The twists and turns of the saga known as Chelopech ended with a golden victory for the state. After years of attempting to invest millions in the mine to boost gold production, the concessionaire – Canadian firm Dundee Precious Metals, has finally succumbed to the Government’s silent refusal for its environmental impact assessment. The conflict had been going on for so long that the European Commission had been brought in as a mediator. However, now the concession has entered a phase of public-private partnership.

On March 10, Bulgarian Prime Minister Sergei Stanishev announced that the state will once again be a shareholder of the mine, with a 25 per cent stake. Dundee will also now have to pay a higher concession fee and will have to withdraw its complaint to the EC. The case repeatedly hit international headlines because of Environment Minster Djevdet Chakurov’s continued reluctance to agree to Dundee’s operations in Bulgaria. Chakurov has been a long-time promoter of reinstating the state as a shareholder in the mine.

The Canadian firm has also promised to finance the rehabilitation of all the land affected by the mine’s operations, at a reported cost of $155 million. According to Stanishev, this is the first deal of its kind in the European Union. In return, the Government pledged to approve Dundee’s investments in both Chelopech and Krumovgrad.
The agreement came after a series of talks between the private company and a expert political team of MPs Yordan Tsonev (MRF), Petat Kanev (BSP) and Milen Velchev (NMSP) and the economic adviser to the prime minister, Lyubomir Stoinev.

Technically, the state will return as a shareholder through the so-called Silver Fund, an entity that has not yet been created. The entire concession proceeds will be paid into the fund, as will half of all privatisation inflows and 10 per cent of the budget surplus. The ultimate idea is to generate extra funds for pensions.

Critics, however, were quick to question whether the new arrangement was well-conceived or timely. One of the reasons given was that the bill governing the formation of Silver Fund was yet to be passed in Parliament. Economy Ministry officials said, however, that this was the state’s sole way to be a concession shareholder because the Subsurface Resources Act precludes it from participating in concessions.

Dundee has also acquiesced in a doubling of concession payments. The extent of the fee will be directly bound to returns: the fee will be between two to eight per cent of extraction revenues, based on returns ranging between 10 and 60 per cent. The current Ordinance sees concession fees fluctuating between 0.8 and four per cent on returns from 10 to 50 per cent.

The new concession arrangement will translate to a large increase in concession proceeds. While last year gold output in Chelopech brought 1.7 million leva in revenue, the new arrangement should pay at least 51 million leva a year to the state coffers. This means that the fees should bring 700 million leva in revenue over a 10-year period.
The arrangement, however, is unlikely to reduce the protests by environmentalists. Their main issues is that Dundee has never renounced the use of a cyanide-based technology. The EU allows each member state to make its own decision on the use of cyanide. On March 10, Stanishev said only that the state would do everything possible to guarantee that all technical and environmental standards were met.

The agreement is also unlikely to ease business’ concerns that it is just the prelude to Chelopech’s hidden privatisation.

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