2018 Annual Results Press Release
2018 Annual Results Press Release
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PRESS RELEASE
FOR IMMEDIATE RELEASE TSXV Trading Symbol: GBU
March 14, 2019
2018 Annual Results
Gabriel Resources Ltd. (“Gabriel” or the “Company”) announces the publication of its Annual Results and
Management’s Discussion and Analysis report for the year ended December 31, 2018.
Summary
Gabriel remains focused on the progression of its arbitration case against Romania to be determined under
the rules of the International Centre for Settlement of Investment Disputes (“ICSID”), part of the World Bank
(“ICSID Arbitration”).
o On May 2 5, 2018 , Romania supplemented its counter -memorial (“Counter -Memorial”) filed on
February 22, 2018 by filing a further preliminary objection to the jurisdiction of the Tribun al
(“Jurisdictional Challenge”) with ICSID.
o On November 2, 2018 , Gabriel filed with ICSID a comprehensive rebuttal of the legal and factual
contentions raised in the Counter-Memorial and its response to the Jurisdictional Challenge (“Reply”).
o On February 28, 2019, Gabriel filed its comments with ICSID on the ‘amicus curiae’ submission made
by certain non -governmental organizations who have opposed the Roșia Montană gold and silver
project (the “Roșia Montană Project”) for many years.
On July 10, 2018 , the Company announced the resignation of its President and Chief Executive Officer
and the retention of his services as a consultant in connection with the ICSID Arbitration . On August 8,
2018, Dragos Tanase was announced as President and Chief Executive Officer of Gabriel.
The net loss for the fourth quarter of 2018 was $1 2.7 million (Q3 2018 $17.2 million), and for the year
ended December 31, 2018 was $50.6 million, or $0.13 per share.
On December 13, 2018, the Company announced a non-brokered private placement (the “December 2018
Private Placement”) to raise gross proceeds of US$20 million (approximately $26.3 million) , of which
US$15.2 million was received in December 2018 with US$4.8 million received on closing in January 2019.
As at December 31, 2018, the Company held $18.1 million of cash and cash equivalents.
The Company has identified a requirement for additional funding in the medium-term to maintain its primary
assets and finance the material estimated costs associated with advancing the ICSID Arbitration.
As previously reported, in 2017 Gabriel’s Romanian subsidiary, Roșia Montană Gold Corporation S.A.
(“RMGC”) was served with a decision by the Romanian National Agency for Fiscal Administration (“ANAF”)
assessing a liability for value added tax in the amount of RON 27m (the “VAT Assessment”) and a further
demand from ANAF in respect of interest and penalties of RON 18.6 million (together approximately $14.6
million). On February 6 , 2019, the Alba Iulia Court of Appeal ruled in favour of RMGC’s annulment
challenge to the VAT Assessment. ANAF has appealed this decision.
2018 Annual Results Press Release
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Dragos Tanase, Gabriel’s President and Chief Executive Officer, stated:
“Gabriel remains very confident in the merits of its ICSID Arbitration claim and is highly appreciative of the
continued support shown by securityholders providing further funding, which will underpin progression of that
claim. We are also encouraged by the recent decision of the Alba Court of Appeal confirming the annulment of
the abusive VAT Assessment against RMGC. The Company can now focus its full resources on the continued
pursuit of the ICSID Arbitration.”
Further information and commentary on the results in the fourth quarter of 2018 and the full financial year is given
below. The Company has filed its Annual Audited Consolidated Financial Statements and related Mana gement’s
Discussion & Analysis on SEDAR at www.sedar.com and each is available for review on the Company’s website at
www.gabrielresources.com.
For information on this press release, please contact:
Dragos Tanase
President & CEO
Phone: +4021 223 1351
Max Vaughan
Chief Financial Officer
Mobile: +44 7823 885503
Richard Brown
Chief Commercial Officer
Mobile: +44 7748 760276
Neither TSX Venture Exchange nor its Regulation Services Provider (as that term is defined in policies of the
TSX Venture Exchange) accepts responsibility for the adequacy or accuracy of this release.
Further Information
Status of the ICSID Arbitration
The ICSID Arbitration seeks compensation for all of the losses and damages suffered by the Company
and its wholly-owned subsidiary, Gabriel Resources (Jersey) Ltd. (together “Claimants”), resulting from
the Romanian State’s wrongful conduct and its breaches of the protections afforded by certain treaties
for the promotion and protection of foreign investment to which Romania is a party against expropriation,
unfair and inequitable treatment and discrimination in respect the Roșia Montană Project and the
prospective gold, silver and porphyry copper deposits in the neighbouring Bucium concession area
(“Projects”) and related licenses.
On November 2, 2018, the Claimants submitted their Reply which sets out a comprehensive rebuttal of
the legal and factual contentions raised in the Counter-Memorial and includes Gabriel’s response to the
Jurisdictional Challenge.
The latest procedural calendar prescribes the following key dates in the ICSID Arbitration schedule:
o Romania to file its response to the Reply (“Rejoinder”) and its reply on the Jurisdictional
Challenge by May 10, 2019.
o Gabriel to file its surrejoinder with regard to the Jurisdictional Challenge by June 14, 2019.
o The Tribunal will hold a hearing on the merits of the claim from December 2 to 13, 2019.
A redacted version of the Reply was published on the ICSID website on February 8, 2019 following
completion of a process prescribed by the procedural orders of the Tribunal.
The latest stage of the ICSID Arbitration proceedings has involved a process whereby certain non -
disputing parties (referred to as amici curiae) who have opposed the Project for many years have sought
leave from the Tribunal to make written or oral observations in the proceedings. The Claimants provided
comments on the non-disputing parties’ petition on November 23, 2018.
On December 7, 2018, the Tribunal granted the n on-disputing parties’ request to file an amicus curiae
submission but restricted the submission to commenting on certain factual issues while excluding the
legal arguments and testimonies and denying the non-disputing parties’ request to participate in the
hearings of the ICSID Arbitration. On February 28, 2019, the Claimants filed their comments on the
amicus submission with ICSID.
2018 Annual Results Press Release
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Management Changes
On July 10, 2018 , the Company announced that the former President and Chief Executive Officer,
Jonathan Henry, resigned from his position. Mr. Henry continues to act as a consultant in connection
with the ICSID Arbitration claim against Romania. On August 8, 2018, the Company appointed Dragos
Tanase as President and Chief Executive Officer. Mr. Tanase has been the managing director of RMGC
for 10 years, a position in which he continues to serve.
VAT Assessment
As previously reported, the VAT Assessment levied against RMGC (together with a further demand in
respect of related interest and penalties ) by ANAF relates to VAT refunds previously claimed and
received by RMGC from the Romanian tax authorities in respect of RMGC’s purchase of goods and
services from July 2011 to January 2016.
On April 5, 2018, RMGC initiated an action before the Alba Iulia Court of Appeal (Division for
Administrative and Tax Claims) seeking the annulment of the VAT Assessment. On February 6, 2019,
the Alba Court of Appeal ruled in favour of RMGC’s annulment cha llenge of the VAT Assessment . On
February 28, 2019, RMGC received a copy of the Alba Court of Appeal’s written decision. ANAF
subsequently filed an appeal against this decision with the High Court of Cassation and Justice,
however no hearing date has yet been set.
RMGC also filed a request for a stay of enforcement of the VAT Assessment before the Alba Iulia Court
of Appeal on August 10, 2017. On October 2, 2017, the Alba Iulia Court of Appeal admitted RMGC’s
request for a stay of enforcement of the VAT Assessment, pending the determination of RMGC’s
annulment challenge of the VAT Assessment. ANAF subsequently filed an appeal against this decision
with the High Court of Cassation and Justice . On February 28, 2019, the High Court of Cassation and
Justice dismissed ANAF’s appeal and the stay of enforcement remains in effect.
The Company intends to pursue all available legal avenues to challenge the VAT Assessment along
with the interest and penalties and to fully protect its rights and assets.
Liquidity and Capital Resources
On January 15, 2019, the Company completed closing of the non-brokered December 2018 Private
Placement with certain existing securityholders for gross proceeds of US$15.2 million received in
December 2018 with the balance of US$4.8 million received in January 2019 (in aggregate
approximately $26.3 million).
The Company’s average monthly cash usage during Q4 2018 was $4.8 million (Q3 2018: $4.3 million).
At the end of Q 4 2018, accruals for costs in respect of the ICSID Arbitration amo unted to $1.8 million
(Q3 2018: $6.2 million). The build-up in accruals in Q3 2018 was due principally to the significant legal
and other advisory services required by the Company for the preparation and submission of the Reply,
which were substantially invoiced and paid by the end of Q4 2018.
As at December 31, 2018, the Company held $18.1 million of cash and cash equivalents.
The Company believes that it has sufficient sources of funding to cover its planned activities through to
November 2019 and will require additional funding in the medium -term to maintain its primary assets,
including to fund the costs associated with the Company advancing the ICSID Arbitration. Management
continues to review the Company’s activities in order to identify areas to rationalize expenditures.
Financial Performance
Operating loss in 2018 was $44.4 million, $15.0 million higher than in 2017 ($29.4 million) principally
due to three main factors. First, 2018 ICSID Arbitration related costs of $22.0 million were $9.8 million
higher than 2017 as a consequence of higher ac tivity levels following receipt of Romania’s Counter -
Memorial and in preparation of the November 2, 2018 filing of the Reply. Second, in 2018 an impairment
charge of $3.9 million relating to the long lead time equipment was recognized. Third, the 2018 payroll
expense of $10.7 million was $2.1 million higher than in 2017 due principally to settlement expenses
paid to the former President and CEO of the Company in July 2018.
Finance costs in 2018 include $8.0 million (2017: $7.1 million) of accreted interest costs in respect of
the debt components of private placements completed in May 2014 and July 2016 .
2018 Annual Results Press Release
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About Gabriel
Gabriel is a Canadian resource company listed on the TSX Venture Exchange . The Company’s principal focus has been the exploration and
development of the Roșia Montană gold and silver pr oject in Romania (“Roşia Montană Project”). The Roşia Montană Project, one of the largest
undeveloped gold deposits in Europe, is situated in the South Apuseni Mountains of Transylvania, Romania, an historic and pro lific mining district
that since pre-Roman times has been mined intermittently for over 2,000 years. The exploitation license (“License”) for the Roşia Montană 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 Roşia Montană 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.
Upon obtaining the License in June 1999, the Group (as defined below) focused substantially all of their management and financial resources on the
exploration, feasibility and subsequent development of the Roşia Montană Project. Despite the Company’s fulfilment of its legal obligations and its
development of the Roşia Montană Project as a high -quality, sustainable and environmentally -responsible mining project, using best available
techniques, Romania has blocked and prevented implementation of the Roşia Montană 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.
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 manag ement’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 uncertaintie s and contingencies
that may cause the Company’s actual financial results, performance, or achievements to be materially different from those exp ressed or implied
herein. Some of the material factors or assumptions used to develop forward -looking statements include, with out limitation, the uncertainties
associated with: the ICSID Arbitration, actions by the Romanian Government, conditions or events impacting the Company’s abil ity to fund its
operations (including but not limited to the completion of further funding noted above) or service its debt, exploration, development and operation of
mining properties 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”, “is of the view”, “anticipates”, “believes”, “plans”, “projects”, “estimates”, “assumes”, “intends”, “strategy”, “goals”, “objectives”,
“potential”, “possible” or variations thereof or stating that certain act ions, events, conditions or results “may”, “could”, “would”, “should”, “might” or
“will” be taken, occur 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:
• delay or extension to the duration of the ICSID Arbitration;
• required disclosure, costs, process and outcome of the ICSID Arbitration against Romania;
• changes in the liquidity and capital resources of Gabriel, and the group of companies of which it is directly or indirectly parent (“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 new or existing securities in part or in whole to Common Shares;
• the ability of the Company to maintain a continued listing on the TSX Venture 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, gover nments 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 forward-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 which can be viewed online at www.sedar.com.
ENDS