El Dorado should mine but not refine Gold in Greece!

Eldorado needs a social license to mine Greek gold

Author: John Psaropoulos

History shows that the Canadian miner faces determined and sustained opposition on environmental grounds, but it could have its treasure if it pledged a measure of it to the local population

Protesters shout slogans during a rally in Athens, as they oppose a copper-gold mine project in the Halkidiki region in northern Greece on March 12. (Yorgos Karahalis, Reuters) Last Saturday, a crowd of approximately 15,000 people from Thessaloniki and the Halkidiki peninsula flooded the commercial high street of Greece’s northern port city. They paraded placards with the faces of politicians who had helped sell four mining concessions to a series of Canadian and Australian companies over the past decade, and chanted, “We want forests, earth and water, not a tomb made of gold.” On Monday the protests spread to Athens and Komotini, and more anti-mining events are planned.
Why, at a time of desperately high unemployment (nominally 27 percent nationwide, but forecast by the Labour Institute to rise to 31 percent by the end of the year) is a foreign investor having such trouble establishing himself?
The tomb of gold the protesters refer to is a series of environmental calamities they fear will befall the area if Canada’s Eldorado Gold Corporation, the current holder of the concessions, proceeds with plans to extract and refine gold ore. Chief among those concerns is the poisoning of the water table from naturally occurring arsenic in some of the ore and from cyanide used in the leeching process. Many are concerned about the demise of air quality from dust produced by the pulverisation of millions of tonnes of the ore. Greece’s Geological Research Institute found low-content gold deposits across northern Greece in the 1980s, and many locals suspect that Eldorado will one day extend its operations uncontrollably, turfing up hundreds of thousands of hectares.
It is not the current lead, zinc, copper and silver mining operations the locals object to – only the extraction of gold. For Eldorado and for Greece, the stakes are huge. Eldorado estimates that its concessions at Stratoni, Skouries and Olympias in Halkidiki and Perama in Alexandroupolis contain provable reserves of some 12 million ounces worth more than $20 billion on today’s market. If the mines were to operate as planned, they would account for a fifth of Eldorado’s worldwide gold production by 2016. They would make Greece Europe’s leading gold producer and bring in export revenues of a billion dollars a year, helping to reverse what many economists now believe was Greece’s worst problem before the crisis – its massive trade deficit.
Eldorado says it has invested $100 million over the past year and would invest ten times that amount over the lifespan of the mines. But it also knows that Greece ranks poorly as an investment environment and that the people of Halkidiki have already seen off a number of suitors.
If the history of the goldmines is full of unfulfilled potential, it is also replete with lessons for a mature investor. Another Canadian mining company, TVX Gold, went bankrupt over the mines. It alienated locals with layoffs in 1995 and did little to win them back. A series of legal challenges that local authorities lodged with the Council of State delayed development for so long, that by 2003 TVX was forced to write off its Greek subsidiary and merge with another Canadian miner.
Eldorado has learned from TVX’s layoffs, and rather than paring down operations it has doubled the size of the payroll to 800 in a year. That increases the number of families invested in the mines’ future and gives the impression that it is about to make something happen. But Eldorado cannot ultimately buy everyone off with jobs. It will have to address broader environmental concerns. Greece generates a quarter if its income from tourism, transport and trade. By contrast, little more than three percent comes from primary industry, and most of that comes from farming, which is environmentally sensitive. It is hardly surprising that most people in Halkidike, a peninsula of white sandy beaches, forests and wildlife, are already employed in hotels, restaurants, farming and fishing.
Frontier Pacific, the Canadian firm from which Eldorado bought its Perama concession, understood that beyond its legal license from Athens, it had to win what its CEO, Peter Tegart, called “social licensing” from the local population. Eldorado needs to do the same. Politicians in Athens will change a dozen times during the lifetime of the mines; the locals are there to stay; and it is they who do not currently feel like stakeholders.
Unfortunately for Eldorado, central government has lost so much authority during the crisis, that winning licenses in Athens probably sets its chances back in the local constituency. Any ministers who claim to be in a position to deliver the population are simply overstating the case. And while some local opposition may be politically driven, much is based on genuine conviction. Winning Halkidiki, therefore, has to be seen as a wholly separate exercise from the legal and bureaucratic one, and one that Eldorado must undertake alone.
This will take a lot more than the company’s current tactics of press conferences in Athens or flyers inserted in Sunday papers suggesting that environmentally aware protesters do not represent “the true Halkidiki”. A well-advertised town hall meeting in Thessaloniki, where Vancouver-based CEO Paul Wright and the company’s top brass in Greece answered concerns, would be much more in the right vein.
Forthrightness is key. For instance, Greenwich Resources, a UK company trying to develop a small gold mining concession at Sappes, near Alexandroupoli, has decided that no amount of persuasion will do away with cyanide concerns. It would forego the cyanide leeching process altogether and ship crushed ore for processing elsewhere. This sacrifices about a tenth of the gold content, but it kills a potentially deadly argument.
Eldorado insists that its cyanide process is fully contained (as opposed to open-air) and would produce storable cyanide bricks, not vats of poison. Local activists are still not convinced. If Greenwich Resources is prepared to sacrifice 10 percent over cyanide, Eldorado could do the same in a slightly different way. It could volunteer to deposit 10 percent of profits in a foundation dedicated to environmental restitution, improving schools and hospitals, scholarships to Canadian universities and even modest pensions for those whose health is affected by mining activity.
Ultimately Eldorado has to be prepared for failure. The people of Halkidike may simply decide that they are not prepared to accept the risks at any price. That decision would have to be respected. Governments in Athens will not teargas them into submission, and academics and activists will seize every possible opportunity to file injunctions. Eldorado can argue that it is a canary in the investment goldmine that is Greece, and that its demise will deter others; but it can only do so convincingly if it has made honest and direct efforts to engage the people it most affects.
Greeks are aware that resource-based industries are finite. Themistocles stressed the point in the early 5th century BC, when he convinced Athenians to use newly discovered deposits of silver to produce a mighty fleet rather than a handout. His leadership saved Greece from a second Persian invasion. Eldorado needs to convince the Greeks that it is Themistocles, not Xerxes.