On August 20, Eldorado Gold confirmed that Hellas Gold, a Greek subsidiary of the company, is suspending all its mining and development activities in Halkidiki, northern Greece, commencing the week of August 24. The suspension, which will affect Hellas Gold’s Stratoni mine as well as the Skouries and Olympias projects, is a direct result of the revocation by Greece’s Ministry of Energy of the technical studies of its projects in Halkidiki.
The suspension is based on test work completed on the Olympias Phase III flash smelting process. This pilot scale test work was completed at Outotec’s comprehensive metallurgical and smelting facility in Finland, while the Ministry contends that it should have been done at site in Halkidiki.
The test work is a part of the technical studies pertaining to both the Skouries and Olympias projects. The technical studies form the basis of a number of other permits required by the company in order to proceed with the development and construction of the Skouries and Olympias projects.
Hellas Gold is taking legal action against the decision of the Ministry of Energy, including the filing of an injunction request before the Council of State, Greece’s Supreme Court on administrative and environmental matters.
Hellas Gold will continue to perform essential environmental protection works at its three sites in Halkidiki – Stratoni, Skouries, and Olympias – in order to safeguard the environment and the public interest. It will, the company says, “however, be forced to suspend the majority of its employees in Greece for a period of up to three months on terms in accordance with Greek labour legislation. Hellas Gold would be left with no option but to terminate employees if the permits were not reinstated. Currently, Hellas Gold and its contractors employ 2,000 persons directly in Halkidiki. Eldorado estimates that 5,000 direct and indirect jobs have been created in Greece as a result of its mineral investment in the country.”
Paul Wright, Chief Executive Officer of Eldorado, commented: “This unfortunate outcome is detrimental to the company, Hellas Gold, our Greek employees, contractors, community supporters, and Greek society. However, Eldorado cannot and will not continue to allocate expenditures to our projects in Greece while the Ministry of Energy is openly hostile to our activities, as evidenced by recent Ministry decisions. We sincerely hope to resume our activities in Halkidiki at some point in the near future – preferably through constructive engagement with the Ministry of Energy rather than a court decision.”
Recently SNL Metals and Mining published a report by Tom Manzella explaining how important Eldorado is to the Greek mining industry. “Eldorado Gold Corp. offers great potential in the country, as it has given itself the ammunition to achieve success in the near future through its gold projects,” he wrote.
“Eldorado owns three gold projects in Greece: Olympias, Skouries and Perama Hill, along with an operating zinc mine called Stratoni. The company’s strong Greek presence doesn’t end there; among the seven companies that SNL tracks with projects in the country, Eldorado comes in second with $36.39 billion in reserves and resources in-situ value. The other companies combine for $43.90 billion.
“Larco SA, the company with the largest in-situ value, owns an open-pit nickel mine called Larco Nickel that has 2.5 Mt of contained nickel reserves and resources, although only 353,000 t are classified as reserves. While the reserves and resources were last reported as of 2006, SNL has estimated Larco Nickel’s production at 18,000 t for 2014.
“Eldorado’s potential in Greece has not come without several roadblocks. In March, Greece’s then-newly elected government dealt a major blow to the Skouries project when it revoked a construction permit that would allow an essential processing plant to be built. This was primarily due to environmental and tourism concerns regarding the project. However, in late April a Greek court overturned a 2013 decision by a local environmental group that also denied the company approval for the plant.”
A a June news release from Eldorado said it “expects commissioning of the Skouries project in the first quarter of 2017 pending anticipated near-term resolution of outstanding approval challenges.” That is now threatened.
“Clearing regulatory hurdles will allow Eldorado to move forward with the Skouries project, which together with Olympias will offer new opportunities for both the company and Greece,” Manzella wrote.
“Eldorado already invested $450 million between these two projects and is not backing down despite risk in the country. The company’s Investor Presentation from June highlights that it continues to employ over 2,000 people in Greece — where unemployment figures remain north of 25% — and that it will pay at least $1 billion in taxes to the Greek government over the next two decades.
“SNL data illustrates the stark contrast of Eldorado’s attributable in-situ values for gold, zinc and copper projects, which represent some of the company’s primary commodities. Stratoni, the company’s only operating zinc mine in Greece, has an in-situ value of $164.2 million based on its total attributable reserves and a nominal zinc price of $2,161/t. Skouries provides the company with an in-situ value of $4.58 billion in copper reserves based on a nominal price of $6,283/t. Conversely, Eldorado’s three gold projects account for $9.74 billion in attributable in situ value, based on a nominal gold price of $1,150/oz.
“These figures — combined with the fact that there are only 76,000 t of attributable zinc reserves at Stratoni, make clear the rationale behind Eldorado’s continued commitment to its Greek gold projects despite the country’s ongoing financial crisis.”
If its projects can proceed, Eldorado can expect to see a substantial increase in Greek gold production starting in 2016 when phase two construction at Olympias could be complete and in 2017 when Skouries commences production. By 2020, Eldorado has estimated 123,420 oz of gold equivalent production at Olympias alone.