TVX Gold seeks compensation after Greek gold-processing project blocked
DAVID PADDON
Canadian Press
Friday, March 01, 2002
TORONTO (CP) - TVX Gold wants compensation from the Greek government after the Toronto-based company was blocked from building a gold-recovery plant because of environmental concerns.
Greece's highest court ruled 20-7 on Friday that the risk associated with TVX's troubled Olympias operation, which would have used potentially lethal cyanide to extract gold from ore, outweighed any benefit to the economy.
Although TVX and the mining industry argue that cyanide can be used safely, public concern has risen in recent years because of environmental poisonings in the Balkans, Spain, Guyana and the former Soviet republic of Kyrgyzstan.
The Olympias project, about 65 kilometres east of the city of Thessaloniki, was the main reason that TVX - a junior mining company with most of its interests in North and South America - invested $250 million US in Greece.
Almost since TVX's initial 1995 investment, which included the Stratoni base-metal business, TVX has been embroiled in legal battles and public opposition over the Olympias project.
TVX is considering its options, including legal action, says Sean Harvey, a former investment banker who became TVX's chief executive last April during financial restructuring.
Harvey said Friday it was the Greek government that lost the legal battle, not TVX, since the court ruled that government-issued permits issued to TVX were invalid.
"The government issued permits to TVX and the court found the government was not allowed to issue those permits and annulled them," Harvey said.
It wasn't clear Friday - since the entire decision hadn't yet been read by TVX lawyers - whether TVX might be permitted to extract ore from the Olympias mine and ship it outside Greece for processing, he added.
"Obviously, we had a contract with the Greek government so we'll look at all our options - including legal remedies - so we can recover some of monies for our shareholders that have been expended in Greece," Harvey said in an interview.
Although other TVX operations in Greece, including the Stratoni base metal operation and the Skouries development project, weren't affected by the court decision, Harvey said his company won't put any more money into Greece.
"TVX did not go to Greece to run a base-metal operation. TVX principally went to Greece to develop the Olympias project," Harvey said.
"The strategy for TVX is (now) very much focused outside of Greece and on growing this company and turning it into an intermediate gold producer."
As a junior mining company, TVX produces about 200,000 ounces of gold annually through its partial ownership in five mining operations: two in Canada, two in Brazil and one in Chile.
Intermediate gold firms typically produce 250,000 to 500,000 ounces of gold annually, a level that TVX could achieve by buying out its partner in the Americas, Normandy Mining of Australia, recently taken over by Denver-based Newmont Mining Corp.
The court's decision wasn't "totally negative" for TVX because it creates closure for the company, said mining analyst Michael Fowler of Harris Partners of Toronto.
"Going forward, Greece is probably not in TVX's business plan in the future, except for legal action."
Overall, TVX's other operations are in good shape, especially now that gold prices have recently recovered from a 16-year low of $253 US an ounce to about $300, he said.
As for the concerns raised about the use of cyanide in gold processing, Harvey said cyanide is used in a wide variety of industries and would pose no environmental threat at Olympias.
But a spokeswoman for Mining Watch Canada - an Ottawa-based coalition of environmental, social justice, aboriginal and labour organizations - said she welcomed the Greek court's decision to block the Olympias project.
"It's deeply opposed by the people in the area. And it will have long-term effects that are dangerous," Joan Kuyek, Mining Watch's national co-ordinator, said from Vancouver.
Kuyek said cyanide is too risky to use in mining for several reasons, including the threat of earthquakes that may affect any safety procedures put in place to protect the environment.
"A lot of mining is based on the concept that nothing will go wrong and when it does go wrong they don't have any answers for it," Kuyek said.
In trading on the Toronto stock market Friday, TVX shares (TSE: TVX) fell seven cents to $1.07.
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