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Carol Mignea, 75, guide of "Alburnus Maior" museum gestures in an old gold mine, used by the Roman Empire workers some 1,900 years ago, in Rosia Montana, 450km (280 miles) northwest of Bucharest.

BOGDAN CRISTEL/Reuters

Some investors see an opportunity in Gabriel Resources Ltd. after the shares slumped to record lows at the start of the week: Early Wednesday, the share price jumped more than 20 per cent.

Okay, we're talking about a mere 14-cent gain on a stock that traded for more than $8 less than two years ago. Nonetheless, the bottom-feeding suggests that there is still hope that the gold mining company will either get its Romanian gold mine going, or that it will successfully sue the Romanian government for killing the project.

Either way, investors are being too optimistic.

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The company's problems are concentrated on the Rosia Montana project in Romania. Gabriel Resources has been trying to develop the mine over the past decade but has been running into popular and political opposition within Romania, largely related to what the mine will do to the environment and the local village.

This opposition, backed by the country's prime minister, looks set to kill the project – a particularly painful scenario for the company, given that it isn't exactly diversified. It has no revenues and operates only in Romania.

Gabriel Resources isn't backing down. It is threatening to sue the government for $4-billion (U.S.), citing what it sees as "multiple breaches of international investment treaties." And it apparently has some big backers. Bloomberg News reported that hedge fund manager John Paulson – Gabriel's biggest investor, with close to a 16 per cent stake – is on side. It also counts Newmont Mining Corp. is also a major investor.

But Gabriel Resources also faces skepticism over the the viability of the Rosia Montana mine, making the political drama look like a sideshow to the company's future.

John Hempton of Bronte Capital , an Australian hedge fund, weighed in on Tuesday with his thoughts – though it should be noted that he is betting against Gabriel Resources with a short position on the stock.

His skepticism has two parts. One, that the Rosia Montana mine has been in use for about 2,000 years, by everyone from Roman slaves to workers for the former Romanian communist regime, which was starved for foreign exchange at the time.

"The mine was closed as uneconomic (loss-making) after the Iron Curtain fell," he said on his blog. "It just wasn't a very good gold mine – at least it wasn't after the slaves had picked over the ore body." (Emphasis his.)

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Gabriel Resources says the mine has 17.1 million ounces of gold and 81.1 million ounces of silver – and a proposed $1.4-billion mine, using modern extraction methods, will get it.

Mr. Hempton is also skeptical over whether Gabriel Resources can muster much of a fight, despite its legal bluster over breached treaties: "But they don't mention what treaties. Indeed I am for the most part unaware of what treaties might pertain," he said. "For this reason I suspect Gabriel's legal case is modestly overstated."

He suspects the stock has entered the final phase of its collapse. Investors, bidding the shares higher on Wednesday, disagree – but it is hard to see why.

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