A Yukon mining company is at the centre of nation-wide protests in Romania over a proposed gold mining project in that company.
The Rosia Montana project, Europe’s largest gold mine, has been on hold for the past 14 years, snarled in legal wrangling over environmental legislation.
Gabriel Resources wants to begin mining the giant open pit again, with a processing system that includes the use of cyanide.
Environmental activists and local farmers living in the area oppose the project, and they took to the streets in the tens of thousands after Romania’s government gave the project the green light last week. The only roadblock now is Parliament approval, which is expected this week.
“The project is stupid from all points of view,” said Alexandru Ghitaa, a 33-year-old Romanian economist who is part of the protests. “It’s a disaster for the country and it shouldn’t happen. It’s unsustainable, environmentally and economically. It’s a scam that won’t bring real benefits to Romania.”
“I’ve been to Rosia Montana,” said Ciprian Morega, 26. “I talked with the locals. What I learned is totally different from what I see on the TV. Gabriel Resources pays lots of money for an advertising campaign promoting cyanide mining.”
The deal between the Yukon company and the Romanian state has been widely criticized in Romania, even by members of the government. After the first day of protests, the president and the prime minister of Romania accused each other of taking bribes from the mining company and promised a referendum on the issue.
As the protests have spread, Gabriel’s stock has tumbled. On Tuesday, its share price dropped 18 per cent to $1.39, the lowest it has hit since April.
But Gabriel is a Yukon company in name only. It’s traded on the Toronto Stock Exchange, its directors include billionaires from around the world, and its head offices are located in the United Kingdom.
The only thing making it a Yukon company is that it’s incorporated here. Law firm Macdonald and Company administers the company’s file from their offices on Whitehorse’s Lambert Street.
Grant Macdonald said that he couldn’t speak to Gabriel’s situation specifically for reasons of confidentiality, but that it is common for foreign-owned companies to incorporate in the Yukon for the sake of convenience, as the territory’s Business Corporations Act doesn’t require corporate directors to reside in the territory.
Paul Lackowicz, another Yukon lawyer who handles incorporation for a number of large foreign companies, said that attracting companies like Gabriel to the territory is a good thing, and it poses virtually zero risk to Yukoners.
“Corporations have to incorporate somewhere,” he said, “so why not here?”
Resource companies that register in the territory but work overseas are bound by the environmental legislation of the countries they work in, and any dispute would be fought out in that country, Lackowicz explained.
With Gabriel, for example, if Romania decided that the company had breached environmental protections, it would be settled in Romanian court.
“You get these big companies coming here (to the Yukon) but you don’t have to worry about them leaving behind giant contaminated sites like Faro or Yellowknife’s Giant mine,” Lackowicz said.
The companies that Lackowicz works with have revenues in the high hundreds of millions of dollars. Ultra Petroleum Corp, a hydraulic fracturing company from Texas, had $809 million in revenue last year alone.
Foreign incorporation isn’t the only thing that Lackowicz does, but it does create another revenue stream that brings money into the territory.
“I have 20 people working in my office, and this is one of the revenue streams that allows me to keep them employed,” he said.
He compared the Yukon’s suite of legislation to that of Delaware, another place that doesn’t require corporate directors to reside where they incorporate. Delaware has a reputation for being a good place to incorporate, and attracts many of America’s largest corporations, even though they operate entirely outside the state.
Lackowicz explained that, along with generating legal fees, allowing foreign companies to easily incorporate in the Yukon means they are governed by Yukon’s shareholder legislation.
Any time there is a shareholder dispute, they have to come here to fight it out. That sometimes means small armies of lawyers and directors descending on Whitehorse, staying in Yukon hotels and eating at Yukon restaurants, not to mention the money generated for the Yukon legal system itself.
“Yukon is a small jurisdiction, which means we can be very flexible and be able to react quickly to problems,” said Lackowicz. “We’re like the small PT boat, when the provinces or the federal government is like a giant oil tanker. It takes forever to turn those things around, but we can be more agile.”
That agility is another level of protection for the Yukon. It means the territory can afford to loosen its restrictions on corporations, said Lackowicz, and also react more quickly if problems arise.
Three years ago, Lackowicz and other lawyers began lobbying the government for changes that clarify and loosen restrictions around foreign incorporation. Those changes are nearing their final step.
On Thursday, the government announced it is seeking feedback on a number of changes to the Business Corporations Act, Business Name Act, Securities Act and a business law amendment bill. The changes to the Corporations Act have a number of tweaks that Lackowicz said will make the Yukon more enticing to foreign companies.
“This project has been a major undertaking,” Community Services Minister Brad Cathers said in a release.
“When complete, Yukon will have some of the most robust and modern business legislation in the country, creating an environment that is welcoming to business while providing safeguards to Yukon consumers and investors.”
Lackowicz agrees.
“We’re in a global economy and the directors are from all over the world. Corporations are individuals like you or I, except that there’s a paper trail of their existence. They have to live somewhere,” Lackowicz said.
- With files from Vlad Ursulean.
Contact Jesse Winter at
jessew@yukon-news.com