not continue in such a form (the whole China rare earths debacle highlighted that) and I think there is a recognition on the part of governments that European countries should do what they can to get greater control over the availability of raw materials."

For Wright, while more needs to be done, there is a growing realization on the part of governments that mining is part of our lives and it is not going to go away.

And, he says, "Governments would be better served by encouraging responsible mining in their jurisdictions and in that way enforce good quality mining.

Gabriel Resources President and CEO, Jonathan Henry, agrees that the region has become more receptive to mining telling Mineweb, "I think there has been a sea change in the last 20 years, with countries such as China coming to the fore as a powerhouse meaning the global economic dynamics have changed for good."

And, while he cautions that the various countries in the region have very differing view on mining, some are very receptive.

"I don't think you can say there is a developing gold industry in Europe; Germany has probably done all the mining it is ever likely to do, Hungary has banned the use of cyanide, as has the Czech Republic which means there's probably not going to be any gold mines in those countries. But, Europe is currently in a deep structural recession right now, and anything that can stimulate job creation and contribute to GDP will be attractive to politicians, which means the resources sector is well placed."

But, he warns, if it is to succeed the rules and regulations still need to be obeyed and this is where the region has fallen down in the past.

As Henry points out, while the region is often very good at creating rules and regulations, it is less accomplished at implementing them, the tailings dam accident in Kolontar, in Hungary is a good example of this, he says.

Indeed it is exactly this sort of "bad press" that Gabriel is trying to reverse with its Rosia Montana project in Romania.

Situated in Romania, Rosia Montana, like Astur's Salave project, has faced significant opposition in the past, in particular from environmental groups. The main reason for this, in Rosia Montana's case is that the region has been the victim of unregulated mining for around 2000 years and understandably people are concerned about the future impact a new mine could have.

Somewhat ironically, probably the best hope for environmental rehabilitation the region has is to let Gabriel in and let it help clean up the environmental mess made over the last few centuries as part of the development of a modern mine on the site.

"We are much better placed now than we were three or four years ago," he says, "because we provide jobs and economic benefits. Jobs and economic benefits are absolutely key for the Romanian people. The fact that we can clean up the environment that is currently very polluted, where there has been unregulated mining for 2000 years, is now secondary to the economic benefits which a mine of this scale can bring."

But, Henry says the group is thinking further than just the provision of jobs over the short term.

"Romania has never permitted a modern mine, let alone one which complies with the stringent rules and regulations of the EU. They are used to the communist style of mining which has been pretty harmful to the environment. What we are trying to do is to turn Rosia Montana into a ‘model' mine for Europe and get in an independent monitoring board to show people how it can be done."

If they get it right, one could well see an even larger resurgence of mining in the region which, as Pinkowski points out, has a lot going for it.

"I would much rather be in Europe than other jurisdictions. It has infrastructure, skilled labour, an educated workforce, a willingness from government for new jobs and, also, stable governments that don't change royalty rates or where you risk expropriation on your properties."

From mining's perspective it is definitely a region to watch.

Geoff Candy
Mineweb

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