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Eldorago Gold Corp.’s Hellas mine in Stratoni, Greece. (Nikolas Giakoumidis for The Globe and Mail)
Eldorago Gold Corp.’s Hellas mine in Stratoni, Greece. (Nikolas Giakoumidis for The Globe and Mail)

Tensions mount between Eldorado Gold and Greek government Add to ...

Greek Energy Minister Panos Skourletis says Eldorado Gold Corp. chief executive Paul Wright shorted the shares of his own company, comments the miner dismissed as “utter nonsense,” as tensions mount between the Canadian company and the government in Athens.

Eldorado shares fell 19 per cent to $3.53 on Jan. 12 on the Toronto Stock Exchange, the biggest one-day decline since December 2008, after Mr. Wright announced at a press conference in Athens that the company was suspending its investment plans for its Greek mines, blaming the attitude of the government.

Eldorado suspends operations in Greek mine (BNN Video)

“[Mr.] Wright is a CEO, he’s smart and he’s experienced; he gave a press conference knowing that the share price of the company would tumble,” Mr. Skourletis said when asked for an update on the country’s talks with Eldorado Gold in a wide-ranging interview on Thursday. “Why did he do that? In my opinion, and I told him when he was here, he played games with the share price. ‘You have told your friends that you are going to say these things at the press conference so that they could sell beforehand and then buy at lower prices.’”

The minister’s comments are the latest in a battle of words between the two sides that have failed to reach agreement over Eldorado’s plans to develop its mines in Greece. The country’s ruling Syriza party has said the company’s activities are polluting the environment. Mr. Skourletis last summer revoked a development permit for one of Eldorado’s mining sites. The decision was annulled by Greece’s top administrative court.

“I am absolutely certain that he shorts the company’s shares,” he said about Mr. Wright. “His compensation is tied, among other things, to the company’s share price, and he plays games with it.”

The minister provided no trading details to back his claim.

Mr. Skourletis’s allegations are “without basis and offensive,” Eduardo Moura, Eldorado vice-president and general manager for Greece, said in an e-mail, when asked to respond to the comment. The company’s spokeswoman in Vancouver, Krista Muhr, replying on behalf of the CEO, said the allegations are “utter nonsense.”

Elorado is not a heavily shorted stock, relative to other gold miners. In the week before Mr. Wright’s January comments in Athens, short positions in Eldorado rose to 1.9 per cent of the company’s free float, according to Markit data. That was slightly up from the 1.7-per-cent short interest on Dec. 31, which was a 52-week low.

By comparison, short interest in Barrick Gold Corp. was at 2.2 per cent of free float at the time, while Agnico Eagle Mines Ltd. was at 5.3 per cent and Iamgold Corp. at 7.6 per cent. Newmont Mining Corp. was at 0.5 per cent. (A short sale occurs when the seller borrows stock from a brokerage, and sells it, expecting the price to fall. If it does, the seller will buy stock at the lower price to replace the stock that was borrowed.)

Mr. Wright has recently been buying Eldorado shares. He added 18,569 shares at $3.83 a piece on Feb. 8, according to data compiled by Bloomberg. That brings his total to 1.17 million shares.

Eldorado closed at $4.01 a share on Tuesday on the TSX, for a market value of $2.87-billion.

Its shares have tumbled 39 per cent in the past year, the most among 19 competing miners tracked by Bloomberg, as it has gone back and forth with the government to develop its mines in Greece. Last month, the company said that a preliminary review indicates an after-tax impairment expense of $1.2-billion to $1.6-billion “primarily related to its Greek assets.”

“Eldorado’s commitment to Greece has resulted in over $700-million of investment into the country since 2012,” Mr. Moura, its vice-president, said. “The failure of the ministry on numerous fronts has forced the company to revise our investment plans; however, we remain committed to our Greek projects and the creation of jobs and long term development for the benefit of all stakeholders.”

According to Mr. Skourletis, one of the closest allies of Prime Minister Alexis Tsipras, the company “blackmails” the government and the environmental watchdog in Greece to approve permits for further development of the mines “with eyes closed,” or risk a suspension of the investment and laying off of hundreds of miners. “They are colonialists, not investors,” Mr. Skourletis said.

The company denies violating environmental legislation, citing rulings by Greece’s top administrative court. “The Council of State – the Supreme Court of Greece on environmental and administrative matters – has repeatedly confirmed the integrity of our permits, including five rulings since 2014 declaring null and void various decisions of the Ministry of Energy and Environment,” Mr. Moura said.

While Mr. Skourletis acknowledged the court’s decision, he said that “the Council of State has ruled on specific aspects of the case, it hasn’t ruled on whether it’s a good or bad investment.”

Eldorado submitted licensing applications to further develop its mines in Northern Greece in December, the minister said. Authorities are required by law to respond within three months, and they will do so by the end of March, the minister said. If the miner complies with its environmental and planning commitments, then the government won’t stop the project which was licensed by the previous government, as there’s “continuity in state decisions,” Mr. Skourletis said.

He added, however, that the company probably wants to halt its investment to Greece anyway.

“Eldorado may want to stop the investment in Greece, and they just want to put the blame on the Greek government,” he said.

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