DPM, which is active in exploring gold in Canada and operates an Armenian mine in which it owns a majority stake, came to Bulgaria in 2003, when it acquired concessions to explore for precious metals near Krumovgrad, in the south of the country and at Chelopech, located 65km east of Sofia. Chelopech deposits are substantial, estimated to contain 119.4 tonnes of gold, 298.8 tonnes of silver and 430,900 tonnes of copper. Krumovgrad is more modest but still offers 28.2 tonnes of gold and 13.9 tonnes of silver.
By the end of March 2007, the company had committed to invest 98.5m euros at Chelopech and 37.6m euros at Krumovgrad. Moreover, if it gets the necessary permits, DPM will be investing an additional 146.1m euros in both projects. Chelopech said it had secured sales contracts of between 40,000 and 75,000 tonnes of gold-copper concentrate in 2008 and of between 30,000 and 80,000 tonnes in 2009.
The next step for DPM is to expand the production capacity of Chelopech, by building an autoclave and a metals processing facility that will allow the extraction of gold and copper from the ore instead of shipping the concentrate elsewhere to be processed. DPM said the move is necessary because Chelopech ores have a high arsenic content so there are few firms that can process the concentrate. The trouble is that DPM has been waiting on Chakurov’s green light since March 2006.
Although Chakurov has had some questions about the environmental impact of the project, his main contention has been that the contract is not in line with Bulgaria’s interests for two reasons.
First, the concession fee payable should be higher than the 1.5% agreed. Second, according to Chakurov, the state should, as in many other countries, own a stake in the company involved in the extraction. While DPM said it is willing to allow a small hike in the fee (to 2.15%), it will not agree for the state to own shares in the company.
Last year, the government set up working groups to look into the general question of concession fees and to examine the specifics of the Chelopech concession.
However, the judiciary has been less impressed. In late April, the Supreme Administrative Court said Chakurov must either accept or reject the environmental assessment forthwith. Chakurov’s response in late May was that he would “most likely” ask DPM to do another assessment for Chelopech.
Consequently, DPM has invoked the might of Brussels and announced that it was taking Bulgaria to an arbitration court in the Netherlands, mentioning potential claims of $800m for Chelopech and $200m for Krumovgrad. DPM is playing another card, too. As they say they cannot afford to wait much longer, they might decide to build their processing plant in another country. Since plant designs are completed, the studies needed for building it somewhere else could be completed by November this year. So the pressure is on.
Though it can impose sanctions in face of violation of EC rules, Brussels is not bound to act on complaints. However, this one comes at a sensitive time. In late June, the EC is due to deliver a report on Bulgaria’s progress in the EU in certain areas, including corruption.
