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Battles against cyanide continue in Romania

After the epic battle against the Rosia Montana gold mine in Romania ended in success, many people still don’t know that Romania and other countries in the region such as Bulgaria are still threatened by several gold mining proposals, some of which would involve the use of cyanide leaching.

The first open cast gold mine to use cyanide leaching in Romania would be the Certej project in Romania, planned for development by Deva Gold SA, majority-owned by Canada’s Eldorado Gold company.

The project is particularly sensitive given the fact that in 1971 the failure of a mine dam at Certej led to the death of 89 people. Yet it appears that Eldorado Gold has been underplaying the risks of the project and pumping up the benefits. So with this in mind Mining Watch Romania, of which Bankwatch is a founding member, has produced a new report aimed at giving Eldorado’s investors the other side of the story.

Below is their press release from today. The original is online here.

 

 

REPORT: No silver lining for the Certej cyanide gold mine

Romania, April 29, 2015 — Mining Watch Romania in association with 22 Romanian and international NGOs is pleased to present Anticipating Surprise-Assessing Risk: An investors’ guide to Eldorado Gold’s Certej mine proposal (TSX:ELD). The report exposes a compendium of risks associated with the Certej gold project and highlights some less evident or known facts that in return are likely to impair ELD’s ability to develop it.

Eldorado Gold, a low cost Canadian gold mining company, intends to open Romania’s first cyanide based open-pit gold mine. The Certej deposit is owned by Deva Gold S.A., a joint venture between Eldorado Gold (80%) and state-owned Minvest Deva (~20%). The proposal is facing both strong national and international opposition.

Due to opposition Eldorado’s Certej project has already undergone multiple changes; reflected in the significant increase of initial capital costs. Forecasted capital and production costs and projected revenues as published by ELD are based on over-optimistic and unverified projections in terms of costs and prices. Eldorado’s embellished story of its financial soundness has been called into question by analysts who have recently downgraded Eldorado Gold Corp from Buy to Hold due to ‘costs higher than expected’.

“Eldorado’s Certej project caught the full attention of environmental NGOs in the region. An increasing number of Romanian citizens demand transparency in the permitting process as opposed to the murky previous procedures” says Ionut Apostol from Greenpeace Romania.

The attempts on the part of ELD’s management to circumvene Romanian legal procedures was spotted by watchful citizens’ organisations who alerted the public and national supervisory authorities. Any further attempts to take advantage of servile, unscrupulous local officials is likely to induce additional reputational damage for Eldorado and will likely give rise to additional litigation cases. ELD’s environmental certificate is currently subject to litigation brought forward by civil society organisations active at Rosia Montana (TSX:GBU).

Romania’s most relevant and successful social movement for the past 25 years was triggered by opposition to a gold mining project – Rosia Montana. As has been the case with Rosia Montana, with Certej it is also becoming evident that the less transparent and the more corrupt a proposal is, the more risky it is.

“Eldorado obtained permits whose legality is either being questioned in courts [1] or have already been proven illegal. The profit margin of the Certej operation does not allow Eldorado to engage in media & advocacy campaigns or in legal battles comparable to Gabriel Resources. And even if it did, in light of the situation above it’s best for investors to drop out while losses are relatively small” adds Roxana Pencea of Mining Watch Romania.

According to Stefania Simion, strategic litigation coordinator for the Save Rosia Montana campaign: “Eldorado promotes a low cost mining project in a country that faced two devastating cyanide mining accidents. We will take all necessary measures to make sure no detail is left unchecked and any small irregularity will be signaled to both the public and supervising authorities.”

Eldorado Gold, just like Gabriel Resources more than ten years ago, tends to minimise and interpret the heavy risks of the Certej mine, thus exposing investors to uncertainty and hazard. Certej, just like Rosia Montana, is not a “quality” asset, as management presents it, for technical, financial, social and legal reasons described in the report. Low gold prices make the project’s profit margin very precarious, especially because management has not acknowledged that without the “social licence” there is a very high political risk associated. “Shareholders should be skeptical of a company management that is willing to expose them to such risks without full disclosure and discussion”, comments Jamie Kneen of Mining Watch Canada.

“Romania will not have murky mines with significant social, environmental and economic costs forced upon it to the benefit of corrupt officials and misleading company management. Investors should turn to Rosia Montana to assess what risk and cost this really represents,” says Stephanie Roth, a volunteer with the Save Rosia Montana campaign.

[1] Court action registered under file no. 4024/117/2014 at the Cluj County Tribunal.

* * *
For more information contact:
Mining Watch Canada — Jamie Kneen on +1 613 761-2273
Mining Watch Romania — Eugen Melinte on +1 514 893-9239
Mining Watch Romania — Roxana Pencea on +40 (0) 723 024300
Alburnus Maior and the Save Rosia Montana campaign — Stefania Simion
on +40 (0) 741 137266
Alburnus Maior and the Save Rosia Montana campaign — Stephanie Roth
on +49 151 57472625
Greenpeace Romania — Ionut Apostol on +40 (0) 721 251207

Ukraine’s Other Chernobyls


In 1983, the Soviet Union inaugurated two nuclear reactors in what is now Ukraine. One of them, unit four at Chernobyl, experienced an explosion and fire three years later that released large quantities of radioactive particles into the atmosphere – a catastrophic accident whose effects are still being felt far beyond Ukraine’s borders. The other reactor, unit one at the South Ukraine Nuclear Power Station, remains in operation, though all indications suggest that it should be retired.

The prolonged operation of unit one and the country’s aging nuclear power plants probably would not have been possible without financial support from European taxpayers, delivered through the European Bank for Reconstruction and Development and the European Atomic Energy Community (Euratom) as part of a €600 million ($650 million) “safety upgrade” program. In defiance of both the Convention on Environmental Impact Assessment in a Transboundary Context (the Espoo convention) and the EBRD loan agreement, the program was undertaken in the absence of any consultation with Ukraine’s European neighbors.

Discovering Ukraine’s Nuclear Shadows

Images and reporting from a Bankwatch fact-finding mission to explore the state of nuclear safety in Ukraine.

Read the story

Thanks to these efforts, the South Ukraine plant was granted a ten-year lifetime extension permit in 2013 by the State Nuclear Regulatory Inspectorate (SNRIU). But, according to a comprehensive study released last month by the National Ecological Centre of Ukraine (NECU), the assessment on which this decision was based was deeply flawed. In fact, the unit one reactor suffers dangerous vulnerabilities, with observed wear in some areas already exceeding tolerable levels by a factor of ten. Such vulnerabilities, the study warns, could result in a nuclear emergency, including a release of radioactive particles inside the unit – or even into the environment.

This is hardly an isolated case. Three of Ukraine’s nuclear power units are currently operating beyond their design lifetime, with nine others set to reach the end of their intended lifetime within the next five years. Most immediately, unit two in South Ukraine will reach that point in less than three weeks, meaning that the SNRIU must now decide whether to grant that unit a 20-year lifetime extension.

The SNRIU will make this critical decision without key information about the health and environmental risks that the reactor poses to Ukraine and its neighbors. Though this contravenes Ukraine’s responsibility, as a signatory to the Espoo convention, to carry out a cross-border environmental-impact assessment (not to mention missing the opportunity to consider potential alternatives to continuing the reactor’s operation), no such analysis is expected to take place.

Last month, campaign groups in neighboring countries wrote to their representatives at the EBRD, requesting that the bank suspend its support for revitalizing Ukraine’s nuclear power plants until a cross-border assessment is carried out. A similar letter, signed by CEE Bankwatch Network and 45 other environmental NGOs from across the region, had already been sent to the European Commission’s Directorate-General for the Environment and the European Union’s director at the EBRD.

But, even with such an analysis, Ukraine’s nuclear regulator would be in no position to guarantee the safe operation of aging nuclear units. Not only is its professional capacity dubious, as the NECU study highlighted; its independence has been dramatically curtailed by the government’s recent decision to reduce significantly regulatory obligations for businesses and state-owned companies (except with regard to taxation). As the EBRD acknowledged in February, the SNRIU is now prohibited from taking the lead in conducting safety inspections, which is in breach of the EBRD loan agreement conditionality.

This is to say nothing of the immediate threat posed by the ongoing military conflict with Russia-backed rebels in the Donbas region of eastern Ukraine. Beyond the obvious risks associated with instability, there is the fact that Ukraine depends on Russia not only for most of the fuel to run its aging reactors, but also for the treatment and storage of most of its spent fuel. In other words, Ukraine’s dependence on nuclear energy, which accounts for about half of its electricity generation, has increased its strategic vulnerability to Russia.

That alone should be enough to convince Ukraine’s government not to perpetuate their country’s reliance on this insecure and dangerous energy source. If it is not, the 29th anniversary of the Chernobyl disaster, commemorated this month, should serve as a stark reminder of how much damage a nuclear accident can cause.

Ukraine should take its reactors’ expiration dates as an opportunity to pursue a safer, more sustainable energy future. Given that this would also be in Europe’s interest, EU governments and citizens must do whatever it takes to support this effort. It is a long-term commitment, but one for which there may not be a lifetime extension.

Copyright: Project Syndicate, 2015

Tax dodging, development and European public banks


Tax cheating pulls out USD 100 billion from the pockets of developing countries every year (enough to get almost every child into school four times over) according to Oxfam. At the same time, limiting the power of big multinationals requires political will that international agreements and international financial institutions so far don’t display.

Current tax schemes in the developing countries started with the structural adjustment programmes in the 1980s. Back then, countries in Africa were told to offer tax exemptions for foreign companies interested in the extraction of natural resources.

The consequence is that developing countries lose more as a result of international tax evasion and avoidance than they receive in foreign aid (pdf).

Not surprisingly, after decades of weak taxation and development finance that too often favours multinationals from developed countries, the number of people living in extreme poverty remains unacceptably high.

Central and eastern Europe and international financial institutions

Also countries in central and eastern Europe (CEE) have joined the tax race, trying to attract investors by low tax rates, with questionable results. For instance, the tiny Hungarian village Újlengyel with 1600 inhabitants and no local tax is – at least on paper – home a dozen multinationals, including three offshore oil companies, one of them a Hungarian subsidiary of one of the biggest deepwater drilling companies in the world, Seadrill Ltd. According to Tax Justice Network, Hungary lost 241 billion dollars due to global tax evasion in the last decades.

While international agreements – and unharmonised national tax systems – laid the groundwork for this system, development banks have joined the dirty work. Between July 2009 and June 2013, the International Finance Corporation, the World Bank’s private financing arm, supported financial intermediaries that were registered in tax havens with 2.2 billion dollars of public money according to Eurodad’s report Going offshore.

Meanwhile in Europe, the European Investment Bank is facing one of its greatest PR challenges related to a USD 50 million loan for a copper mine in Zambia which is accused of tax evasion. The bank is also not ashamed to provide hundreds of millions of Euros to one of the biggest African investment holdings, Qalaa, which has paid extremely low levels of corporate tax since it was founded over 10 years ago and relies heavily on some of the most secretive financial jurisdictions in the world.

Although the EIB has faced severe criticism for its behaviour from watchdog organisations, the European Parliament and the European Ombudsman, its reaction is not to change the way it works but to make its operations more secretive.

The new report ‘Towards a Responsible Taxation Policy for the EIB’ is providing a more comprehensive overview of the tax havens problematic at the EIB and outlines how the bank can improve by introducing country by country reporting, identification of beneficial ownership and a workable list of non-compliant jurisdictions.

Despite bold statements by Europe’s political leaders to put an end to tax evasion, Europe’s own bank is still too careless with lending public money to companies registered in tax havens. This is all the more worrying now that the bank is gearing up to manage the EUR 315 billion investment plan of the Juncker commission.

Guest post: Ombla must be protected, not flooded!


Jagoda Munic is co-ordinator of the Nature Protection Programme at Zelena akcija/Friends of the Earth Croatia and chairperson of Friends of the Earth International.

Yesterday the consultancy firms Oikon and Geonatura presented a new nature impact assessment study for the environmentally and economically risky Ombla hydropower plant in Dubrovnik, Croatia. The study had been commissioned by project promoter HEP at the request of the Ministry of Environmental and Nature Protection and was met with a full hall of members of the public.

Despite the fact that a contract for financing from the European Bank for Reconstruction and Development was cancelled in May 2013 due to findings that the project would have serious impacts on the Ombla caves’ unique biodiversity, HEP is still stubbornly pushing the project forward.

In the two years since the last study was carried out, no additional research has been carried out in the Vilina Cave-Ombla spring complex. Instead, other nearby caves have been visited in an attempt to prove that Ombla does not contain anything that other nearby cave systems do not, and that it would therefore be acceptable to flood it.

In spite of the fact that the presentation lasted for a full six hours, members of the public were yesterday once again left without answers to a range of outstanding questions on the Ombla project, such as the economic feasibility of the project, impacts on local inhabitants, and the cultural aspects of Ombla, as these have not been covered in any publicly available document since the outdated and low quality 1999 environmental impact assessment study.

Along with local civil society organisations Srdj is ours, the Save Ombla and its inhabitants initiative, Eko-Omblici and Eco-Centre Green Sun, Zelena akcija/Friends of the Earth Croatia believes that it is high time for HEP to finally withdraw from the Ombla hydropower plant and invest in improving the capacity and efficiency of existing hydropower plants, as well as in solar and wind plants, and that the Ombla river basin should be declared as a transboundary protected area with Bosnia and Herzegovina, not only because it is a biodiversity focal point on the European and global level but also due to the need to protect Dubrovnik’s drinking water.

The Dubrovnik-Neretva County must also protect this area as a Protected Landscape (which has already been declared but not implemented) and as a Special Nature Reserve, for which the State Institute of Nature Protection would need to carry out an expert assessment.

Once again we’re calling on the Croatian government to prevent the Ombla hydropower project from going ahead because:

  • it is based on an environmental acceptability decision from 1999
    – the data used for the environmental assessment date from the ’80s and ’90s of last century,
  • additional research of the biodiversity showed that the site is a unique habitat of exceptionally rich fauna which would be compromised or destroyed if the project goes ahead,
  • independent experts judged the 1999 environmental impact assessment study as low quality in an independent evaluation,
  • the project is risky and experimental, and considering the experience with HEP’s previous investments it is justified to expect costs 30%-40% more than planned,
  • the energy that would be generated by Ombla hydropower plant could be ensured by investing in solar,
  • mistakes made by HEP would be covered by customers through higher electricity prices.

Unpaid coal bill: Romanian coal exports to Serbia marred by corruption


The signing of an agreement in November 2014 to export 1.2 million tons of coal from Romania to Serbia was seen as one of those win-win contracts for both countries. Half a year later, the deal, tarnished by corruption allegations and a dodgy tender process (Bankwatch reported), seems to be going from bad to worse.

Last week, reports in Romanian national media revealed that the contract between the Romanian state-owned Oltenia Energy Complex (OEC) and a consortium of three Serbian and Romanian firms was suspended and is likely to be cancelled soon, because the Serbian part has failed to pay for the imported coal. In line with the contract, Oltenia Energy Complex has so far delivered more than half of the 1.2 million tons of lignite to Coal BVA, the Romanian company that is part of the consortium. Yet, as Romanian media reported last week, OEC cashed in only 500 000 euros until now. With a price of EUR 13.5/ton [1], this means a little over six percent recovery. Representatives of OEC stated that the Serbian company Virom groupa doesn’t even return their calls, let alone pay for the delivered coal. (No comment was available from BVA Coal so far.)

Almost half of the planned new power capacity in the Western Balkans comes from coal.

Coal in the Balkans

Find out more

The contract was designed to be profitable for the 3 companies making up the consortium, hardly for OEC, which is selling the lignite at a lower price than that of production.[2] Still, in November OEC’s manager, was reported saying that he “would sign another contract unconditionally at a price of EUR 13/ton, if he had the opportunity to export coal to Serbia for another 20 years.” He also claimed in February that this was the best contract ever signed by his company, although now it only seems to add to OEC’s unrecovered claims which stood at EUR 220 million in 2014.

Back in November, OEC withdrew its bid for supplying coal to Serbia in the last minute, referring to a EUR 1,5/ton custom tax too high to pay and inability to ensure the transport of coal across the border into Serbia. Instead, it agreed to supply the 1.2 tons of lignite to an apartment company set-up only one month before the contract was signed, part of the controversial consortium involving oil and customs mafia companies in Serbia.

The contract is currently being investigated by the internal control body within the Ministry of Energy and the findings may throw the OEC into yet another corruption scandal, adding to the ones involving former Minster of Large Infrastructure Projects Dan Sova and current OEC general manager, Laurentiu Ciurel.

While this all sounds like a drama whose victims don’t deserve our sympathy (from the energy mammoth to suspicious trading companies) the real cost of coal goes way beyond these unpaid bills of a dodgy deal.

The lignite open-pit mines in the Oltenia region are planned to expand over an area of 700 hectares of forests and require the expropriation of approximately 70 households. In the last 25 years, in addition to forests, expanding lignite pits wiped out at least three villages and many others suffer from the proximity to the pits.

Because of legislative loopholes, Oltenia Energy Complex is slicing the total area it needs to destroy into fragments of up to one hectare, enough for a few weeks of mining operations. Thus it avoids going through a procedure to identify the social and environmental impact of mining expansions and the measures to reduce it. As a glimmer of hope, 211 of the 700 hectares have been saved from deforestation after positive court decisions in petitions filed by Bankwatch Romania and Greenpeace Romania.

How does all this make coal “a cheap, clean and reliable source of energy” that is worth putting our money in as most governments in the region are portraying it? I am hoping I will not have to repeat this point much longer.

Notes:

1. Representatives of Oltenia Energy Complex are quoted with different prices for the coal in the same report. While OEC’s general manager speaks of EUR 13/ton, its mining operations director mentions EUR 13.5/ton.

2. According to the same local media reports, financial reports of OEC showed a cost of production of RON 65/ton of coal at the time the contract was signed. The contract however used an anticipated price of production for 2015 of RON 58/ton. In addition, the coal produced by OEC apparently comes at a granulation too big to serve the Serbian power plants, which required OEC to purchase extra equipment to make the pieces smaller.