World Bank halts funding for massive Romanian mine. (Environmental Intelligence).

The World Bank on October 10 halted loan negotiations with Canadian mining company Gabriel Resources, which is hoping to raise capital to take over and expand an existing state-run mine in Romania. In a highly unusual move, World Bank President James Wolfensohn directed the International Finance Corporation (IFC), the bank's private lending arm, to drop the loan application.

Wolfensohn made his decision after a discussion with two environmental activists, representing Romanian NGOs, during the Bank's annual meetings in September. The dialogue prompted the bank president to intervene in the preliminary discussions between the company and the IFC.

The $100 million loan would have helped Gabriel begin developing the open pit gold and silver mine at Rosia Montana, located in the mountains of western Transylvania. Over the past two years the company has raised $90 million for the mine, which is expected to cost $400 million over its lifetime. The proposed 2,500 hectare mine would operate for 16 years and extract an estimated 300,000 kilograms of gold and 1,600,000 kilograms of silver.

Romanian environmentalists are concerned that the mine, which would use cyanide to extract gold from the ores, could seriously pollute the region's waterways. And they point to past examples of weak governmental oversight to prevent mining spills: in 2000, a cyanide tailings dam split at a mine in Bala Mare, Romania, polluting the Tisza and Danube Rivers. The incident killed 1,200 tons of fish and polluted the water for 2.5 million people.

The mine would also require the relocation of more than 2,200 people. Gabriel began offering cash buyouts to homeowners to voluntarily relocate as early as June 2002, paying about $35,000 per home. "That's 30 years of work," said Simon Lawrence, Gabriel's vice president of development. "$100 a month is the average wage for Romanians. This is a very good opportunity to sell a property that has very little value to them." Since the World Bank halted loan negotiations, however, buyouts have been postponed.

Romania is one of the poorest countries in Central and Eastern Europe, and the government is trying to privatize its mining industry as a shot in the arm for its domestic economy and to facilitate its accession into the European Union. In October 1999, the central government declared a "Disadvantaged Zone" status for the Rosia Montana borough, which would exempt Gabriel from paying custom duties and taxes on production and income until October 2009.

Two years ago when Gabriel started actively trying to get local support, it advertised in local newspapers that the mine would create 3,000 to 20,000 jobs. Today, the company says that 3,000 jobs will be created during the 2-year construction of the mine site, but admits that employment will drop to 300 to 500 jobs upon completion. "They have run a well-organized disinformation campaign," said Francoise Heidebrock, spokeswoman for Alburnus Maior, a local group that opposes the project and sent a delegate to the World Bank meetings.

Heidebrock also says that her country's government is highly corrupt, and tried to block Romanian activists from attending the World Bank meetings. Transparency International, based in Germany, publishes an annual "Corruption Perceptions Index," which catalogues perceptions of a country's degree of corruption on a scale of 0 (most corrupt) to 10 (least corrupt). Romania scored 2.8 on the 2001 Index.

Prospects for the future of the mine remain uncertain. The IFC maintains that the decision to drop the project was not simply a response to Wolfensohn's directive, however. "The company thought they could move faster with private capital," said Yasmin Tayyab, IFC civil society coordinator. Joszef Feiler with the Prague-based Central and Eastern European Bankwatch Network, said the withdrawal of an IFC loan, which usually attracts four times more investment from private lenders, is a major blow to the project. "I have a feeling that private capital is hesitant to get involved with this dubious business," said Feiler. "Usually World Bank rejection sends the 'sell' signal, but definitely not the 'buy' one."