Eldorado’s suspension threatens Greece’s image as a place to invest

Damage seen as ‘very significant’ as nation tries to rebound from debt crisis

Eldorado Gold Corp. has put Greece on the spot.

The Vancouver-based mining company’s decision on Monday to suspend all its operations in Greece, citing delays in acquiring routine permits, puts the Syriza government of Prime Minister Alexis Tsipras in a difficult position. Eldorado Gold is the largest foreign investor in Greece and its decision comes as the country, which is working on creating a sustainable path to exit its bailout program, tries to lure foreign investments.

“Irrespective of what will happen next, the damage for Greece as an investment destination is done and it is very significant,” said Wolfango Piccoli, co-president of Teneo Intelligence in London.

The Greek economy has shrunk by more than 25 per cent since Europe’s sovereign debt crisis began in 2008. Since 2010, the country has been under bailout programs with stringent belt-tightening requirements. It has been working on attracting investments like Eldorado’s to end the bailouts and tackle high unemployment.

Eldorado’s decision “is a major blow for the Greek economy,” Mujtaba Rahman, managing director of Eurasia said. “It will make it harder for Syriza to successfully exit the bailout next year.”

Since acquiring Greece’s Kassandra Mines for about US$2 billion in 2012, Eldorado has invested an additional US$1 billion in the country, its chief executive George Burns said in a statement. That figure would double if the firm could fully develop its Olympias, Skouries and Perama Hill assets, he said, adding that Greek operations will be suspended unless it gets relevant permits by Sept. 21.

“I’ve been with Eldorado since February and CEO for five months and I haven’t had any hostility from the government, but just haven’t seen progress on permits,” Burns said in Athens on Monday. “Hopefully we’ll get constructive comments from the government on our investment rather than just talk of arbitration as Eldorado can be a great advocate for the government’s strategy for investments.”

Eldorado has applied for licensing but the Greek energy ministry has said it would launch an arbitration process this month to ensure the company’s Greek unit, Hellas Gold, respects its contractual obligations.

Regardless of whether that happens, the suspension was “absolutely the right thing to do,” Kerry Smith, an analyst with Haywood Securities Inc., said Monday. “The worst strategy that they could have would be to continue to spend money on these projects with no visible line of sight.”

Suspending operations will cost about US$30 million, including ensuring the tailings facility at Skouries is safe and equipment at the site is protected, chief operating officer Paul Skayman said in a conference call Monday. Care and maintenance costs are estimated at US$25 million a year. The site will begin moving into care and maintenance on Sept. 22 if it doesn’t get the requisite permits.

Eldorado’s decision to suspend operations is just the latest wrinkle in the company’s tortuous relationship with Greece. It amended investment plans in January 2016 because of a lack of necessary permits and licenses. The company and the Greek government have also had a very public airing of differences with each side accusing the other of manipulation.

Questions about the company’s Greek investment have weighed on Eldorado’s shares, Burns said in Athens. Shares in Eldorado have fallen 52 per cent in the past year and ended the day down six per cent to $2.34 in Toronto.

Eldorado is also waiting for details from the Greek government on a pending arbitration process. The company said it’s confident any potential arbitration will demonstrate its adherence to all relevant laws and regulations, and said it will reassess its investment options in Greece after it receives the required permits.