How far to go for gold?

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Estera Szekely is miserable.

Sturdily built, wearing a pretty blue and yellow dress and her hair gathered in a tight bun, she has spent her entire 60 years here in Rosia Montana, a tattered Transylvanian mountain village that hasn't seen any wealth since the local gold mines shut down. For the past 33 years, she has lived in a large, yellow stucco house on the village's main square, where she and her husband, Oliver, a carpenter, raised three sons.

Oliver died last year. His cluttered workshop on the house's ground floor remains untouched. His widow has found little solace in her family. Her brother is barely talking to her, and her daughter-in-law, who lives upstairs, is frosty as well.

The reason for Szekely's sadness and loneliness lies just across the square. She points to the offices of Rosia Montana Gold Corp., known simply as "Gold" among the locals. It is 80.5% owned by Gabriel Resources, a Toronto-based public company that plans to spend $1 billion to develop Europe's biggest gold mine, which would surround the village, turning it into an island in a sea of rubble (all currency in U.S. dollars unless otherwise noted).

Gabriel has already bought out many of the properties in Rosia Montana to make way for the mine. Szekely doesn't want to leave the only place she knows-the area is like a lush version of Tuscany, minus the millionaires' villas and postcard-perfect towns-and is refusing to hand over the keys at any price. Her brother and daughter-in-law support the Canadians. Both work for the gold company: he at a local charity it created, she in its environmental office.

Szekely says the tension between the residents who want to sell their properties to Gabriel and those who don't is unbearable. "It was a happy village," she says through an interpreter. "But now it's hard to speak openly about whether you are for or against this project. It kills you psychologically.

"My husband asked me not to sell the house-he's buried here and I am not going to open his grave," Szekely says, starting to weep. "He was a good, good man."

This is the face of gold fever, a compulsion to develop the planet's dwindling reserves that is so intense that mining companies find practically no obstacle to mine development to be insurmountable. The value of this precious metal may at bottom be more notional than practical, but here, as in places all over the world, the lust for more of the stuff requires drastic measures like uprooting an ancient town.

The ore at Rosia Montana is not even rich-now that the onetime Roman mining site has been tapped for two millenniums, only flecks remain, albeit in vast quantities. Yet with the price of gold seemingly ever-rising, flecks is all it takes to drive junior companies to develop new plays, and major companies to keep watch with their takeover wallets at the ready.

The fate of Rosia Montana is not yet sealed. Gabriel has waged a marathon battle against a variety of opponents to develop its mine-and it now believes it's finally on the verge of winning. The struggle plays like an epic, spanning decades and featuring a dazzling international cast: starring roles for a colourful Canadian dynasty, a murderous despot and a mining developer with a seedy past; supporting roles for gold titans Barrick and Newmont and for three billionaire investors; and cameos by George Soros, Vanessa Redgrave and none other than Dracula himself.

On a July day, it is 30 degrees and sticky here in the Apuseni Mountains of Transylvania, some 400 kilometres northwest of the Romanian capital of Bucharest. The blast of cold air that comes when Valentin Rusu heaves open the steel doors to the mine shafts of Alburnus Maior comes as a relief.

The lanky guide, himself a former miner, leads the way down 157 slippery steps to a narrow, dimly lit corridor, where he points out the contours of the distinctive trapezoid "galleries" employed by the miners of ancient Rome.

Rusu then points to chisel marks on the wall and the niches that held the galleries' tiny oil lamps. The remains of wooden wheels used to pump water from the galleries can be found in the dangerous, off-limits parts of the mine. In total, about seven kilometres of Roman mining galleries remain, scattered throughout the valley and mountains in and around Rosia Montana (Red Mountain), the Romanian name for Alburnus Maior.

When Rome added Dacia-roughly what is now Romania-to its far-flung collection of exotic real estate, it gained one of its most dependable, long-term supplies of wealth. The seizure of the Dacian gold deposits in early second-century AD was considered such a coup that Emperor Trajan ordered 123 days of celebrations. The gold helped to finance a public construction spree in Rome that included Trajan's Column, the 30-metre-tall marble pillar that celebrates the Dacian conquest.

Almost 2,000 years later, the gold seekers come from Canada. The most ambitious of them is Gabriel, a Toronto Stock Exchange-listed company that wants to turn Rosia Montana into a new El Dorado.

Historians believe that Transylvania produced 55 million ounces of gold between the Dacian era and the mid-1990s, when the last of the latter-day mines started shutting down. Those mines were inefficient, toxin-spewing wrecks: They had been starved of investment during the Communist era, surviving on an intravenous drip of subsidies. The conditions attached to Romania's entry to the European Union required their closure.

But, for all that mining, Transylvania still has the biggest-known undeveloped gold reserves in Europe and one of the top three reserves globally. Geologists figure that the central Transylvanian area known to the new cohort of miners as the Golden Quadrilateral contains 30 million to 40 million ounces of gold-and additional drilling could find more. At current prices of about $1,300 an ounce, the gold has a market value of $39 billion to $52 billion. (Thirty million ounces is more than 20 times last year's output from Nevada's Goldstrike, the biggest property in the portfolio of the world's biggest gold miner, Barrick.)

The goal of Gabriel and its rivals is to extract the stuff over the next 20 years or so-in other words, those 30 million to 40 million ounces would come out of the ground in 1% of the time it took to scrape out the first 55 million ounces.

If the local picture is fraught thanks to resistance and red tape, the big picture makes Rosia Montana sparkle. Gold in the ground is a slowly vanishing resource, and the chase is on to lock up the last known major reserves. The World Gold Council says annual production has yet to top the peak it hit in 2001. That's in spite of the inspiration of price rises: Big gold discoveries (like big oil discoveries) are increasingly rare. The planet's total known gold reserves are in decline, as production, driven by the need to provide quick investment returns to impatient shareholders, outstrips reserve replacement. An estimated 65% of the gold mined since ancient times has been produced since 1950.

To the new wave of miners, Transylvania, at least on paper, seems a gift: vast reserves in a politically stable, fairly low-cost European country with a long tradition of mining, an educated workforce and a supply of skilled-and out-of-work-miners. But for Gabriel in particular, that's where the good news ends.

The first Canadian to be seized by the dream of developing Rosia Montana was the son of one of Canada's most colourful businessmen, uranium titan Stephen B. Roman.

In 1983, five years before his death, Roman and son Stephen G. were scouting for business opportunities in Romania. The country's Communist dictator, Nicolae Ceausescu, asked the Canadian duo to help develop his country's uranium and coal assets. He also asked them to lobby the Canadian government to speed up the development of the country's Canadian-designed Candu nuclear reactor.

Both the reactor and the dictator came to a sticky end. The reactor went vastly overbudget and became one of the biggest blots on the history of the star-crossed Candu export program. Ceausescu, who had driven the country to economic ruin and starvation, was executed along with his wife in the Romanian Revolution in 1989.

But unlike the uranium and coal prospects, the idea of a new period of Roman gold mining, so to speak, had life in it.

The younger Roman inherited his father's penchant for exotic mining and energy plays and, as of the mid-1990s, was dabbling in projects from Chile to Turkey. Accordingly, a mining finance colleague of Roman's in Toronto, Gerald (Tim) Wood, figured that it would be a good idea to introduce Roman to Frank Timis, a fast-talking, foul-mouthed Romanian entrepreneur.

Timis, by his own account, had been a refugee from the brutal Ceausescu regime. He landed in Toronto after a stint in Australia, where he had dabbled in gold plays and picked up three fines for heroin possession.

Timis told Roman that the gold mining licences in and around Rosia Montana had been transferred to his Rosia Montana Gold Corp. by a state-owned company in the mid-1990s. It was the sort of giveaway that became typical after Europe's Communist regimes collapsed: The post-Ceausescu government, which couldn't afford to keep the subsidized mines going, gave them up, along with nearby exploration properties, without realizing their development potential. Timis suspected that Rosia Montana hid more gold than anyone realized, and touted the area to Roman and Wood. "We were the first foreigners to bring drilling rigs into the country, post-Ceausescu, and we explored," Roman remembers. "The [projected]ounces kept climbing."

So it was time to raise financing. To speed up the process, Timis took a publicly listed, but idle, Yukon shell company and recast it as Gabriel Resources. As of the late 1990s, Gabriel became the legal owner of about 80% of Timis's Rosia Montana Gold Corp. Romania's state-owned mining company, Minvest, kept most of the rest, giving it a window into the new Transylvanian gold rush. About $5 million was raised for Gabriel privately; Timis was named the company's first chairman and chief executive officer, while Roman became vice-chairman.

Optimism about its founding project ran high at Gabriel. But the Romanian press had a field day after discovering that the core of Europe's biggest undeveloped gold play had fallen into the hands of a drug offender. Press accounts claimed the government had handed Timis the mining rights for an outrageously low $3 million. (In the notoriously opaque Romanian resources development industry, the figure is impossible to verify.)

Annoying as the media's focus was, a bigger obstacle was environmental opposition from the "Rosia Rebels," one name for the loose coalition of local and international opponents of the mine that jelled as the 2000s progressed.

In 2000, the tailings dam of an Australian-Romanian gold-recovery company in northern Romania overflowed, disgorging an estimated 100,000 cubic metres of cyanide-laced water. According to the BBC and other media, the cyanide polluted the drinking water of 2.5 million people in Romania and Hungary, and destroyed more than 1,200 tonnes of fish. There were no known human fatalities, but the accident contributed to the pan-European drive to outlaw the use of cyanide in gold mining. (The European Union Parliament recently proposed a ban, but the overarching European Commission has rejected it.)

It was an untoward development for Gabriel. Because the Romans mined out the rich seams, the reserves at Rosia Montana are relatively low-grade. Huge amounts of ore would have to be processed-with cyanide-to yield decent output. Forget unobtrusive underground mining; two mountainsides would have to be blown up to create huge open-pit mines, which would be exploited alongside two existing pits. The nearby Corna Valley would be filled with the mines' waste rock and cyanide-laced sludge. Covering nearly 300 hectares, the pond, supported by a dam that would rise from its initial height of 70 metres to 180 metres-one-third the height of Toronto's CN Tower-would eventually hold 215 million tonnes of waste.

The company has spent more than 10 years and about $400 million trying to put its plan into action. Gabriel has determined that its properties at Rosia Montana contain 10.1 million ounces of reserves-the amount it knows it can extract. It believes another 4.6 million ounces are in the ground (along with 47.6 million ounces of silver, which the company also aims to mine). The plan is to produce an average 500,000 ounces of gold a year for 16 years.

Gabriel vows to preserve and restore Rosia Montana's small historic centre and some of the Roman mining galleries; to that end, it has already opened a small mining museum. The company says about 2,000 people in and near Rosia Montana have to be relocated, an effort that is 75% completed, leaving the village with about 500 people.

The hitch is the refuseniks and their supporters, who believe Rosia Montana will become an environmental wasteland after Gabriel extracts its last ounce of gold. They are skeptical, too, of the direct job-creation figures cited by the company-about 2,300 during the two-year construction phase and 880 during the mining phase-noting that automation is turning mining everywhere into a low-employment industry; likewise, they doubt Gabriel's promises to protect Rosia Montana's heritage.

At the time of the northern Romania spill, Gabriel was in the early days of negotiating to buy the houses of Rosia Montana residents. Farmer Eugen David remembers the period well. "When they presented the project," he recalls, "they said: 'For the project to happen, you have to leave.'"

David didn't take kindly to that proposition and was inspired to help found an activist group which, with a nod to the Romans, named itself Alburnus Maior. It was ineffective at first, because the subsistence farmers who formed its core knew little about campaigning. That changed in 2002, when they met Stephanie Danielle Roth, a Swiss-French environmental activist.

Roth was in Transylvania only because she was in the midst of a successful campaign to block the construction of Dracula Land, a theme park that was to include a golf course and several hotels. The project would have destroyed an oak forest reserve next to the Sighisoara citadel, which is said to have been associated with Transylvania's most famous son.

Between 30 and 60 permits are required before a mine can be constructed in Romania, covering everything from the right to remove forests and cemeteries to the right to construct dams and effluent discharge systems. Roth helped devise a strategy of challenging any document issued by agencies reviewing Gabriel's project that she and her fellow campaigners considered "irregular." The goal was to ensure the documents were consistent with Romanian and European Union mining, environmental and heritage laws, and to insist on the public dissemination of any documents that the government attempted to keep secret. The Rosia Rebels and their lawyers argued that many of the relevant documents were faulty, because of the information they omitted or because they were "the result of subjective pressures rather than of proper objective assessment." In a recent interview, Roth said that "If the laws are applied properly, this project will never go ahead."

Roth's words evoke eternity, but the battle had not been on long when Gabriel's principals got discouraged. By 2002, their dream of a Transylvanian El Dorado was turning into a nightmare, and the environmental heat was not the only reason. The flak over Timis's drug arrests was coming not just from the media, but from stock market regulators as well. Meanwhile, the Romanian government showed little interest in supporting the project, in spite of the 80% unemployment rate in Rosia Montana. The World Bank, which had a major role in the beleaguered country's affairs, wasn't any help either. In October, 2002, the Bank's private financing arm, International Finance Corp.-mandated to help finance risky projects in poor countries-rejected Gabriel's request for project funding. The IFC was scared off by environmental and social concerns, according to some media reports. But the IFC, in a statement made in July for this story, said it bailed "in light of indications from Gabriel Resources that there was available commercial funding for the project."

Realizing it needed to present a new face to regulators, investors and the Romanian government, Gabriel brought in a slate of new executives and directors. It was the sort of clean-out that would happen with alarming regularity throughout the decade-the company has had no fewer than six CEOs since its launch-as the Rosia Montana project lurched from one setback to another. Roman stepped down in 2002 and no longer has any association with Gabriel. Timis left in 2003. "Because of the heavy and stressful situation, I sold my 14% shareholding in Gabriel," he told a Romanian magazine. (Timis, who is now promoting oil and iron plays from London, was not available for an interview.)

The environmental backlash only grew as the company forged on. One powerful name invoked by Gabriel's opponents was George Soros, the Hungarian-born hedge-fund billionaire whose network of philanthropic foundations includes the Soros Foundation Romania. Haunted by the cyanide spill in 2000 that had polluted the Danube, Hungarians in general opposed the Rosia Montana project, and Soros, or at least his philanthropic arm, was no exception. His Romanian foundation hounded Gabriel and the Romanian government departments and agencies involved in the mine's review and permitting process. It urged them to respect the rule of law, ensure the process was transparent and, in the words of a statement of Soros's, "meet the legitimate demands of opponents to the mine."

Thanks to the publicity generated by Soros's foundation and Roth, funding for Alburnus Maior flowed in. In 2005, Roth was a recipient of the high-profile Goldman Environmental Prize for her campaign to stop Gabriel, which she had called a "modern-day vampire." Roth donated two-thirds of the $150,000 prize to the anti-Gabriel movement, keeping the Rosia Rebels (and their lawyers) well funded.

Things just kept getting better for the Rebels. In 2005, a documentary, New El Dorado, which went on to win several awards, presented Rosia Montana's gold as a curse, not an asset. A year later, actress Vanessa Redgrave, picking up an award at the International Transylvania Film Festival-sponsored in part by Gabriel-spoke out against the mine. "Our planet is dying and we have no right to destroy the ecosystem," she said.

Redgrave dedicated her lifetime achievement award to Alburnus Maior. This prompted Gabriel to take out an ad defending itself in The Guardian, to which Redgrave replied: "I am amazed that they should be so desperate...as to put in an advert criticizing me, but it's for their shareholders back in Canada." Gabriel also fired back at its opponents by financing its own film, Mine Your Own Business, which was released in 2007.

As the rhetorical volleys went back and forth, Gabriel did gain an important backer: Newmont Mining, the U.S. gold mining giant, invested in Gabriel in 2004. The move signalled that Newmont was a potential buyer of the whole company-the oft-preferred exit strategy of mining juniors.

In 2007, Soros told Newmont to tread lightly. According to Gabriel's website, he wrote to Newmont's CEO, "I feel it is my duty to advise you to consider carefully any further involvement with Gabriel Resources and the Rosia Montana project."

Despite all the vocal opposition and the labyrinthine bureaucratic process, Gabriel's executives at the time, led by CEO Alan Hill, were convinced that the mine was on the verge of approval. They continued to raise a small fortune on the stock market to pay for technical, environmental and archeological studies, to purchase the villagers' houses and land and to fund the relocation of graves. By 2007, Gabriel had hit the three-quarter mark in its drive to buy up properties in the area, "demonstrating strong local support for the project," in the words of a company document issued this year.

The company was also emboldened by legal setbacks it had delivered to the Rosia Rebels and its submission of a technically sophisticated environmental impact assessment that, it felt, addressed every one of the Romanian government's concerns. In early 2007, Gabriel had pleased investors with the prediction that the mine construction permits would land that winter. "We estimate that it will take approximately two years to construct the mine, putting the first pour-of-gold target date in fall 2009," it stated confidently in a press release.

Those bold hopes were put on hold in September, 2007, when the Romanian environment minister suspended the environmental impact review that Gabriel had so much confidence it had finessed. And he gave no indication when it might be restarted. CEO Hill accused the minister of "total disregard for the rule of law in Romania."

The project was pretty much dead. Gabriel stopped buying houses in the village. The company's shares went into free fall even as gold prices were rising, turning a company worth about $1.5 billion (Canadian) at the start of 2007 into one worth a fifth of that in 2008.

Over the years, Gabriel had raised and spent $400 million, with absolutely nothing to show for it. Europe's richest gold seam was effectively valueless.

How could Gabriel have miscalculated so spectacularly? The latest Gabriel boss, a 44-year-old Irishman with a degree in zoology named Jonathan Henry, says Gabriel should have put more emphasis on the non-technical aspects of the mine: the jobs, the promised cleanup of the suppurating Communist-era mines, the restoration of key archeological features, and the new houses in a development at Alba Iulia for everyone who sold their Rosia Montana homes (many of which are in deplorable condition). "It was a very strong project technically, but there was no point building the world's best gold mine if the local population doesn't realize the benefits of it," Henry says.

Stephen Roman's view is that Gabriel got greedy after his departure and went too big too fast, proposing a mine that stunned local residents with its sheer, destructive size. "All [Gabriel]saw was the dollars," he said. "They should have started with a small operation and added on to it as they gained the trust and confidence of the residents."

The enemies of the project would not savour their victory for long, however. While post-Ceausescu reforms had brought a measure of prosperity to Romania, it had been tenuous progress. And the year after the project's meltdown, Romania was hit hard by the global financial crisis, setting wheels in motion in the other direction for Rosia Montana.

Last December, Romanian president Traian Basescu and his centre-right Democratic Liberal Party formed a new government, one eager for foreign investment. At about the same time, Gabriel shares began to rise. They doubled from their 2009 low, then almost doubled again before the year was out. But why?

Certainly gold's seemingly unstoppable climb helped: The price has doubled since the start of 2007, when it was about $600 a ounce. So did the arrival of some new, high-profile billionaire investors-a sign of confidence in the Canadian company. At various points in the last few years, Thomas Kaplan's Electrum Group, John Paulson's Paulson & Co. and Beny Steinmetz's BSG Capital Markets made purchases of Gabriel shares at attractive prices. By the end of the year, the trio collectively owned almost half of Gabriel's shares, effectively making the Canadian company the plaything of wealthy foreigners. Each of the men-all famously aggressive investors-was bullish on gold as a store of value during economic turmoil and as protection against inflation.

Shortly after the new government took office in late 2009, economy minister Adriean Videanu declared, "I want this project [Rosia Montana]to start as soon as possible." The finance minister made similar noises. After all, Romania was in crisis. It had negotiated a ¤20-billion bailout package from the International Monetary Fund and the European Union to repair its battered finances, and was keen to attract foreign investment to create jobs and make its economy more competitive. At Rosia Montana, it was presented with a project that Gabriel had claimed would generate $4 billion-plus for the Romanian economy in the form of taxes, royalties, contracts to suppliers and the like during the 16-year life of the mine.

CEO Henry credits the apparent turnaround in government sentiment to a determined, behind-the-scenes lobbying effort by Gabriel executives. "This project is not as much a political football as it used to be," he says. "We've come a long, long way in the last two years. You are seeing public statements from senior officials who are in favour of the project."

Another factor may be at work-the Gabriel billionaires. Henry describes them as "passive investors." But he also hints the big boys are not completely idle. "I would hope that they all have good contacts with the Romanian government and are types that could open doors for us," he says. "But we are not aware of this."

A gold mining CEO, who did not want to be identified, says he has no doubt the billionaires, especially Steinmetz, an Israeli mining magnate who is one of the world's biggest suppliers of rough and polished diamonds, are promoting the Gabriel project in Romania, though he too stresses he is not aware of any specific lobbying efforts. "Beny doesn't go into any situation where he doesn't win," says the CEO, who is not involved in Romania. "He makes problems go away. He gets things done." (Steinmetz was not available for comment.)

By this summer, morale among Gabriel executives was high. Senior Romanian government officials continued to make encouraging comments about the mine, as did the country's environment minister. "I would be extremely disappointed if we don't see a restart of the environmental review process by the end of the year," Henry said in mid-July.

He was right. On Sept. 17, Gabriel announced that a Romanian government technical committee would reopen the environmental permitting review process. While Gabriel was careful not to promote the news as a major victory, nor to dare predict how long the crucial review would take, shareholders seized on the rare bit of good news and pushed up the shares 20%.

High morale notwithstanding, Gabriel may be underestimating the resolve of the Rosia Rebels.

The rebels can be roughly split into three groups. The first is outsiders, mostly preservation and environmental groups, among them Greenpeace and MiningWatch Canada. The second is elderly Rosia residents, like Estera Szekely, who vow to die where they were born. Largely self-sufficient, they wouldn't know what to do with the ¤50,000 to ¤100,000 they would receive for their properties. They don't want new houses elsewhere.

The third group is what worries Gabriel the most. It is made up of younger Rosia Montana residents, most of them farmers like Eugen David, some the owners of small businesses. Property buyouts, outward migration and deaths have thinned their ranks from about 800 a few years ago to perhaps 100 today. But what they lack in numbers they make up for in determination. They insist they will use any measure, from unrelenting legal challenges to kneeling in front of the bulldozers, to protect their land. They think Rosia Montana should be developing sustainable industries, like agriculture and tourism, not one that requires the destruction of towns and valleys, churches and cemeteries.

Devian Petru, 54, a retired mechanic who sports two gold teeth, refuses to sell his house "because we don't want to destroy our roots, because of the pollution and because [the mine]will wreck the area." But the decision comes at a cost. He feels increasingly isolated from the community. "My neighbour supports the project and we don't talk to each other any more," he says. He knows of a family that got ripped apart because two of three brothers wanted to sell to Gabriel against the third's wishes.

Although Gabriel's key concern is the relatively young residents, younger people in Rosia Montana are, on the whole, in favour of the project. Mostly jobless, many of them spend their days drinking cheap beer or plum liquor. Gabriel has already hired a few of them, including Christian Gruber, who works as a computer technician. The rending of the village's social fabric by the buyouts has left him with mixed emotions about working for Gabriel. "But I have to live," he says-he's happy for the income.

His brother Andrei runs one of the few businesses still operating in Rosia Montana, a tidy, two-bedroom hostel called La Gruber. He is dead set against the project. He and Christian live in the same house. If Gabriel gets its way, he will lose his business. If it doesn't, his brother will lose his job.

Gabriel CEO Henry thinks the holdouts' concerns are massively overblown. The mine, he says, will be a technological marvel whose waste cyanide levels will be well below tight European Union standards. (Such facts, however, may have less influence on opinions than a horrific tailings spill from a Hungarian aluminum plant that hit the Danube watershed in October.) If Gabriel leaves, Henry says, the local archeological heritage will crumble to dust because no one else can offer restoration funds. "We're reaching out to the hearts and minds of the local population and it's working," he says. "Our detractors are the NGOs [non-governmental organizations] Some are against the project just because they are against the project. They have been very clever in suing the government. We do not underestimate them."

Indeed, Henry knows Gabriel's next battle will be a tough one. He has opened three gold mines in his career-in Malaysia, Indonesia and Burkina Faso-but "this is all of the challenges I've ever had rolled into one, plus more." Henry thinks continued education about the merits of the mine will win out, allowing Gabriel to mop up the property owners who have refused to sell. But what if they hold fast? "We want to find a proper solution for each family," he says.

But Eugen David says there is no solution for Gabriel if any of his band cannot be persuaded. "If people don't sell, the project cannot start," he says. "They will have to come here with arms and bulldozers to get us out."

Gabriel does believe it has a nuclear option. "The law of this country allows for expropriation, but it's the last thing we want to do," Henry says.

While executives at Gabriel anticipate a breakthrough in their long slog to production, two other Canadian miners that came on the Romanian scene more recently-Carpathian Gold and European Goldfields-have barely ruffled political or environmental feathers as they move closer to their mine openings.

"This is the second- or third-largest undeveloped gold deposit in the world," says Randall Ruff, Carpathian's exploration executive vice-president, at the company's Rovina Valley gold/copper exploration site, about 20 kilometres southwest of Rosia Montana. "We are witnessing a renaissance of mining in Transylvania."

Ruff points to some core samples. They contain bits of gold, most of which are so small as to be invisible. Using an eyepiece, Ruff finds a speck large enough to be visible to the naked eye. It glints in the noonday sun, and he smiles. "This region will be producing one million ounces of gold a year between the three Canadian gold companies," he says.

Ruff is referring to Carpathian and its two larger rivals, European Goldfields and Gabriel, each of whose shares trade on the Toronto Stock Exchange. Together the trio dominates Europe's biggest undeveloped gold reserves. But it's an open question whether the three will survive as independent players-if they even want to-and whether the Canadian-headquartered content will go undiluted. As the ore bodies come closer to development, they will inevitably attract the attention of the industry heavyweights, all of which have voracious appetites for new reserves and production. Indeed, Gabriel has already been sized up by Toronto's Barrick Gold, and the stake held by Newmont Mining, Barrick's main rival, stands at about 15%.

Little Carpathian, with a stock market value of about $170 million (Canadian), is near the end of an ambitious exploration program and is applying for a mining licence. It expects its first gold "pour" from its planned mine, whose development cost is estimated at $530 million, in about three years. European Goldfields, valued at $2 billion (Canadian), is well on its way to producing gold from its Certej deposit, which contains 2.4 million ounces of reserves and, like Gabriel's project, will require the use of cyanide leaching; it is in the final stages of the permitting process and expects production to start in early 2013.

The uncertainty about the launch of Gabriel's mine helps to explain why its market value has, until recently, routinely been smaller than European Goldfields', even though the two companies have roughly similar overall reserves. At about $2 billion (Canadian) each, the two companies' market values evened up in the early autumn, after Gabriel's environmental review announcement.

Some mining executives think Gabriel might be snapped up the moment it receives its construction permits. The same could happen to Carpathian and European Goldfields.

Peter Munk, Barrick's founder and chairman, downplays his company's desire to make a splash in Romania, even though his company is a partner in Transylvania with a small mineral exploration company, Valhalla Resources. But he agrees that the Canadian trio and other companies contemplating mine openings may not last long once the permits land.

Noting the financing and technological challenges of creating new mines, Munk says, "These companies will be incorporated at some point into larger-producing gold companies, the ones that are well-financed and have relationships with international financial institutions."

Ruff, of Carpathian, does a quick calculation on the profit potential of the region. Assume, he says, that the cash production costs per ounce are $500. Add $150 per ounce for the capital costs, mainly the mine construction. That takes the total cost figure to about $650 an ounce. A few years ago, the price would have made Romanian gold uneconomic. But gold prices have now soared to about $1,300. The difference between the total cost and the current gold price-about $650 an ounce-is the raw profit. Multiply that by the 30 million ounces in the ground, and you come up with a theoretical pretax, pre-royalty profit of about $20 billion.

But that itself is not the gold rush that the three billionaire investors in Gabriel are likely to be excited about. None of the three, who collectively own almost half of Gabriel, is likely to stick around for the long term: Hedge funds, by definition, are quick-buck artists. One top gold executive who knows the three billionaires' operating style says all the trio cares about "is that Gabriel gets its permits."

When it does, he says, Gabriel's market value will soar, and the billionaires probably will want to cash out and move on to the next kill. On the other end of the transactions will be the gold companies caught up in a wave of consolidation frenzy: According to data compiled for this year by Bloomberg, 290 gold deals worth $38.4 billion had been announced by September.

Driving takeover mania is the general belief that gold prices are just as likely to rise as fall in spite of 10 straight years of gains, and the relative scarcity of discoveries; global gold production has been in decline. Gold companies that need to replace reserves are taking the easy way out and buying rival companies instead, even if the price tag is high. Oddly, that could change if the gold price keeps rising: At a certain price, gold companies may decide to develop reserves instead of buying competitors, a shift that would take the froth out of the buyout market.

Barrick and Newmont are not the only potential buyers of the Romanian mines. Aggressive, second-tier players, among them Kinross, Goldcorp, Yamana Gold and Agnico-Eagle Mines, all of them based in Canada and all eager to grow quickly through mine development or company purchases, or both, seem just as likely to pounce. Mining bosses say the top Russian gold companies-notably Polyus Gold, which has been poking around Transylvania-should not be ruled out of contention either. Nor should Australian miners.

Transylvania's reserves are just too big to ignore. "It's a world-class deposit," says one of the gold CEOs who's keeping watch.

Gabriel Resources has known that for more than a decade. But as the company has learned, world-class deposits can come with world-class problems.