Set side-by-side, there were two significant slices of news from Greece this week that amply illustrate the issues and complexities underlying the current crisis there.
The first hit the international headlines: the resignation of prime minister Alexis Tsipras, following the German parliament’s ratification of the third bail-out deal.
Tsipras will seek a new mandate from the Greek people, after conceding that the one he won in an election less than a year ago had “exhausted its limits”.
The second received coverage only in the specialised financial and mining press: once again Eldorado (TSE:ELD) has hit a road-block in its plans to develop the multi-million ounce Skouries gold-copper project in the Chalkidiki peninsular in the north of the country.
The Greek Ministry of Energy has taken exception to technical work conducted on the proposed smelting process at Skouries, and also at another project that Eldorado is developing in Greece, Olympias.
The precise rationale behind the Ministry of Energy’s thinking is a little unclear, but the official statements and ramifications are unequivocal.
The technical work for Skouries and Olympias has been “suspended” because it was conducted in Finland, not in Greece.
The argument from Eldorado is that Finland has the best testing facilities, which is straightforward enough.
The Ministry for its part presumably thinks local Greeks should have undertaken the testwork.
Be that as it may, the ministry’s objections have had a wider knock-on effect on local employment as its “suspension” has led Eldorado to shut down work across its portfolio of Greek projects.
All told, that portfolio is quite extensive and accounts for 5,000 direct and indirect Greek jobs.
Aside from Skouries and Olympias, the company also operates the producing Stratoni mine, all acquired in a billion dollar deal during the height of the boom, when Eldorado bought London-listed European Goldfields.
Quite how much Eldorado is ruing that decision is perhaps still open to question, given that Skouries alone looks capable of producing upwards of 10mln ounces of gold over a lengthy mine life, not to mention sizeable quantities of copper.
But it’ll only be worthwhile if the Greeks actually let the company get on and build the thing.
As Eldorado highlighted in its official releases to market, this is not the first time that legal roadblocks have been thrown up in front of it.
It’s now saying that the Ministry of Energy is “openly hostile” to its activities, and will be taking legal action of its own.
London’s analysts took a mixed view of all this.
Coming on the same day that Alexis Tsipras resigned in part because he said one thing and did another, it’s hard to avoid the overall impression that this is a country where words are not met by actions and which is turning in on itself
“A casual observer would expect the Greek government to be keen to support mining, given the employment, royalties and taxes that it brings, especially in areas where unemployment is staggeringly high,” said Investec in its morning natural resources note.
“Surprisingly this is not the case, with numerous bureaucratic delays making the process of developing mines in Greece an almost impossible task.”
But analytical comment by Mirabaud, where they have a highly intelligent Greek mining analyst in the shape of Nik Toleris, was slightly more nuanced.
The Greek government’s decision, said the Mirabaud analysis, “is not based upon a sound legal basis to support a long-term disruption to operations. We highlight the fact that Eldorado has received several favourable decisions from the Council of State, the highest Greek court, on environmental matters, and thus we believe that the less important technical issues will also be resolved in the company’s favour.”
So far, so predictable.
But then we get to the nub of the matter.
“However, we understand that the procedure will take a few months,” continues Mirabaud.
And across that period, the election that Mr Tsipras has now called will take place.
The election, says Mirabaud, is “the main reason behind the action of the Greek Minister of Energy in order to boost local political support.”
So it seems that like Mr Tsipras, who railed and railed against the Troika before caving in dramatically to its demands and doing a deal, the Greek Minister of Energy will rail and rail against Eldorado.
Bearing all that in mind, for Eldorado it can’t be any fun doing business in Greece.
But for 10mln ounces of gold it’s probably still just about worth persevering.