Gabriel Resources Ltd. ("Gabriel" or the "Company") (TSX:GBU) announces the
publication of its Third Quarter Financial Statements and Management's
Discussion and Analysis Report for the period ended September 30, 2012.
Additionally, the Company has today filed a new National Instrument 43-101
compliant Technical Report on the Rosia Montana Gold and Silver Project,
Transylvania, Romania, effective as at October 1, 2012 (the "Technical Report")
on the SEDAR website (www.sedar.com).
Summary
-- The political landscape of Romania has shifted significantly since the
start of 2012. The current Prime Minister, Mr. Victor Ponta, is the
third to have served Romania in this role in the last six months. Mr.
Ponta, President of the Social Democrat Party ("PSD"), leads a coalition
government ("USL"), predominantly formed by the PSD and the Liberal
Party ("PNL"), which was formally sworn in by Parliament on May 7, 2012.
At the beginning of September, 2012 the Government announced that the
parliamentary elections will be held on December 9, 2012.
-- Permitting for the Rosia Montana Project ("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.
-- With the uncertainty created by ongoing political change in 2012, and
Government focused on internal domestic (as well as EU related) matters
together with parliamentary elections in the short-term, the Company is
of the view that there will be no material dialogue with the Government
on the Project permitting for the remainder of the year and has scaled
back expenditure in most areas. 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.
-- An independent proposal has been put before the Alba County Council for
the organization of a regional referendum on December 9, 2012 in respect
of the recommencement of mining at Rosia Montana. The Company
understands that Alba County Council has yet to consider the proposal
fully and vote on this matter, however should such a referendum proceed,
the Company would welcome the platform to illustrate the positive impact
of the Project on environmental rehabilitation, job creation and
heritage salvation for an area that has many years of mining tradition
and no viable alternative to the significant economic benefits the
Project can deliver. Should the referendum go ahead, the Company may
have to resume certain activities including media and public relations
and increase its previously reduced expenditure accordingly.
-- The Company's 80.69% owned Romanian subsidiary, Rosia Montana Gold
Corporation S.A. ("RMGC"), recently received the 17th positive court
decision for the progress of the Project from 18 legal challenges to
permitting, licencing and other Project matters since early 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. The Company 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.
-- $89.7 million of cash and cash equivalents was held at September 30,
2012.
-- SRK Consulting (UK) Ltd ("SRK") has provided a Technical Report
commissioned to reflect the status of the Project as at October 1, 2012,
and to present updated capital and operating costs and revenue
projections from those last published by the Company in March 2009 (the
"2009 Report") within the context of the current environment for
commodity, capital equipment and consumable prices. Key highlights
include:
-- No material change to the Proven and Probable Mineral Reserve
previously published as there has been no material change to the
mine plan.
-- Annual production of the Project estimated at an average of
approximately 610,000 ounces of gold and 2.6 million ounces of
silver (years 1-5) and 485,000 ounces of gold and 1.8 million ounces
of silver over the 16 year life-of-mine ("LoM").
-- Initial capital cost of US$1.4 billion and LoM sustaining capital
costs of US$571 million.
-- Operating cash costs of US$16.97 per tonne of ore processed,
equivalent to US$399 per ounce of gold produced over the LoM
(including refining, transport, treatment, a four per cent royalty
and net of silver credits).
-- At a gold price of US$1,200/oz, silver price of US$20/oz and 10%
discount rate, a post-tax, pre-finance NPV of US$865 million, IRR of
19.6% and payback in year four of production.
-- At a gold price of US$1,800/oz, silver price of US$35/oz and 10%
discount rate, the post-tax, pre-finance NPV increases to US$2.5
billion, the IRR rises to 32.5% and payback accelerates to year two
of production.
-- Estimated capital required to bring the Project to positive cashflow
is approximately US$1.54 billion.
Jonathan Henry, Gabriel's President and Chief Executive Officer, stated:
"The potential for a local referendum is a positive development for the Company
- this would allow an open and transparent platform for those that will be
directly impacted to demonstrate their true support for the Project. The Project
will provide substantial economic, social and environmental benefits not only
for the local area around Rosia Montana but also for Romania as a whole. In the
absence of any public commitment from the Romanian Government, the timeline for
permitting the Project remains uncertain, and is likely to remain so until after
the December parliamentary elections."
Further information on the highlights of the Technical Report, and commentary on
the operations and results in the third quarter of 2012 is given below. The
Company has filed its Condensed Consolidated Financial Statements, Management's
Discussion & Analysis and Technical Report on SEDAR at www.sedar.com and each is
available for review on the Company's website at www.gabrielresources.com.
About Gabriel
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.
Further Information
Financial Performance
-- The net loss for the third quarter was $3.7 million, or $0.01 per share.
Liquidity and Capital Resources
-- Cash and cash equivalents at September 30, 2012 totaled $89.7 million.
-- The Company has been implementing its previously announced plans to
reduce substantially monthly costs until such time as the Government
moves ahead with Project permitting. Notwithstanding, should the
proposed referendum go ahead, the Company may have to re-activate
certain activities.
NI 43-101 Technical Report
-- The Technical Report filed today reflects the status of the Project as
at October 1, 2012 and presents updated capital and operating costs and
revenue projections from those previously published within the context
of the current environment for commodity, capital equipment and
consumable prices.
-- There is no material change to the Proven and Probable Mineral Reserve
previously published as there has been no material change to the mine
plan. SRK's audited Mineral Reserve Statement reflects the ore planned
to be mined as assumed by the economic model and simply comprises the
portion of the Mineral Resource that, inclusive of mining dilution and
allowing for mining losses, falls within the pit outlines designed.
-- SRK considers the Mineral Reserve statement summarized below, and the
following Mineral Resource statement, to be in accordance with the
Canadian Institute of Mining, Metallurgy and Petroleum (CIM), CIM
Standards on Mineral Resources and Reserves, Definitions and Guidelines
(CIM Standards).
Reserve Category Tonnage Au Grade Ag Grade Au Metal Ag Metal
(Mt) (g/t) (g/t) (Moz) (Moz)
-----------------------------------------------------------------------
Proven 112.5 1.63 9.01 5.9 32.6
Probable 102.5 1.27 4.55 4.2 15
-----------------------------------------------------------------------
Total 214.9 1.46 6.88 10.1 47.6
-----------------------------------------------------------------------
-- The audited Mineral Resource statement is reported by SRK at a cut-off
of 0.4 g/t Au (rather than 0.6 g/t Au used in the 2009 Report) to
reflect the fact that at current gold prices this material has potential
to be economic and is summarized below.
Tonnage Au Grade Ag Grade Au Metal Ag Metal
Resource Category (Mt) (g/t) (g/t) (Koz) (Koz)
----------------------------------------------------------------------------
Measured 171.5 1.32 8 7,260 43,160
Indicated 341.2 0.9 3 9,890 37,960
----------------------------------------------------------------------------
Measured and
Indicated 512.7 1.04 5 17,142 81,117
----------------------------------------------------------------------------
Inferred 44.8 0.98 3 1,420 4,100
----------------------------------------------------------------------------
-- The annual production of the Project is estimated at an average of
approximately 610,000 ounces of gold and 2.6 million ounces of silver
during its first five years of operation and an average of approximately
485,000 ounces of gold and 1.8 million ounces of silver over the 16 year
life-of-mine.
-- The initial and sustaining capital costs for the Project have been
updated for the purposes of the Technical Report as at the third quarter
of 2012. These updated estimates are a combination of first principle
estimates, quotes and escalations of previous estimates. Overall the
initial capital cost has increased from US$876 million in the 2009
Report to US$1.4 billion and the sustaining capital costs from US$366
million in the 2009 Report to US$571 million.
-- Operating cash costs, estimated in accordance with standard industry
practices and valid as at the third quarter of 2012, equate to some
US$16.97 per tonne of ore processed, equivalent to US$399 per ounce of
gold produced over the LoM (including refining, transport, treatment, a
four per cent royalty and net of silver credits).
-- The economic analysis presented by SRK in the Technical Report, which
considers the Proven and Probable Mineral Reserve planned to be mined
and processed over a 16 year period at the Project derived the following
key post-tax, pre-finance LoM results at a gold price of US$1,200/oz and
silver price of US$20/oz:
-- Undiscounted cash flow US$3.6 billion;
-- NPV at a 10% discount rate of US$865 million;
-- IRR of 19.6%; and
-- Payback of initial capital outlay in Year 4 of production.
-- SRK further reports that, assuming a spot price of US$1,800/oz for gold
and US$35/oz for silver in the economic analysis, the operating cash
cost, net of silver credits reduces to US$371/oz. On the same basis, the
following key post-tax, pre-finance LoM results are reported:
-- Undiscounted cash flow of US$7.7 billion;
-- NPV at a 10% discount rate of US$2.5 billion;
-- IRR of 32.5%; and
-- Payback of initial capital outlay in Year 2 of production.
-- Including estimated interest, financing and corporate costs the Company
estimates the capital required to bring the Project into production and
to a position of positive cashflow is approximately US$1.54 billion.
Political Environment
-- During 2012, the intense domestic political infighting has limited
significantly the level of Government engagement on the Project and
continues to be a cause for concern inside and outside of Romania with
pronouncements from the EU and European governments.
-- On July 6, 2012, Romania's Parliament voted to suspend the President
pending a public referendum on the President's removal. The referendum,
which was held on July 29, 2012, 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 was approved one month later by the
Constitutional Court and President Basescu was reinstated in his
official position on September 4, 2012.
-- With the uncertainty created by ongoing political change in 2012, and
Government focused on internal domestic (as well as EU related) matters
together with parliamentary elections in the short-term, the Company is
of the view that there will be no material dialogue with the USL
Government on the Project's permitting for the remainder of the year.
-- The Company 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.
-- On October 18, 2012 the Romanian media reported that a proposal had been
put before the Alba County Council for the organization of a regional
referendum on December 9, 2012 in respect of the recommencement of
mining at Rosia Montana, the location of the Project. The Company
understands that Alba County Council has yet to consider the proposal
fully and vote on this matter. There are multiple benefits that the
Project will bring to an area that is facing extreme poverty whilst
continuing to suffer a growing legacy of environmental damage and decay
of cultural heritage caused by past unregulated mining activities.
Should the referendum proceed, the Company would welcome the platform to
illustrate the positive impact of the Project on environmental
rehabilitation, job creation and heritage salvation for an area that has
many years of mining tradition and no viable alternative to the
significant economic benefits the Project can deliver.
Project Ownership and Royalty Rates
-- 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 official announcements since July 2012 and
the Company has had no discussions with the USL Government in respect of
Project ownership or royalty rates.
Environmental/Permitting
-- As a consequence of the recent political changes, the Company awaits
further clarification from the USL Government and the Technical Analysis
Committee as to whether further meetings or documentation will be
requested and the next steps in its environmental 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.
-- The permitting progress of the Project relies heavily on Government
approval of the environmental permit ("EP") and the issuance, in
accordance with due process and Romanian law, of various permits and
approvals at local, county and federal levels of government. The USL
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. The Company is looking forward to
having an open dialogue with the Government, in whatever form it takes
following the December 2012 parliamentary election, to understand and
discuss any and all issues and concerns in relation to the Project.
-- As a result of the ongoing delays to the permitting process, two 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, have expired. One
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 been extended, pursuant to local council
decisions, through to July 2014 in both cases. Furthermore, RMGC has
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. Through Q3 2012, the
restoration of sixteen 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.
-- 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 achieved practical
completion during Q3 2012. The remaining restoration works are planned
to be scaled back until such time as the 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 has been opened to the public. The Company has already hosted
approximately one thousand visitors, representing various stakeholder
groups.
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 has been a long-standing sponsor to the annual 'Miner's Day &
Mining Communities and Mining Traditions Festival', which in August 2012
involved almost 4,000 attendees.
-- 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.
Litigation
-- 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. Since early 2010 17 court decisions (from 18
legal challenges to permitting, licencing and other Project matters)
have been positive for the progress of the Project.
-- Cases concluded during the third quarter of 2012 include:
-- An action commenced by two NGOs which sought the cancellation and
suspension of UC-87 was dismissed by the Bucharest Tribunal on
December 21, 2011. The NGOs appealed this decision, an appeal which
was irrevocably rejected by the Bucharest Court of Appeal on October
15, 2012.
-- A claim initiated by the Archaeological Restoration Association
("ARA") in the Alba Iulia Tribunal which sought to commence the
procedure of classifying certain buildings from Rosia Montana as
historical monuments was rejected at a hearing on February 3, 2012.
This decision was appealed by the ARA to the Alba Iulia Court of
Appeal, an appeal which was irrevocably rejected by that Court of
Appeal on October 3, 2012.
-- Upcoming hearings in the fourth quarter of 2012 include:
-- A claim seeking the cancellation of the Strategic Environmental
Assessment endorsement ("SEA") to the Industrial Area PUZ, which was
issued by the Regional Agency for Environmental Protection of Sibiu
in March 2011, is scheduled to be heard on November 9, 2012.
-- A claim seeking the suspension of the SEA, initiated by the same
NGOs, is also scheduled to be heard in the same court on November 9,
2012.
-- The next hearing of a claim by three NGOs in the Cluj Tribunal
seeking the suspension of the Archaeological Discharge Certificate
("ADC"), issued in July 2011 for the Carnic open-pit, is scheduled
to be heard on November 9, 2012.
-- On November 19, 2012 a request filed by the same three NGOs for the
cancellation of the ADC is scheduled to be heard with the Cluj
Tribunal.
-- A further hearing is scheduled for November 26, 2012 in respect of
the outstanding legal challenge originally commenced by RMGC in
November 16, 2007 to compel the MoE to resume the EIA review. On
June 19, 2012 the High Court of Cassation and Justice quashed a 2009
decision of the Bucharest Court of Appeal and further ordered that
the file should be returned to the Bucharest Court of Appeal to be
reheard on its merits. RMGC now awaits confirmation from the
Bucharest Court of Appeal that it has accepted RMGC's request to
discontinue a related monetary damages claim against the MoE and its
former officials and the case as a whole due to a lack of interest
(as the EIA review has recommenced).
-- 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.
Outlook
-- The Company's key objectives in the short term include to:
-- Operate on a reduced cost basis until such time as the 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;
-- Obtain approval of the EP and all other required permits that allow
construction activities to commence;
-- Maximize shareholder value, while optimizing the Project benefits to
those in the community and the surrounding area.
Qualified Person
The Technical Report was authored by Dr. Mike Armitage, FGS, C.Geol, MIMMM, CEng
of independent consultants, SRK. Dr Armitage is a Qualified Person for the
purposes of the Technical Report, under the standards set forth by National
Instrument 43-101 "Standards of Disclosure for Mineral Projects", of the
Canadian Securities Administrators. The Mineral Resources and Mineral Reserve
statements in the Technical Report are reported in accordance with CIM
Standards. Dr. Armitage has consented to the public filing of the Technical
Report and has reviewed and approved the extracts of, or summary from, the
Technical Report within this news release, as applicable.
Forward-looking Statements
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.
FOR FURTHER INFORMATION PLEASE CONTACT:
Gabriel Resources Ltd.
Jonathan Henry
President and Chief Executive Officer
+44 7798 801783
jh@gabrielresources.com
Gabriel Resources Ltd.
Max Vaughan
Chief Financial Officer
+44 7823 885503
max.vaughan@gabrielresources.com
www.gabrielresources.com
Buchanan
Bobby Morse
+44 207 466 5000 or Mobile: +44 7802 875227
bobbym@buchanan.uk.com
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