Broke Greece Is Sitting on an Actual Gold Mine – And Wants to Shut It Down

Nov. 2, 2015 UPDATE: The top administrative court in Greece ruled today that it would annul a decision by the leftist Greek government to revoke the mining license of Canada-based Eldorado Gold.

The ruling reverse a May decision to revoke Eldorado's license because of a failure to carry out some safety tests in Greece. That prompted the company to suspend mining operations and lay off much of its work force. Given the nation's debt woes, the action was puzzling.

Most of Eldorado's 1,300 employees had returned to work last month following a temporary ruling in favor of the mining company.

AUG. 19, 2015 UPDATE: Today the Greek government suspended operations at Eldorado Gold's Skouries gold mine.

Officials said the company had violated contract terms. But the Syriza government had made clear even before it was elected in January that it was ideologically opposed to the gold mine and wanted to shut it down.

Attempts to use the courts to shut down the mine in recent months have failed, with Eldorado winning at least two decisions. Apparently the government finally discovered a "violation" it could use to shut down the gold mine without going through the Greek legal system.

The closure of the mine leaves thousands of Greek workers without jobs at a time when the country's unemployment rate is more than 25%. And despite a third bailout, the Greek economy remains in desperate need of foreign investment.

The Eldorado Gold mine, a $1 billion project, is one of the largest foreign investments in Greece.

[Original story follows.]

A gold mine is something governments wish for in a national debt crisis – so why is the new, broke Greek government getting rid of one?

This is a story about political ideology trumping common sense.

Greece's debt problems have raged for more than five years. The country is literally on the verge of complete insolvency.

In recent months the situation has grown dire as Greece's new government, elected to power in January, has tried to reverse the austerity measures required by its European Union creditors.

This is a country that needs to do everything it can to prop up its economy as it seeks to avoid a financial disaster. But Greece's ruling leftist Syriza has other ideas…

Since taking office, Syriza officials have done everything they can to shut down a lucrative gold mine run by Canadian gold miner Eldorado Gold Corp. (NYSE: EGO).

In fact, stopping the project was near the top of the Syriza agenda.

"We are absolutely against it and we will examine our next moves on it," Energy Minister Panagiotis Lafazanis told Reuters just days after the election.

In early March, Lafazanis revoked a license Eldorado needed to complete construction on the Skouries site pending further review.

But just look at what this project would have brought to Greece's economy…

This Is What Greece Needs

The Skouries project, located in northeastern Greece, currently employs 2,000 people in a region suffering with an unemployment rate of close to 35%. The rate for all of Greece is nearly 26%. Full mining operations had been expected to be underway next year, with 1,000 more employees to be hired by 2020.

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In addition to the jobs, Eldorado officials say the gold mine at Skouries would, by 2017, provide the Greek government with 500 million euros ($560 million) a year in export revenues. Maybe not enough to pay off the $323 billion euros ($362 billion) that Greece owes, but every little bit helps.

Eldorado Gold is one of the biggest foreign investors in Greece. Since 2012, the company has sunk $450 million into Skouries. It had planned to spend an additional $785 million by 2020.

And the Skouries gold mine has unusually high potential.

"The conditions that exist particularly in northeast Greece are unique in my mind," Eldorado CEO Paul Wright told Reuters last year. "I've been in the industry for 35 years and I've yet to see a situation where there is such a mineral endowment that is being recognized – in many cases quantified – but remains unutilized."

For now, Eldorado is proceeding with the project in the hope that it can get Lafazanis to change his mind. But the company is prepared to bail out of Greece if necessary.

The previous Greek government had fast-tracked the Skouries gold mine. That government considered it a model for attracting desperately needed foreign investment to Greece.

So why would the new government be so hell-bent on shutting it down?

Syriza officials say it's about protecting the environment. But there's more to it than that – and it defies logic…