“I have never encountered anything like it.” Paul Wright, chief executive officer of Hellas Gold’s parent company Eldorado Gold, has difficulty understanding the quagmire in which the firm’s large investment in Halkidiki has found itself.
In an interview with Kathimerini, Wright says that the project in northern Greece bolsters employment, exports and tax revenues for the Greek state during what is a very difficult period. He also points out that the project has survived a number of court challenges. “And yet the government wants to stop it.”
We met at the company’s Athens headquarters. Wright was visiting the country for a third time since the January election in a bid to reach some sort of understanding with the new government. Despite efforts made by the company, as well as Canada’s government, his contacts with Greek government officials have proved difficult.
“It is uncertain what the government’s intentions are. We are receiving mixed signals. There has been interference, negative statements about the investment,” he said. Have there also been some positive signals? “I am probably being a bit generous when I talk about mixed signals. It’s been negative rather than positive. And that’s been noted by our marketplace.”
Wright says that for the time being he has no clear picture about how the government’s thinking on the project is developing. He says that one of the reasons he met with Panayiotis Lafazanis, minister of production reconstruction, when he visited Athens last week, was to find out more about what the new administration thinks.
As he sees it, “this project is held through a contract with the government, a legally binding contract that obliges the parties to fulfill obligations. These obligations are binding both on us and on the state.”
“We believe fundamentally in this project, we believe in the society, and we believe that it is in the best interest of the Greek state,” Wright said.
In his view, there is a lot of “misinformation” about the company’s activities, which also seems to have affected the stance of the new government.
“We will continue to try to clarify things to the government. However, as a corporation, we cannot in the medium to long term work in an environment in which the government does not support the project. The actions that have been taken are affecting our productivity, they are affecting our costs. Inevitably, unless these situations are remedied, it would be likely that we would have to curtail further development.”
Asked to elaborate on his comment, Wright said: “It would mean reducing our labor force to one that was able to maintain the assets, but the mines would not develop further. The investment necessary for that would effectively stop.”
Has Wright regretted the decision to invest in Greece? And given the experience of the past three years, what would be his advice to a foreign company mulling a long-term investment in Greece?
“I don’t want to answer that question at this moment in time. Look, this is a point I’ve made over and over again with the previous government – with the new one, I haven’t had a chance to. This investment is hugely important for us; but it must also be hugely important for the country and for the government as well. And not just because of its contribution to economic activity,” he said.
“The institutional investors that we have are the biggest in the world – the Fidelities, the Black Rocks etc. These shareholders are watching this investment closely and looking to see the extent of support from central government. It is a test case for them as regards whether Greece is investible. These are investors who have invested with us successfully for the better part of 20 years, and they have seen us succeed in developing mines all over the world. So they have confidence in us to do things right, whether it’s with the government, with local society, on technical or environmental issues. So if we don’t succeed here, it will not be a reflection on us; they will see it as a reflection of the environment we had to operate in,” he said.
The local community
Wright insists that reactions from locals against the investment are relatively limited.
“Around 4,000 people from the entire region have visited our facilities, to see what we are doing with their own eyes. They often ask us, ‘Is this what all the fuss was about?’”
Company officials point out that in the last national election, and with the exception of Ierissos, which is the stronghold of the mine protests, conservative New Democracy won 42 percent of the vote in Aristotelis municipality, compared to SYRIZA’s 28 percent. The leftist party had been vehemently opposed to the investment.
In Wright’s opinion, support for the project is warranted. “Our investment in Halkidiki is practically the only one of its size in the past two to three years, providing long-term jobs, with good salaries and benefits,” he said.
“There are well-developed laws and regulations in Europe in the 21st century that determine how mines must operate, in accordance with high environmental standards,” he said.
“Halkidiki historically has been a mining district since the days of Alexander the Great. It is not an unusual activity for this area. This – the fact that people there understand mining – is the reason why there was modest opposition to begin with, and it has become less with time. Unfortunately, it has taken on a political dynamic.”
Eldorado has three areas of mining activity in Halkidiki: Olympias, Stratoni and the new mine in Skouries, which is the focus of protests by locals.
How does he respond to criticism over the environmental impact of the project (for example the draining of the water table, the destruction of a sensitive forest ecosystem, and potential flooding due to deforestation)?
“All aspects of what you describe have been dealt with in the environmental impact assessment (EIA). The hydrological study that’s in the EIA proves that there is no problem with the ground water, and the necessary engineering design is in place to contain the issue of surface runoff,” Wright said.
He also refers to logging activity in the region, which leads to the same annual levels of deforestation as the mine will cause in total (1,800 hectares).
Furthermore, he says, according to the terms of the EIA, “the area will be reforested at the end of the concession period,” a commitment that is guaranteed via the “50-million-euro bond to give comfort that the reclamations requirements will be satisfied.”
“In the five years it took to develop the EIA there were three legal challenges that reached the Council of State. In all three cases, the court rendered decisions in the company’s favor, going as far as to state that the development of these projects is in the best interests of Greek society and the Greek economy,” Wright said.
The company plans to make use of a process called flash smelting, in place of the cyanide-based process used by TVX, previous owner of the mines, which was halted by the Council of State in 2003, due to environmental concerns. Critics say that flash smelting is not possible on a mineral concentrate with very high levels of arsenic, like the one found in Olympias.
Wright defends the process. “Flash smelting is widely used in our industry. For the arsenopyrite reserves of Olympias, we are continuing engineering testing in partnership with the Finnish company Outokumpu to perfect the method. Flash smelting, the way we are going to do it, will extract the gold while stabilizing the arsenic and rendering it inactive.”
Under fire: Company’s tax
planning, use of Dutch
companies ‘entirely legal’
Eldorado has also come under fire in Greece for using “aggressive” – as they have been labeled – tax planning strategies that are designed to minimize income tax from profits as stipulated by Greek legislation.
‘No profits in Greece’
According to a recently published report from the Center for Research on Multinational Corporations (SOMO), Eldorado uses a loan financing structure that shifts interest payments from Hellas Gold via mailbox companies in the Netherlands – a country that has often criticized Greece’s failure to collect taxes – to a Barbados entity where this income remains untaxed.
First of all, we currently make no profits in Greece,” Eldorado Gold’s chief executive said.
“We have invested 450 million US dollars, and have already paid taxes – VAT and others – in excess of 50 million euros. Regarding our tax planning and the use of Dutch companies, we do what most corporations do and it’s entirely legal.”
“We try, like every business and indeed every individual, to legally minimize the amount of tax we have to pay,” Wright told Kathimerini.
Hellas Gold is expected to report profits for the first time in 2017, which is also when the benefits of the Dutch tax scheme will become evident.
Eldorado Gold is a Canada-based multinational corporation that builds and operates gold mines in Greece, Romania, Turkey, Brazil and China. It is listed on the New York and Toronto stock exchanges.
Asked about the significance of the Halkidiki investment for the company, Wright said: “The investment in these assets was approximately 2.5 billion Canadian dollars [1.82 billion euros]. We have already spent 450 million US dollars [418 million euros] for their development, and the plan is for that development to reach 1 billion euros [930 million euros]. For a company whose market capitalization is 5 billion US dollars, it’s clear that Halkidiki is an important part of how we envisage the future.”