Gold miner’s woes cloud Greece’s investment skies

Athens, Greece – The fate of one of Greece’s biggest foreign investments hung in the balance on Wednesday as relations between the government and Canada’s Eldorado Gold Corporation reached a breaking point.

Push, literally, came to shove outside the energy and environment ministry as dozens of yellow-vested miners tried to force their way past a blue wall of riot police to gain an audience with Energy Minister Yiorgos Stathakis.

“The miners are going crazy. They don’t know what’s going to happen tomorrow,” said Yiorgos Hatzis, a senior member of one of the four unions that chartered overnight buses from northern Greece to picket the ministry.

At stake are 2,400 jobs and a $3bn investment into what was once touted as Europe’s largest gold-mining operation. Instead, says Eldorado, it is becoming a bottomless pit of expenditure and delay that now threatens to suck in the Greek government’s reputation for attracting desperately needed investment.

The trouble began on Monday when Eldorado announced it would suspend all its operations, located chiefly on the Kassandra peninsula in Chalkidike, because the government has held back operating licenses.

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Massive, rock-pulverising machinery is sitting in crates at its Skouries mine, and the company recently cancelled the unveiling of a new processing plant at its Olympias operation, because its temporary operating license runs out on September 21. Between them, the two locations are thought to contain eight million ounces of gold, currently worth more than $10bn, as well as silver, copper and lead.

“Should we not receive these permits, we will be suspending our investment and moving into full care and maintenance mode beginning September 22nd,” said Eldorado President and CEO George Burns.

Stathakis on Wednesday told workers the government would be renewing the Olympias permit, obviating a shutdown.

“That’s news to us,” commented a senior company official. “We await the pending permits for Olympias and Skouries imminently,” said a company statement.

Workers remained unconvinced. “We will continue our struggle because we haven’t been fully vindicated,” said Christos Zafeiroudas, a union leader. He announced the miners would encamp outside the ministry until permits are issued.

The dispute triggered the involvement on the Canadian government on Wednesday. “I will always intervene and always will have the back of Canadian companies when they face unfair situations around the world,” Canada’s trade minister Francois-Philippe Champagne told Bloomberg.

A mixed marriage

The Syriza-led government campaigned against the development of the Kassandra mines ever since Eldorado bought the concessions in 2012. The party embraces a strong environmental ideology, which Prime Minister Alexis Tsipras gave voice to on Sunday at the Thessaloniki International Fair – a forum where Greek leaders traditionally spell out their economic vision for the year ahead.

“We believe the production model of the country can better succeed if we invest not in labour intensity but knowledge intensity and the comparative advantages of this country, which is nature. The Greek natural environment, quality agricultural goods, and locations in this country offer the prospect of a high flow of tourism. But if we destroy the natural environment and our human resources we’ll have no production in the country,” Tsipras said.

Eldorado has proposed earth-moving works on a scale not seen in Greece in recent decades. It faced severe scrutiny on its environmental impact assessment, which took seven years to approve. 

Then there is Syriza’s traditional stance against privatisation. When it came to power on January 25, 2015, it was quick to nail its colours to the mast. As ministers were sworn in on the 27th, they publicly proclaimed the cancellation of two high-profile privatisations then under way – the Public Power Corporation and the Piraeus Port Authority.

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The Athens Stock Exchange collapsed as foreign institutional investors pulled out, and Deputy Prime Minister Yannis Dragasakis scrambled onto the airwaves late at night to announce that Syriza would come up with its own privatisation plan. It was the first indication that the reality of markets could sway the ideology of Syriza, but it was also an example of how tin-eared the inexperienced Syriza could be towards markets.

That is a lesson CEO George Burns took to heart on June 8, a day after he met with Stathakis. Speaking to Al Jazeera, he sounded stricken as he related the tale.

“I’ve got a group of analysts at the investment, touring them around, to show them how proud we are of the work, how far we’ve been advancing since the last time they visited, and to paint a picture of how this is going to be a great investment for our investors and for the country – actually doing exactly what the prime minister is wanting, trying to develop interest and confidence that Greece is a great place to invest. And he put a press release out that day announcing that he is going to take us to arbitration… and we got hammered that day in the market,” said Burns.

The arbitration process, due to begin on Friday, concerns the most contested of Eldorado’s proposals – to build a flash-melting plant at Stratoni that is to produce bars of gold and would mark the final phase of the investment. The government is sceptical about the company’s ability to adapt flash-melting technology, which avoids the use of poisonous cyanide, and has demanded rigorous technical and environmental explanations.

“The company has done a proposition,” said the ministry source on condition of anonymity. “The ministry returned this study of the company with an extensive list of technical notes, which did not satisfy the ministry, in July 2016.”

Eldorado ultimately chose to appeal to the Council of State, Greece’s top administrative court, where it has won 18 cases against challengers, including the government. The government responded by taking Eldorado to arbitration.

“According to the initial agreement, we should go through an arbitration process for issues that cannot be resolved because this is the best way to do it. The process is binding for both sides,” said the ministry source.

Tsipras has dragged his party towards the political centre ever since he saw a realistic prospect of winning power. In 2012, Syriza dropped its pro-Grexit stance and embraced the euro. After battling creditors in 2015, it embraced austerity.

But these about-turns produced defections and embarrassment, which Syriza has yet to make up by increased prosperity or social spending. Greece’s growth did reach 0.4 percent and 0.8 percent in the first two quarters of the year after a flat performance last year, but with unemployment at 23 percent, the Federation of Hellenic Industry called it “a recovery that did not meet expectations”.

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Some Eldorado officials believe Syriza chose the arbitration process to extricate itself from its own political left wing, and this is part of the process of moving the party to the centre.

Burns agrees the problem is one of severing political alliances that have outlived their use. “I think there is a connection between the anti-mining interests and the reluctance for the government to be openly supportive,” he told Al Jazeera.

“In every jurisdiction there are people who are ideologically against mining… At some point the government says ‘Okay, we’ve given people who don’t want the mine to move forward all the chances they’re going to get, and now we’re going to be supportive to the investment.’ That’s what typically happens. It hasn’t happened yet here.”

The ministry source disagreed. “We do not read it as a political issue but as a legal-environmental issue.” The government points out that Greece earned $3.3bn in foreign investments last year, an eight-year high.

Eldorado’s relations with Syriza reached a low point in February 2016, after the company again threatened to pull out, causing its share price to fall 19 percent.

Then-environment minister Panos Skourletis accused CEO Paul Wright of shorting his own company, triggering a lawsuit. There were echoes of that tone on Monday, when the prime minister’s strategic planning advisor called on Greeks to encourage Eldorado to leave Greece. “Good riddance, Eldorado. May you find no footing anywhere,” Nikos Karanikas tweeted. The tweet was later deleted.

Burns won’t publicly put a figure on losses suffered in Greece, but said the delays have impacted cash flow and share price. The Kassandra mines’ first privatisation to another Canadian miner, TVX Gold, ultimately failed because of the permitting process, bankrupting the company.

Asked if he would consider a pullout, however, Burns said, “I am confident these mines will be built. These are fantastic assets.”