Alburnus Maior – how NOT to develop

Cluj-Napoca, 13 March 2014

Radu Cristian BarnaFaculty of European StudiesUniversitatea Babeş-Bolyai

Why do resource rich countries have poor people?

Lack of democracy → lack of transparency in public decisions → general interest not taken into account → lack of citizens’ control on public theft and on abuse

on public confidence

• RMGCGabriel Resources Ltd (80%)

Minvest (20%)

Gabriel Jersey (Jersey Islands)

Starx Resources (Cayman Islands)

Barick Gold Newmont

• 330 t. gold + 1600 t. silver• Largest opencast gold mine

in Europe• 4 open-pit mines• 17 year life span

• Cyanide technology• Storage pond 600 ha.• 200 million m3 cyanide-laced

waste

Sustainable development or just economic growth?

Sustainability has been always neglected in Romania (the state has become a neo-liberal one; market can solve corruption and pollution)

Sustainability means the conservation of the existence framework of a nation, in its natural and cultural parameters. (the guarantor of this logic can be only the state!)

Development has to take into account also the social, political, environmental and cultural aspects (Development means the improvement of the possibility to satisfy their needs for everyone)

• Secret contracts• Politicians are acting as lobbyists for private

companies• Mass-media totally controlled• GUP declared the region as mono-industrial• Pressures: - RMGC CEO: “We force them to

leave because otherwise they will die” - Orthodox priest: “God will damn

those who do not want to sell their properties to the company”

- President of RO: “Such a clean technology… I invite specialists to drink water from the waste-lake”

* New mining law

* New law of public assemblies

Socialization of costs and privatization of profits

Status of work → short term contracts Inequality towards risk has grown exponentially :

If things go bad, golden parachutes are provided for the big boys, but the costs of the failed business, as well as the cost of those lovely parachutes, are left for the stockholders and the creditors and the taxpayers to bear.

Nowadays crisis: too big to fail (Central banks have steered the biggest transfer of debts from financial history, from companies towards people)

Capitalism of free enterprise assumes the process of “creative destruction” (insuring the re(a)llocation of capital and production factors according to the productivity)

The logic of a project like that proposed by RMGC is to maximize financial results and to minimize costs and risks, by transfer of responsibilities from private to the public

Estimated benefices of the RMGC project

Direct benefits:• Construction cost mine - actives for the Romanian state:

876 Mio. $• Minvest Benefit 005 Mio. $

(Capital growth: RMGC has lend Minvest. It remains with 19,3%, but will receive dividends only after paying the loan. This means the part of the Romanian state is practically 0,02%)

• Mining royalty + tax on profit: 863 Mio. $• Tax on dividends (Offshore!) : 0

Indirect benefits :• Operation costs / mining 22,9% 0• Processing and stocks 65,5% 0• Costs /Administrative and general activities 11,6% 313 Mio. $• Direct salaries 120 Mio. $• Indirect salaries 0

  TOTAL: 2,477 Md. $

Explicit Costs

Costs calculated or estimated by the methodology of opportunity costs:  

• Subventions Ministry of Environment ? Mio. $• Activities linked to tourism ( aprox. 100 ani !!!) 220 Mio. $ • Activities linked to animal breeding and agriculture 225 Mio. $• Activities linked to forestry and forest 134 Mio. $• Lost salaries (Closing mine of Roşia-Poieni) 225 Mio. $• Environmental costs remediation & reabilitation 1600 Mio. $• Average cost for maintenance of the waste dam 10180 Mio. $

TOTAL: 12,585 Md. $+

• Loss of other precious metals (Gr, Va, Ti, Ni, Cr...) 39,7 Md. $ !!!• Loss of gold and silver 20 Md. $

Implicit Costs

Example of computable costs, on basis of a specific algorithm

• Participation to all spending according to the 19,3% shares • Costs linked to public health (dangerous substances with potential

of evaporation or discharge : 1.581.760 t., among which cyanide: 192.000 t.)

• Financial risk: (Payback esteemed to 12 ani !!!)Risk of insolvencyRisk of bankruptcy

• Environmental risks: Risk of groundwater pollution Risk of waste dam accident (72% of

accidents in the world after 1990)Risk linked to seismicity

Other Implicit Costs

• Loss on chapter “History and mining patrimony”

• Social costs due to the relocation of the population (2064 pers.)

• Loss of commercial activities in the area (33 small companies)

• Loss of the existing infrastructure• Loss of traditional values• Loss of law cases for „expropriation for

public interest”• Contribution to the process of

accentuation of corruption• Loss of credibility of the government

(lobbyst for private interests)• Loss of image for all other economic

sectors

Other CostsExample of incalculabile costs /inestimable (!?!)

• Cultural losses: 7 monuments from roman times - cat. I 42 monuments - cat. II

17 monuments - cat. III• Mountains• Other ?

Conclusions

Contact:barna@euro.ubbcluj.ro

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