Gold mining – a chance for Europe

Driven by global economic development, 2011 saw both an increase in the gold price due to demand, and a physical supply that can barely satisfy it. The gold price continued to rise and competitiveness on the market became fiercer, as China, US, Russia and African countries continue to lead world-wide supply.

With only about 1.2% of the world’s gold production, but aiming at increasing its economic power and industrial competitiveness, Europe’s focus is to concentrate on the urgency and strategic importance of raw materials and to ensure a sustainable access to them both from within and outside the EU.

In this context, one of the issues currently taken into consideration at EU level is how will European gold mining revitalise Europe’s industry and economy by fostering sustainable supply to meet increased demand?

 “2011 was another impressive year for global gold demand, with investment demand showing strong growth and both the jewellery and technology sectors remaining resilient. Mine ore production increased slightly to a record annual level, but this was counter-balanced by a small decline in recycling and considerable net purchases by central banks.” (World Gold Council, 2012, p. 2)

Overall 2011 gold demand was 4,067.10 tonnes, worth US$ 205.5 billion, 29% higher than in 2010, while the average gold price, one of the most important factors influencing the gold demand and supply curves reached an average of US$ 1,571.52/oz, 28% higher than in 2010.

On the other hand, the gold supply decreased by 4% in 2011 compared to 2010 to 3,994.00 tonnes, from which gold production reached a new annual record of 2,809.5 tonnes.

By comparing values registered in the past by the two above-mentioned trends, it is noticeable that over the past few years that gold demand has continued to increase while its supply either increased at a lower rate or even decreased as was the case in 2011. The phenomenon led the industry to try and identify new ways of satisfying the demand for gold, particularly knowing that gold is a scarce commodity – the U.S. Geological Society estimates that just 51,000 tonnes of global gold reserves remain in the ground and gold mining remains a lucrative business.

Gold mining in Europe

Currently within the EU, exploration and extraction of raw materials, including gold are facing increasing competition from different land users as well as a highly regulated environment. There are also important challenges to overcome in improving the way in which Europe can increase the recovery of materials from waste.

In early 2011, the EU relaunched its Raw Materials Strategy and announced a Flagship Initiative for a resource efficient Europe. These initiatives provided a framework for Europe to become less reliant on non-energy raw materials which are vital to the economy, and increasingly crucial for the development of modern environmentally-friendly technologies.

The new Raw Materials Strategy establishes measures to secure and improve access to raw materials for the EU based on the following three pillars:

1.      Fair and sustainable supply of raw materials from international markets;

2.      Fostering sustainable supply within the EU;

3.      Boosting resource efficiency and promote recycling.

On 13 September 2011 the European Parliament adopted the EU Raw Materials Strategy report, emphasising that the availability of fair access to and stable and predictable prices of raw materials are of vital importance for the development potential, competitiveness, innovation and preservation of European industry.

The report calls for non-fiscal policies in support of the domestic raw materials sector in attracting investment for a sustainable supply in the EU. The report also calls on the European Commission to monitor and address the issue of export and import restrictions.

The report further calls on the European Commission to set up a long-term ‘European Raw Materials Roadmap to 2050’ identifying future developments, threats and opportunities in the Raw Materials and Critical Raw Materials (CRM) sectors.

Gold mining in Romania

Although one of the richest countries in Europe - as far as gold and silver deposits are concerned – over the last six years, gold exploitation in Romania has  completely stopped. All state-owned goldmines (which was all of them) were shut down prior to Romania’s accession to the EU in 2007 under the EU’s state aid rules.

In September 2011, Alexandru Patruti, former president of the National Agency for Mineral Resources stated that currently, “in Romania the gold reserves – as estimated by the companies exploiting them – amount to approximately 700 tonnes and the silver ones reach 2,000 tonnes.” (Mediafax, 2011)

According to a report generated by the Romanian National Agency for Mineral Resources in June 2011, in Romania there are 7 exploration licences: two for ROM AUR (Alba and Cluj), one for SAMAX ROMANIA (Hunedoara) and four for ROMALTYN EXPLORATION (three in Maramures and one in Satu Mare). (National Agency for Mineral Resources, 2011)

The same report mentions only two exploitation licences granted to the ROSIA MONTANA GOLD CORPORATION (Alba) and DEVA GOLD S.A. CERTEJUL DE SUS (Hunedoara). (National Agency for Mineral Resources, 2011)

Rosia Montana

Rosia Montana is a large and important project that could reinstate Romania as Europe’s largest gold producer.

The Rosia Montana Project has reported resources of 14.6 million ounces of gold and 64.9 million ounces of silver (measured and indicated), including 10.1 million ounces gold and 47.6 million ounces of silver reserves (proven and probable at grades of 1.46 g/t and 6.88 g/t respectively). In 1997 Gabriel Resources Ltd signed a concession agreement for the Rosia Montana Project, but the project has been waiting for all its permits for the last decade or more.

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 mining project at Rosia Montana could become a trigger for Romania’s economic development and a sign of hope in the latest economic crisis confronting the European Union.

With state-of-the-art technology, the project aims at building a model mine, while implementing the highest environmental standards. Moreover, the Rosia Montana Project will clear up past environmental damage and legacies, which would otherwise be left.

Regarding the environmental requirements, the project at Rosia Montana complies with all EU legislation currently in force and in some instances even beyond.  The project is in line with the above-mentioned EU Strategy on the sustainable use of resources and the Resource Efficiency Flagship Initiative, all part of the Europe 2020 Strategy.

With the environmental financial guarantees provided, the rigorous protection afforded to cultural patrimony with its current restoration plan for Rosia Montana and surrounding area and the active involvement in the local community’s social and cultural life, the Rosia Montana Project is a solid and responsible investment that the region, Romania and Europe needs and a clear response to the Europe 2020 Strategy.

The project is associated with significant increases in employment opportunities during the life of the mine. Specifically, the mine itself is expected to create 2,390 jobs during the construction phase, with more than 2,300 of these being jobs going directly to the Romanian labour force. In the operational phases it is estimated there will be some 887 persons employed directly. The multiplier effects can be expected to enhance these numbers, according to Oxford Policy Management calculations based on a number of Romanian industries that can expect to see a degree of expansion due to the new mine. In the main operational phase the typical multiplier is over four, implying additional employment for an extended period for over 3,600 Romanian workers. Most of these jobs would be located in the local and regional areas in the vicinity of the project, providing some new well-paying work opportunities and enhancing living standards for households in the area.

At European Union level, it is projects such as the one at Rosia Montana that will play an important part in the long term implementation of the Raw Materials Strategy and the Resource Efficiency Initiative. An increase in investment, job creation, local social development, environmental protection and working to a sustainable future are just a few of the noteworthy results generated by projects such as these.

Sean O’Sullivan and Mirona Coropciuc
Rosia Montana Gold Corporation

Sources:

British Geological Survey. (2012). European Minerals Statistics 2006 - 2010. London: NERC.

EUROMINES. (2012). Views of Indicators of Resource Efficiency. Retrieved 05 21, 2012, from EUROMINES: http://www.euromines.org/sites/default/files/publications/views-indicato...

European Commission, DG Entreprise and Industry. (2012, 02 02). Non-energy raw materials. Retrieved 05 21, 2012, from Policies, Raw Materials: http://ec.europa.eu/enterprise/policies/raw-materials/index_en.htm

Mediafax. (2011, 09 08). The gold reserves estimated by the companies reach 700 tonnes. The silver ones amount to 2000. Retrieved 05 24, 2012, from Mediafax - Romanian newswire agency: http://www.mediafax.ro/economic/rezervele-de-aur-estimate-de-companii-su...

National Agency for Mineral Resources. (2011, 06 17). Report - Exploitations Licences grouped after substance - gold and silver ore. Retrieved 05 24, 2012, from National Agency for Mineral Resources: http://www.namr.ro/license_solid/ET_SUBST_Minereuri%20auro-argentifere.htm

National Agency for Mineral Resources. (2011, 06 17). Report: Exploration Licences grouped after substance - gold and silver ore. Retrieved 05 24, 2012, from National Agency for Mineral Resources: http://www.namr.ro/license_solid/ER_SUBST_Minereuri%20auro-argentifere.htm

World Gold Council. (2012). Gold Demand Trends, Full Year 2011. London: World Gold Council.