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Environmental activists protest a gold mine near the western town of Kirazli, Turkey, on Aug. 5, 2019.

KEMAL ASLAN/Reuters

Alamos Gold Inc. plans on launching an arbitration suit against Turkey valued at over $1-billion, alleging “expropriation and unfair and inequitable treatment,” after the government failed to renew a key mining licence.

In October, 2019, Alamos stopped building its Kirazli gold project after the Turkish government refused to issue a seven-year renewal on its mining licence. The decision came a few months after thousands of people turned out to protest the construction of the mine on environmental grounds.

Since then, Alamos has worked with Turkey to try to resolve the dispute, but things have gotten worse. Late last year, the government also failed to renew Alamos’s forestry permit.

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On Tuesday, Toronto-based Alamos said the international arbitration claim will be filed by its Netherlands-based subsidiaries. The entire process could take up to five years to play out under the Netherlands-Turkey Bilateral Investment Treaty.

In a release, the company said the failure to renew the company’s mining licences “will result in the loss of over a half a billion dollars in future economic benefits to the Republic of Turkey, including tax and other revenues, and thousands of jobs.”

“A renewal of Alamos’s licenses and/or Alamos taking on a partner in which the value of the Turkish assets was highlighted would have been a preferred resolution,” said Tyler Langton, analyst with J.P. Morgan in a note to clients.

“That said, we also believe this claim could facilitate a resolution between the company and the government in addition to highlighting the value of Alamos’s assets in Turkey.”

Alamos also plans to take a $215-million writedown on Kirazli in the second quarter, both as a result of the stalled nature of the mine and the arbitration suit.

The company acquired the project in 2010 and since then has invested more than $250-million and paid in excess of $20-million in royalties and various other fees to the Turkish government.

Kirazli was supposed to be a fairly short lived mine, but a very profitable operation. Yearly production was previously estimated at 100,000 ounces of gold, over a six-year period, with a cost per ounce of gold of US$363, significantly lower than the industry average.

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In 2019, about 5,000 people gathered in the vicinity of the mine, voicing concern about deforestation and the company’s planned use of cyanide. The protestors expressed concern the toxic chemical, which is used in the processing of gold, could leach into drinking water. Alamos said at the time that the processing method was very safe.

On Tuesday, the company said it complies with best practices relating to development, including adhering to the “highest environmental” standards.

Alamos currently operates two mines in Canada and another in Mexico; Kirazli would have been its first operation in Turkey.

Alamos is not the only Canadian mining company to recently butt heads with foreign governments over the right to mine. The Porgera gold mine in Papua New Guinea (PNG), in which Barrick Gold Corp. owns a stake, has been shut down for more than a year. Last year, the PNG government accused Barrick of environmental infractions. Earlier this month, Toronto-based Barrick agreed to a new profit-sharing agreement with PNG that sees it make major concessions in return for the eventual reopening of the mine.

Kinross Gold Corp. and Eldorado Gold Corp. have also duked it out with governments abroad in recent years over ownership rights and profit sharing agreements.

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