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Troubled Greek Gold Mine Clears Hurdle

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Troubled Greek Gold Mine Clears Hurdle

Hellas Gold, the Greek subsidiary of Vancouver-based Eldorado Gold, is one step closer to reviving the Olympias gold mine. The leftist Syriza government had canceled the mine's license due to protests by locals concerned about the mine's environmental impact and effect on tourism. Hellas Gold appealed the decision to the courts, where it was vindicated.

The Greek gold mine still has hurdles to overcome before production can begin in earnest. Perhaps the biggest one is winning over the local population with a combination of jobs and remediation of the valley scarred by the mine's previous owners. In an atmosphere where both sides have resorted to violence, it will be a hard sell.

Local environmental groups have had a sympathetic ear in Athens since the radical leftist Syriza party came to power. Demonstrations against the mines have led to counter-demonstrations by supporters of the mines, who say that they bring much-needed jobs to an area that suffers from 30% unemployment. The company says that its two gold mines in Greece employ approximately 2,000 people, counting contractors.

Eldorado had to sue the government after it revoked its permit to refurbish the old processing plant at Olympias last August. The case reached the administrative Supreme Court, which ruled in favor of the mine in January. The same month, the company suspended operations and laid off 600 people at its other Greek gold mine, in Skouries, due to the government dragging its feet on issuing the necessary permits.

Olympias Gold Mine Main Access
(Eldorado Gold)

Eldorado CEO Paul Wright, in a press release last year on the news of permit revocation at the Olympias gold mine, explained the economic benefits the Syriza government had put at risk.

"Since 2012, Eldorado invested in excess of US$450 million on the construction and development of the two mines in Greece. Once these two mines reach commercial production, Hellas Gold will become one of Greece's top exporters. The funds invested in Greece to date have been used primarily for payments to Greek stakeholders, such as the company's employees, suppliers of goods and services, contractors and government. (the Greek State having received in excess of 50 million euros in taxes as a result of our investments since 2012). Thus the benefits of our investment to the Greek economy are obvious to all."

The January layoffs at the Greek gold mines caught the attention of the leaders in Athens, who dialed back their opposition. Eldorado told reporters this week "We are, I believe, moving to a better place here. We've seen more encouraging engagement between ourselves and the ministry in the last month or two." He noted “These approvals are being granted by the ministry, as opposed to us having to wrest them free through legal action.”

Even so, the company is holding off on further development at Skouries until the rest of the required permits have been issued. Eldorado expects to invest $155 million (2/3 of its total development budget) in the Skouries and Olympias Greek gold mines this year, once it has the approvals it needs.

Map showing the location of the Olympias gold mine. (Click to enlarge)
Map showing the location of the Olympias gold mine. (Click to enlarge)

Cleaning Up Other Peoples' Messes

Operations by Hellas Gold up to the present have been focused on processing the 2.4 million metric tons of tailings left over when a previous company mined lead and zinc at the site. The

Aerial view of the massive plant nurseries at Olympias
Aerial view of the massive plant nurseries at Olympias

company processed 625,000 metric tons of tailings in 2014, recovering 17,737 troy oz of gold. Last year, 16,396 troy oz of gold was reclaimed from 589,000 metric tons of tailings. Re-processing of the old tailings is scheduled to end in early 2016. After this, the old processing plant will need to be refurbished to handle new production from the underground mine.

The other big project has been the environmental reclamation of the landscape scarred by the previous operators of the mine. To this end, Hellas has built giant greenhouses to grow plants for use in reforestation. This project, which began in late 2015, is expected to take all year. Eventually, 26.5 hectares, the size of 36 soccer fields, will be returned to its natural state.


Timeline of the Olympias Gold Mine

Gold and silver has been mined in this area since the reign of Philip of Macedon, the father of Alexander the Great. But, as this timeline shows, the history of Greek gold mines has been a tumultuous one:

1972 - 1995:  Olympias operated as a lead and zinc mine.

1988:   Industrialist Alexander Athanasiadis, owner of the mine, was assassinated by November 17 terrorist group.

1995:   Greek government, who had nationalized the mine, sells it to TVX.

1999:   TVX completes feasibility study.

2002:  Greek government annuls TVX's permit after prolonged opposition to the mines from locals. TVX never manages to bring its Greek gold mine assets to production.

2003:   In December,  Greek government pays TVX €11 million for its Greek assets.

2004: Hellas Gold purchases ex-TVX holdings from Greek state for €11 million.

2007:  Hellas Gold acquired by European Goldfields.

2011: Hellas receives environmental impact assessment for Olympias, Skouries and Stratoni mines.

2012:  Eldorado Gold buys European Goldfields for $2.5 billion in stock. Tailings reprocessing at Olympias begins.

2013:  New surveys put gold reserves at Olympias at 4.6 million ounces.

2015: Environmental reclamation of 26.5 hectares (65.5 acres) begins.

2016: Refurbishment of existing ore processing plant begins.

Once full scale production begins, annual gold production is estimated to average 60,725 oz of gold at AISC of $309/oz (by applying sales of silver, lead, and zinc toward expenses.)

Even though Eldorado has a sterling safety record, and a history of successfully working with local populations in Turkey and China, opposition to their Greek gold mines is not expected to abate anytime soon.

(mine photographs courtesy Eldorado Gold.)

The opinions and forecasts herein are provided solely for informational purposes, and should not be used or construed as an offer, solicitation, or recommendation to buy or sell any product

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