Romania mining: Rosia Montana Gold Corporation has canceled the capital increase of EUR 95.5 million, but continues operations in Romania

, Mining

Rosia Montana Gold Corporation, which was to exploit gold in Rosia Montana, could not raise capital but business activity will continue this year.

Rosia Montana Gold Corporation (RMGC) decided on the capital increase of EUR 95.5 million in October last year, which was to increase the participation of the Romanian state through Minvest Rosia Montana that challenged the Alba Court decision.

The capital increase was necessary to cover the losses. In 2015, RMCG reported a loss of EUR 294.2 million, while six times higher loss was recorded in 2014, according to data from the Ministry of Finance.

In December 2016, RMGC Board of Directors found that “none of the shareholders subscribed and paid in newly issued shares in the exercise period (…) term which expired on  December 5, 2016, ” it was said in the RMGC arbitration case.

Thus, all newly issued shares have been canceled. Then, on December 19, on Extraordinary General Meeting of Shareholders it was decided to continue the company’s operation, given the company’s financial situation in 2015 and that the net assets of RMGC has dropped below 50% of the share capital.

The Board of Directors will consider the options for remedial action to be implemented by 31 December 2016, it is said in the cited document. One option is to reduce the share capital by an amount at least equal to the losses, since the losses were not covered by a major capital.

A similar measure, a reduction of capital, had been taken in 2014 when the reduction of share capital by EUR 26.6 million was approved.

RMGC against Romania on trial in Washington

In 2015, Gabriel Resources, the majority shareholder of RMGC, has filed a request for arbitration at the International Centre for Settlement of Investment Disputes (ICSID) against Romania. The Canadian company argued that it still seeks to reach an agreement with high-level Romanian authorities to resolve the dispute. However, Gabriel Resources is committed to protect their rights and interests in Romania, in the absence of Romanian authorities’ desire to enter into dialogue, the company decided to seek for justice through a Request for Arbitration.

Rosia Montana Gold Corporation planned to develop the Rosia Montana mine in Romania as the most modern mine, aiming to extract 300 tons of gold and 1,400 tons of equivalent to 20,000 silver bullion.

The company was founded in 1997 in Alba, shareholders are state mining company Minvest Deva – with 19.31% and Gabriel Resources – with 80.69%. If gold project would get the green light, Romania could become the first gold producer in Europe, thus overcoming the first two top countries, Finland and Sweden.