Greek dilemma: Are new jobs created by gold mine worth the ecological risk?

A billion-dollar project in the Halkidiki peninsula could bring thousands of jobs to struggling Greeks. But the trade-off might be serious damage to flora and fauna in the tourist region.

The Cassandra mines in Greece's Halkidiki peninsula sat silent for more than a decade, shuttered by a 2003 court order as an environmental hazard.

But one of Europe's richest fields of gold and other key metals has reopened, and the prospect of a further expansion is pitting locals worried about farming, fishing, and tourism against those eager for jobs amid severe economic crisis.

Some locals, spurred by a 27 percent national unemployment rate, want the work. Others say they won't rush to apply for a job.

"I was planning to come back to my home country and work at the mines," says Yannis Verginis, a mineralogist. He worked in Germany's heavy industry until 2000, when he moved with his family to Halkidiki in order to be closer to nature. "But when I came and saw the situation, I didn't apply. I realized that I had to give up my dreams and my life planning, otherwise it would mean the destruction of the region."

'First work and then our health'?

The Canadian firm Eldorado Gold took over the mining rights in 2012. It has already started what will be a $1 billion investment, and mines mainly for gold, but also silver, lead, zinc, and copper. The company says the move will make Greece a major gold supplier – and bring much-needed jobs.

"When our mineral assets in Halkidiki and Thrace reach full production, Greece will indeed become one of the top gold producers in Europe," asserts Eduardo Moura, Eldorado Gold's vice president and general manager for Greece, in an e-mail interview. He says that the approximately 1,900-person direct labor force will grow to an estimated 5,000 "direct and indirect jobs" in Greece as a result of the investment.

But residents, scientists, and civil society organizations worry that the new investment is not sustainable. The University of Aristotle's Environment Board investigated and found the expansion “will radically change the character of the wider region, which has a rich and unique natural habitat, an important historical and cultural landscape, with archaeological sites and a large room for development of the agricultural and tourism sectors.”

Eldorado Gold has the right to do exploratory drilling in 122 square miles, about a tenth of Halkidiki, a popular tourist region the size of Rhode Island. According to the Environment Board's report, the expansion of the mines includes the creation of an open-pit mine and a processing plant. The report says the plan also calls for three dams, built on important water reserves, to create tailing pools that hold dangerous heavy metals. There will also be deforestation of 440 acres of forest that contain rare and endangered species of flora and fauna. Experts from the board also warn the mine will pollute the air and disrupt water supplies in the region. [Editor's note: The original version misstated the rights Eldorado Gold has in the region.]

"The problem is enlarging the operation – the environment won't be able to cope," says Kostas Katsifarakis, professor of water resources at the University of Aristotle in Thessaloniki and president of the university's Environmental Board. He argues that in the area where 40,000 people get their water, drainage will lower the aquifer from 500 meters above sea level to 100 meters below sea level, while floods will occur more often due to the deforestation.

Even some of the locals who worked in the mines don't want to work now. “I myself was working in the mines as a teenager and for 15 years,” says Kostas, who didn't want to have his surname published because he was afraid of repercussions from miners in his village. “But to get 1,500 euros per month and then not have a home for my children, I can't accept that. Those working there now are saying first work and then our health.”

But many say the mining operations can be done safely. "What we're saying is that in all the well-governed countries all activities can co-exist, provided that there are rules," Christos Pachtas, a former local mayor and Greek deputy minister, told local television in May. Mr. Pachtas signed the agreement that awarded the mining rights to Hellas Gold for development.

He ticks off several examples: "Rules for the mines, [but also] for the primary sector in order to protect the environment for example from pesticides, rules for tourism, [or the] development in the operation of waste-water treatment and so on."

Questions of oversight and benefit

Company officials say that the impact on the environment will be properly managed. They note that the environmental assessment has been approved by the government. And they dispute many of the facts presented by the Environment Board's report.

But opponents say that the way the government has handled the mining rights is suspect. The state sold the rights to the Cassandra mines, along with the fixed assets that the previous company had left, for 11 million euros ($13.7 million) to the Greek company Hellas Gold in 2003. Just a few years later, European Goldfields acquired Hellas Gold and sold the Cassandra rights for more than $2.5 billion to Eldorado Gold.

In 2009, the European Commission concluded the rights and the assets were sold to European Goldfields (EG) at below market value, without an independent value assessment and an open bidding process, as Greek and EU policies dictate.

The violation went to the European Court of Justice (ECJ), which ruled that EG owed Greece 15.3 million euros ($19 million) in unpaid transaction taxes. Those taxes have yet to be repaid, and the current government says that it doesn't want the money. Now, the commission has promised to take both the government and the company to the ECJ again over the issue.

Some also accuse Eldorado Gold of not paying enough in taxes. According to a report by SOMO, a Dutch nonprofit that researches tax evasion, Eldorado Gold used a common tax avoidance scheme to circumvent nearly 1 million euro ($1.25 million) in taxes between 2009 and 2013. But Moura says that Eldorado obeys all applicable laws, both EU and Greek, environmental and tax. And he adds that since 2012, the company has paid some 47 million euros ($59 million) in payroll taxes to Greece. "The facts therefore do not support the claims that the Greek state is not benefiting financially from our investments," he says.

Regardless, many Greeks say they are angry with the government over its attitude toward the operation. "The prime minister said that this investment has to continue, that it will mean sacrifices," says Mr. Katsifarakis. "But to sacrifice all the people there? Or to sacrifice all the other economic resources in a region, which is very rich?"