Canada’s Eldorado Gold (TSX:ELD, NYSE:EGO), Greece’s biggest foreign investor, has decided to stop development and investment in its Skouries gold project located in the country’s northern region of Halkidiki, as talks with authorities seemed stalled.
The Vancouver-based firm also said it had initiated legal actions against the government in order to enforce and protect its rights in Greece. The measures include three lawsuits against the Ministry of Energy and Environment for failing to issue routine installation permits, which Eldorado said caused unjustifiable delays to the development of Skouries.
In September, the gold miner had threatened to halt new investments in three of its key Greek projects — Olympias, Skouries and the Stratoni — unless the government granted it permits and showed a willingness to engage in talks.
As a result, Eldorado was almost immediately granted several of the pending permits, with Greek authorities saying they were open to engage in talks with the company. The miner then postponed its decision to leave the country, but warned it reserved the right to place its assets on care and maintenance and to take prompt legal action to protect both the company and its assets should negotiations proved unsuccessful.
"Although we have made good progress on the Olympias mine, we require the necessary permits and government support prior to investing further in Skouries," chief executive George Burns said in the statement.
He added that Eldorado would re-assess its investment in the Skouries project only after receiving all required permits, coupled with a “supportive government open to discussions” regarding the use and implementation of best available technologies at the project.
Shares in the company fell more almost 4% in Toronto on the news to Cdn$1.50 and they were slightly down (0.83%) to $1.20 around 9:45AM ET.
Since 2012 Eldorado Gold has invested about $3 billion in the European country and such figures would double, the company has said, if it was allowed to fully develop its other Greek assets.
Pending permits for Skouries, covering the construction of a smelter on site, have been delayed because of differences between Eldorado and the ministry’s technical experts regarding testing methods applied to comply with environmental regulations.
Environment Minister Giorgos Stathakis, the target of the company’s lawsuits, said in September the issue would have to be settled by arbitration in a Greek court.
Eldorado has slowly reduced its international footprint in the last two years, beginning with the sale of all its Chinese assets in 2016 and this year’s decision to indefinitely shelve expansion plans for Kışladağ mine.
The miner also deferred recently a decision on developing a project in Brazil, citing low gold prices, and went through some leadership changes, with the appointment of one of Goldcorp's top executives as CEO.
Instead, the company is seeking to strengthen its position in its home country. In July, it completed the acquisition of fellow Canadian miner Integra Gold (TSX-V:ICG), gaining access to the Lamaque project near Val-d'Or, Quebec. That asset has potential to produce 123,000 ounces of gold annually on average over 10 years, according to a preliminary economic assessment completed in February.
This is not the first time Eldorado has halted operations in Greece, but definitely the most drastic one. In January 2016, it suspended work at Skouries and threatened with laying off 600 workers following protests by local residents and yet another fall-out with the government. Work resumed about five months later.
Eldorado’s impasse with Greece has been seen by analysts as a test for the left-wing Syriza government’s new policy of welcoming private investment, or what prime minister Alexis Tsipras calls “Grinvestment”.