2017 First Quarter Press Release
2017 First Quarter Press Release
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PRESS RELEASE
FOR IMMEDIATE RELEASE TSX Trading Symbol: GBU
May 11, 2017
2017 First Quarter Report
Gabriel Resources Ltd. (“Gabriel” or the “Company”) announces the publication of its First Quarter Financial
Statements and Management’s Discussion and Analysis Report for the period ended March 31, 2017.
Summary
The Company’s core focus is the progression of its arbitration case against Romania before the World Bank’s
International Centre for Settlement of Investment Disputes (“ICSID”) under applicable treaties for the
promotion and protection of foreign investment to which Romania is a party (“ ICSID Arbitration”).
The tribunal appointed to hear and determine the ICSID Arbitration (“Tribunal”) has issued a procedural
timetable for the ICSID Arbitration which requires Gabriel to file its memorial on the merits and quantum of
its claims (“Memorial”) no later than June 30, 2017.
Gabriel’s Romanian subsidiary, Roșia Montană Gold Corporation S.A. (“RMGC”) , remains subject to
investigations by the Romanian National Agency for Fiscal Administration (“ANAF”) which Gabriel considers
are abusive in scope and duration and were initiated by the Romanian authorities solely in retaliation for the
filing of the ICSID Arbitration.
One such ANAF investigation relates to a re -run of a previously quashed value added tax (“VAT”)
assessment relating to amounts claimed by RMGC in the period 2011 to 2016 . On May 2, 2017 RMGC
received a preliminary report indicating an amount of VAT assessed as owing by RMGC of RON 26m
($8.5m)1, which does not include any penalties or fines. This preliminary report is subject to a review period
in Romania and RMGC intends to dispute this claim as without merit and unlawful.
As at March 31, 2017, the Company held $55.1 million of cash and cash equivalents.
The net loss for the first quarter of 2017 was $9.3 million (Q4 2016:$13.2 million).
Jonathan Henry, Gabriel’s President and Chief Executive Officer, stated:
“Gabriel remains fully committed to safeguarding its rights and investments in Romania and will continue to focus its
efforts and resources on filing its Memorial by the end of June. The Memorial will present the strong factual and legal
arguments supporting Gabriel’s claims against the Romanian State and the significant quantum of damages
sustained as a consequence of Romania’s unlawful acts. Meanwhile Romania continues its discriminatory, abusive
and retaliatory activities against RMGC. The Company believes any requests from the Romanian fiscal authorities
for VAT refunds are completely without merit.”
Further information and commentary on the operations and results of the Company in the first quarter of
2017 is given below. The Company has filed its Unaudited Condensed Interim Consolidated Financial
Statements and Management’s Discussion & Analysis on SEDAR at www.sedar.com and each is available
for review on the Company’s website at www.gabrielresources.com.
1 Assumes the May 2, 2017 Bank of Romania exchange rate of RON 3.05 to the $
2017 First Quarter Press Release
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For information on this press release, please contact:
Jonathan Henry
President & Chief Executive Officer
Mobile: +44 7798 801783
Max Vaughan
Chief Financial Officer
Mobile: +44 7823 885503
Richard Brown
Chief Commercial Officer
Mobile: +44 7748 760276
Further Information
Status of the ICSID Arbitration
The ICSID Arbitration seeks compensation for all of the loss es and damages suffered by the Company and
its wholly -owned subsidiary, Gabriel Resources (Jersey) Ltd. (together “Claimants”) , resulting from the
Romanian State’s violations of its obligations under certain bilateral investment treaties which provide
protections against expropriation, unfair and inequitable treatment and discriminati on in respect of the
Claimants’ investments in Romania. These losses and damages arise not only due to the enormous wasted
costs associated with the Rosia Montana gold and silver project (“ Project”) and related licenses, but also to
the loss of value of th e Claimants’ investments as a consequence of Romania’s acts and inactions which
have substantially deprived the Claimants of the use, benefit and value of their property rights.
The Tribunal’s most recent decision, Procedural Order No.4 issued on January 10, 2017, set s out the
procedural calendar for the ICSID Arbitration process with specific dates for the filing of submissions by the
parties and other necessary procedural matters (“Procedural Calendar”). The Procedural Calendar requires
that the Claimants submit their Memorial no later than June 30, 2017, wherein factual and legal arguments
supporting their claims against Romania will be detailed. The Memorial will also include details of the claimed
quantum of the damages sustained due to Romania’s treaty breaches.
A hearing on the merits of the claims before the Tribunal is currently scheduled to occur in Washington D.C.
from September 9 to 20, 2019.
A summary of the procedural aspects of the ICSID Arbitration is available on ICSID's website at the address
given below. In addition, certain procedural orders and decisions of the Tribunal, together with certain of the
principal submissions filed by the parties during the ICSID Arbitration, will be published on the ICSID website
at the following location: https://icsid.worldbank.org/en/Pages/cases/casedetail.aspx?CaseNo=ARB/15/31 .
RMGC Investigations
As previously announced by the Company, ANAF raised a n assessment against RMGC in July 2016
demanding the repayment of VAT deductions claimed by RMGC in the period 2011 to 2016 which, together
with interest and penalties, amounted to RON 42.9 million (approximately $13.7m). This was challenged with
the authorites by RMGC as, among other matters, it was contrary to the conclusions of eighteen prior ANAF
audits relating to similar suppliers, transactions and activities. In late September 2016 the General
Directorate for the Settlement of Challenges, a division of ANAF, partially quashed that assessment and
directed the VAT inspection to be re -run for the same period but using a new inspection team. On October
12, 2016 ANAF commenced a new VAT inspection.
On May 2, 2017 RMGC received a preliminary report from AN AF including a provisional assessment in
respect of VAT deductions claimed by RMGC in the period 2011 to 2016 (the “Assessment”). The amount of
VAT assessed as owing by RMGC is RON 26m ($8.5m), which does not include any penalties or fines that
the Company understands could also be levied. This preliminary report is subject to comment from RMGC
and a review meeting between RMGC and ANAF before it is finalized.
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In parallel with the Assessment, and for over eighteen months to date, a separate d irectorate of ANAF has
continued to pursue an ad hoc investigation of a broad range of operational activities and transactions of
RMGC and a number of its consultants and advisors over an extensive period spanning 1997 to 2016 (the
“ANAF Investigation”). A NAF has continually demanded, to short and often unachievable deadlines, that
RMGC provide voluminous amounts of information and explanations in respect of, amongst other matters,
transactions with its suppliers and financing transactions of RMGC. Although RMGC is co-operating in good
faith with the ANAF Investigation, Gabriel believes that there is no justification for the ANAF Investigation,
that the breadth and depth of ANAF’s demands are intentionally abusive, and that it has been initiated in an
attempt to intimidate and harm RMGC and the Claimants in view of the dispute with the Romanian State and
the Claimants’ filing of the ICSID Arbitration. Neither the Company nor RMGC has received any feedback on
the status of the ANAF Investigation.
Liquidity and Capital Resources
Liquidity
The Company’s average monthly cash usage during Q1 2017 was $1.7 million, including costs in respect
of the ICSID Arbitration (Q4 2016 monthly average: $2.1 million, Q3 2016 monthly average: $1.3 million).
At the end of Q1 2017, accruals for costs in respect of the ICSID Arbitration amounted to $4.6 million (Q4
2016 $1.9 million).
Capital Resources
Cash and cash equivalents at March 31, 2017 amounted to $55.1 million.
Financial Performance
The net loss for the f irst quarter of 201 7 was $9.3 million, an increase from a loss of $7.4 million in the
corresponding period in 2016, primarily due to incremental legal and other advisory costs pursuant to the
ICSID Arbitration. In addition, there was a $0.7 million increase period-on-period in the accreted finance on
the convertible notes in issue, partially offset by a reduction in payroll costs.
Project Development (including Permitting and Litigation)
In the context of the above disclosures concerning the ICSID Arbitration, the complete lack of positive
Romanian Government engagement on the Project and the change in core focus of Gabriel, and the group
of companies of which it is parent (“Group”), readers are advised to refer to the Annual Information Form of
the Company for the year ended December 31, 2016 (“AIF”) published on March 29, 2017, a copy of which
is filed on SEDAR at www.sedar.com, for information relating to the status of the Project, RMGC’s
exploitation license in Romania, the Group’s exploration and development activities in Romania, the Project
approval and permitting process, and reported gold and silver resources and reserves . Except as disclosed
in the Company’s public filings thereafter, there has been no material change in the information therein from
the date of publication of the AIF to the date of this press release. The Company has also filed its first quarter
2017 quarterly Management’s Discussion & Analysis on SEDAR and it is available for review, together with
the AIF, on the Company’s website at www.gabrielresources.com
About Gabriel
Gabriel is a Toronto Stock Exchange listed Canadian resource company. The Company’s principal focus has been the exploration and development of the
Roșia Montană gold and silver project in Romania. The Project, one of the largest undeveloped gold deposits in Europe, is situated in the South Apuseni
Mountains of Transylvania, Romania, an historic and prolific mining district that since pre-Roman times has been mined intermittently for over 2,000 years.
The exploitation license (“License”) for the Project is held by Roșia Montană Gold Corporation S.A., a Romanian company in which Gabriel owns an 80.69%
equity interest, with the 19.31% balance held by Minvest Roșia Montană S.A., a Romanian state-owned mining company. It is anticipated that the Project
would bring over US$24 billion (at US$1,200/oz gold) to Romania as potential direct and indirect contribution to GDP and generate thousands of employment
opportunities.
Since the grant of the License in June 1999, the Company has focused substantially all of its management and financial resour ces on the exploration,
feasibility and subsequent development of the Project. Despite the Company’s fulfilment of its legal obligations and its development of the Project as a high-
quality, sustainable and environmentally-responsible mining project, using best available techniques, Romania has blocked and prevented implementation
of the Project without due process and without compensation.Accordingly, the Company’s current core focus is the ICSID Arbitration.
For more information please visit the Company’s website at www.gabrielresources.com.
2017 First Quarter Press Release
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Forward-looking Statements
This press release contains “forward-looking information” (also referred to as “forward -looking statements”) within the meaning of applicable Canadian
securities legislation. Forward-looking statements are provided for the purpose of providing information about management’s current expectations and plans
and allowing investors and others to get a better understanding of the Company’s operating environment. All statements, other than statements of historical
fact, are forward-looking statements.
In this press release, forward-looking statements are necessarily based upon a number of estimates and assumptions that, while considered reasonable
by the Company at this time, are inherently subject to significant business, economic and competitive uncertainties and contingencies that may cause the
Company’s actual financial results, performance, or achievements to be materially different from those expressed or implied herein. Some of the material
factors or assumptions used to develop forward -looking statements include, without lim itation, the uncertainties associated with: the ICSID Arbitration,
actions by the Romanian Government, conditions or events impacting the Company’s ability to fund its operations or service it s debt, exploration,
development and operation of mining propert ies and the overall impact of misjudgments made in good faith in the course of preparing forward -looking
information.
Forward-looking statements involve risks, uncertainties, assumptions, and other factors including those set out below, that may never materialize, prove
incorrect or materialize other than as currently contemplated which could cause the Company’s results to differ materially from those expressed or implied
by such forward-looking statements. Any statements that express or involve discussions with respect to predictions, expectations, beliefs, plans, projections,
objectives, assumptions or future events or performance (often, but not always, identified by words or phrases such as “expects”, “is expected”, “anticipates”,
“believes”, “plans”, “projects”, “estimates”, “assumes”, “intends”, “strategy”, “goals”, “objectives”, “potential”, “possible” or variations thereof or stating that
certain actions, events, conditions or results “may”, “could”, “would”, “should”, “might” or “will” be taken, occ ur or be achieved, or the negative of any of
these terms and similar expressions) are not statements of fact and may be forward-looking statements.
Numerous factors could cause actual results to differ materially from those in the forward-looking statements, including without limitation:
• the duration, required disclosure, costs, process and outcome of the ICSID Arbitration against Romania;
• changes in the liquidity and capital resources of Gabriel, and the Group;
• access to funding to support the Group’s continued ICSID Arbitration and/or operating activities in the future;
• equity dilution resulting from the conversion or exercise of existing securities in part or in whole to Common Shares;
• the ability of the Company to maintain a continued listing on the Toronto Stock Exchange or any regulated public market for trading securities;
• the impact on business strategy and its implementation in Romania of: unforeseen historic acts of corruption, uncertain fiscal investigations; uncertain
legal enforcement both for and against the Group and political and social instability;
• regulatory, political and economic risks associated with operating in a foreign jurisdiction including changes in laws, governments and legal regimes
and interpretation of existing and future fiscal and other legislation ;
• volatility of currency exchange rates, metal prices and metal production;
• the availability and continued participation in operational or other matters pertaining to the Group of certain key employees and consultants; and
• risks normally incident to the exploration, development and operation of mining properties.
This list is not exhaustive of the factors that may affect any of the Company’s forward-looking statements.
Investors are cautioned not to put undue reliance on forwar d-looking statements, and investors should not infer that there has been no change in the
Company’s affairs since the date of this press release that would warrant any modification of any forward-looking statement made in this document, other
documents periodically filed with or furnished to the relevant securities regulators or documents presented on the Company’s website. All subsequent
written and oral forward-looking statements attributable to the Company or persons acting on its behalf are expressly qualified in their entirety by this notice.
The Company disclaims any intent or obligation to update publicly or otherwise revise any forward-looking statements or the foregoing list of assumptions
or factors, whether as a result of new information, future events or otherwise, subject to the Company’s disclosure obligations under applicable Canadian
securities regulations. Investors are urged to read the Company’s filings with Canadian securities regulatory agencies including Gabriel’s Annual Information
Form for the year ended December 31, 2016, which can be viewed online at www.sedar.com.
ENDS