In the numerous press releases and reports that it published over the past year, Eldorado Gold Corp claims that its Skouries and Olympias projects in northern Greece are progressing smoothly. However, having failed to overcome the opposition of the local community, the company is now also facing a series of legal challenges and obstacles that are kept away from the shareholders’ eyes.
In a decision published on 11 April 2017, the Greek government announced its intention to take Eldorado Gold to arbitration over a possible breach of contract. The issue at stake is to determine whether Eldorado is actually able to fulfil its contractual obligation to produce pure valuable metals in Greece in light of the Ministry of Environment’s recent rejection of the technical study pertaining to the metallurgy component. This ministerial decision, which puts in jeopardy Eldorado’s entire investment plan, can only be overturned by Greece’s highest administrative court. Eldorado filed an appeal on 28 December 2016; however, no date has been set for the case to be examined at the time of writing.
In early 2012, Eldorado Gold acquired the gold, silver and copper mines of Halkidiki. This project was initiated by Eldorado subsidiary Hellas Gold in 2004, with a commitment to not only exploit the mines but also construct and operate a metallurgy plant to produce pure valuable metals. This commitment was reiterated under the terms of the environmental approval issued by the Hellenic Ministry of Environment & Energy in July 2011, which covers the four inseparable components of the Halkidiki mines project. The establishment of a metallurgical plant is therefore a central obligation of Hellas Gold, both under the terms of its contract with the Greek state and the environmental approval.
Hellas Gold chose to employ the “flash smelting” pyrometallurgical technology, developed by the Finnish company Outotec. The Greek authorities approved this technology on environmental grounds in 2011 and defined its use as a “necessary precondition” for the whole project. However, five years on, Hellas Gold and Outotec failed to demonstrate that flash smelting could be successfully applied under the conditions and design parameters specified in the environmental study. This resulted in the rejection of the technical plan for the copper-gold metallurgical unit by the Ministry of Environment on July 5, 2016. A remedy petition filed by Hellas Gold in September 2016 was met again with a final rejection on November 2, 2016.
This rejection was not unforeseeable. The Ministry’s technical authority noted as early as 2010 that, due to the high concentration of arsenic in the ore from Halkidiki, Hellas Gold was proposing a non-standard application of flash smelting that raised questions as to its applicability. Six years on, the Ministry of Environment concluded that, in the case of these particular high-arsenic ores, flash smelting would generate extremely large volumes of toxic off-gasses and cause multiple technical issues in downstream processing. Eldorado is thus currently at an impasse, technically and legally: the technology on which the entire investment plan is dependent is simply not applicable for technical and environmental reasons, yet under the terms of its environmental approval Eldorado cannot opt for a different technology.
Eldorado’s management has failed to inform investors on any of the above facts and matters. Since July 2016, there have been at least seven press releases and corporate presentations by Eldorado that refer to the development and operational status of the Greek projects. However, these do not include a single mention of the above issues and their possible implications for Eldorado’s activities in Greece.