TORONTO, CANADA--(Marketwired - May 14, 2014) - Gabriel Resources Ltd. ("Gabriel" or the "Company") (GBU.TO) announces the publication of its First Quarter Financial Statements and Management's Discussion and Analysis Report for the period ended March 31, 2014.

Summary of recent events

Capitalised terms used in this summary section are defined in "Further Information" below.

• On March 5, 2014, a new coalition Romanian Government was sworn in. Government approval of the environmental permit is pivotal to the future progress of the Project and a key factor in this decision is the recommendation of the TAC. Despite a further TAC meeting in April 2014, and given the continued political instability in Romania, and recent ministerial changes, the outlook regarding approval of the environmental permit remains uncertain at this time.
• Political activities in Romania are currently focused on the European Parliamentary elections which take place at the end of May, and the run up to presidential elections that are to be held in November 2014.
• Until such time as the Company can initiate additional, meaningful dialogue with the Government regarding the completion of various permitting processes of the Project including the EIA, Gabriel cannot provide any assurances or estimates of the likely time required to address and resolve matters currently preventing the advancement of the Project.
• In light of the repeated delays of the Government to properly address the assessment and permitting procedures for the Project, a thorough review of all activities associated with development of the Project has been undertaken and it was concluded that approximately 80 per cent of the employment contracts of the affected RMGC employees are to be terminated during the second quarter of 2014.
• $31.2 million of cash and cash equivalents was held as at March 31, 2014.

Jonathan Henry, Gabriel's President and Chief Executive Officer, stated:

"Romania has the potential to be a leading gold producer in Europe through the development of Rosia Montana. Although we still remain fully committed to constructing and operating a mine at Rosia Montana we have seen no real or transparent process from the new Government in recent months evidencing a will to proceed with the Project. The Company has recently had to make almost 400 Romanian employees redundant as a result.

"The Company believes that it has delivered comprehensive and compelling answers to all technical assessment questions raised on the Project and that the permitting process for the Project can be successfully completed in the short term."

Further information and commentary on the operations and results in the first quarter of 2014, together with events anticipated in the short term, is given below. The Company has filed its Unaudited Condensed Interim Consolidated Financial Statements and Management's Discussion & Analysis on SEDAR at www.sedar.com and each is available for review on the Company's website at www.gabrielresources.com.

Further Information

Financial Performance

• The net loss for the first quarter of 2014 was $3.5 million, or $0.01 per share.

Liquidity and Capital Resources

• Cash and cash equivalents at March 31, 2014 amounted to $31.2 million.

• During the period ended March 31, 2014, proceeds received by the Company from the exercise of stock options were nil (Q1 2013: not material). Excluding the impact of funds received through the exercise of stock options, tax refunds and realized foreign exchange translation differences, the Company's average monthly net cash usage during Q1 2014 was $3.6 million (2013 full year average was $3.9 million, 2012: $4.9 million). Aggregate cash usage in Q1 2014 includes a reduction in trade and other payables of $2.2 million since the end of Q4 2013.

• In 2014 to date the Company has continued with its underlying cost containment to preserve capital until such time as the Government moves ahead with Project permitting. The most significant recent element of this has been the decision to terminate the employment contracts of approximately 400 employees at Rosia Montana Gold Corporaton ("RMGC"), effective Q2 2014. There will be related, one-time severance payments during the course of 2014 totaling approximately $2.6 million.

Capital Cost

• Including interest, financing and corporate costs, the Company estimates the capital required to bring the Project into production and to a position of positive cash flow is approximately US$1.5 billion.

Political Environment

• Political activities in Romania are currently focused on the European Parliamentary elections which take place at the end of May. The outcome of these elections will be important to assess where the Romanian public's allegiance to political parties lies in the run up to presidential elections that are to be held in November 2014.

• The coalition parties within the Government of Romania ("Government") separated in late February 2014. The alliance of the Social Democrat ("PSD"), National Liberal ("PNL"), the Conservative Party ("PC") and the National Union for the Progress of Romania ("UNPR") (together the "USL"), was led by Social Democrat leader and Prime Minister Victor Ponta, and held a two-thirds majority in parliament since the parliamentary elections of December 9, 2012, a position that enabled it to control both the Chamber of Deputies and the Senate.

• On February 25, 2014, the PNL adopted a resolution for its withdrawal from the Government, and also called for the resignation of Prime Minister Ponta and the legal dissolution of the USL.

• On March 3, 2014, it was announced that the PSD, PC and the UNPR, had reached a political agreement of the terms on which the Democratic Union of Hungarians in Romania ("UDMR"), a political alliance representing the ethnic Hungarians of Romania, was to join the Government. The new Government was sworn in on March 5, 2014.

• Of particular relevance to the Project, UDMR has been allocated the Ministries of Environment and Culture, positions it most recently held when in government in 2012, following which it has been in a position of political opposition for almost two years.

Special Draft Law in respect of the Project

• In order to achieve certain of the objectives assumed by the then Government in its strategic agenda for its four year term, the Government approved and issued a draft law "on certain measures related to the exploitation of the gold-silver deposits from Roșia Montană and stimulation and facilitation of mining development in Romania" ("Special Draft Law"). 

• On November 11, 2013 the Special Joint Committee of the Senate and of the Chamber of Deputies ("Special Committee") published its report ("Report"), and voted in favour of a recommendation therein for the rejection of the Special Draft Law. The Report did not propose acceptance or rejection of the Project by the Parliament, notwithstanding that numerous and wide-ranging conclusions and recommendations were included in the Report.

• On November 19, 2013 the plenary of the Senate rejected the Special Draft Law, adopting the Report drawn-up by the Special Committee. No vote has taken place to date by the Chamber of Deputies, as the decision-making body of Parliament charged with voting on adoption of the Special Draft Law, although the Company fully expects it to be rejected when it is presented. 

Impact on the Project

• The political instability and ministerial changes recently effected, together with the failed legislative initiatives of late 2013, have resulted in a lack of transparency in the foreseeable process for permitting the Project.

• A number of the recommendations in the Report were presented by the Special Committee in response to concerns raised by interested parties during the Special Committee hearings. The Company believes that these issues have already been addressed extensively by the competent authorities or institutions charged with assessing the Project, such as the Technical Assessment Committee of the Environment Ministry ("TAC"), but remain topics for suggestion that further studies need to be initiated or permitting delay should ensure, neither of which has been discussed directly with, or made clear to, the Company at this time. 

• Until such time as the Company can initiate additional, meaningful dialogue with the relevant ministries of the Government and the TAC regarding the completion of environmental permitting and any proposals for further legislative processes through the Romanian Parliament which may affect the Project, Gabriel cannot provide any assurances or estimates of the likely time required to address and resolve matters such as those raised in the Report or as to the impact of recent events upon the permitting progress of the Project.

• In light of the repeated delays of the Government to properly address the assessment and permitting procedures for the Project, a thorough review of all activities associated with the development of the Project has been undertaken, with a goal of further reducing expenditures to ensure the Company remains financially strong, while maintaining, as far as possible, all existing licenses and permits in good standing. Following such review and consultation with the local trade union and concerned authorities regarding retrenchment compensation, it was concluded that approximately 80 per cent of the employment contracts of the affected RMGC employees are to be terminated during the second quarter of 2014.

• In the immediate future, the Company will continue to pursue a strategy of engagement with all stakeholders to explain the critical importance of the Project as part of the sustained economic development for Romania and the Company's commitment to adhere to the highest standards on engineering, environmental, cultural and social matters, which will allow the Project to become a showcase for further investment into Romania and a sustainable legacy for the Romanian people.

Project Ownership and Royalty Rates

• On November 1, 2013 the shareholders of RMGC formally approved the transfer of the entire direct 19.31% shareholding in RMGC from Minvest to Minvest Rosia Montana ("Minvest RM") a wholly-owned state entity.

• In December 2013, the Group was required to recapitalize RMGC in order to comply with Romanian minimum capitalization company law requirements. The subscription to RMGC share capital by the Company was effected through a conversion of existing intercompany debt. In January 2014, following discussions with the Ministry of Economy, the Group agreed to transfer to Minvest RM, for nil consideration, a proportion of the shares subscribed to in December 2013, with a face value of $20.4 million, in order to preserve the respective shareholdings in RMGC.

• As previously reported, on November 14, 2013 the Government issued an emergency ordinance to provide for a new set of royalties applicable to mineral resources, including gold at a royalty of 6% of the mining production value. The ordinance has yet to be debated and voted on by the Chamber of Deputies, the decisional body which could potentially modify the applicable royalty rates. Until such time as an addendum to the exploitation license for the Project ("RM License") is agreed by RMGC, it is the Company's understanding that the royalty rate of 4% established in the RM License will continue to apply to the Project.

Environmental Permit

• During 2013, there were four meetings of the TAC to review of the Environmental Impact Assessment ("EIA"), with the last meeting held on July 26, 2013. It was the Company's understanding that, at that meeting, the TAC had completed all technical review aspects of the EIA process and was close to being in a position to issue a recommendation on the issuance of the environmental permit for the Project ("EP"). However, the subsequent activities of the Special Committee and its Report appear to have introduced further delay to the TAC process.

• A further meeting of the TAC was convened on April 2, 2014, primarily as an opportunity to consider the environmental aspects raised in the Report. The Company noted its observations at that meeting and subsequently in writing to the Environment Ministry that all material environmental issues arising in the Report had previously been considered, at length, by the TAC. No formal conclusions or follow up actions were requested at the meeting and the Company now awaits formal feedback and guidance from the Government, the Ministry of Environment ("MoE") and the TAC as to whether further meetings or documentation will be requested.

• Government approval of the EP is pivotal to the future construction and operational permitting progress of the Project. A key factor in the Government decision is the recommendation of the TAC, however, in light of the continued political focus upon the Project as described above, the TAC process appears to have been stalled and the outlook regarding approval of the EP or any possible re-submission to Parliament of legislation related to amending the existing mining law is uncertain at this time. As a result, the Company remains unable to provide guidance on the timeframes to a final decision on environmental permitting of the Project from the TAC, MoE or the Government. The Company remains confident that it will comply with, and in some aspects exceed, its obligations under EU and Romanian laws for environmental protection and guarantees.

Other Permitting

• Since 2002, when the local council of Roșia Montană passed resolutions approving a zonal urbanism plan designating an industrial zone under the footprint of the proposed new mine at Roșia Montană ("2002 PUZ"), the Company has updated the design of the proposed mine, reduced the size of the footprint, expanded the protected zones and incorporated a number of additional changes to the proposed mine, all arising as a result of public consultation. Accordingly, in 2006, an amended PUZ for the industrial development area of the Project was initiated, and such PUZ was further updated in 2010 ("Industrial Area PUZ"). It is currently proposed that, subject to the receipt of the relevant approvals, the Industrial Area PUZ will replace the 2002 PUZ which is due to expire in July 2014.

• The Industrial Area PUZ is at an advanced stage, as at March 31, 2014, RMGC had obtained 19 out of the total number of 23 endorsements necessary for its approval. However, in April 2014, pursuant to a legal challenge launched by non-governmental organisations ("NGOs") opposing the Project, one of the 19 endorsements was cancelled by court order. The Company, together with the relevant authorities, has submitted an appeal against this decision. After obtaining all the necessary endorsements, the final approval for the Industrial Area PUZ will be required to be given by the local councils of Roșia Montană, Abrud and Bucium. The court order does not affect the current standing of the 2002 PUZ which remains in force and effect.

• In addition, 10 out of the total of 13 endorsements necessary for the final approval of the zonal urbanism plan for the Rosia Montana historical protected area ("Historical Area PUZ") had been obtained at the end of Q1 2014.

• Although an extension to the validity of the existing Industrial Area PUZ has been obtained until July 2014 and a process has been commenced to obtain certain new PUZs, the final approval of the PUZs follows after a series of endorsements and approvals from various authorities. There can be no assurance that the outstanding endorsements will be obtained in a timely fashion, that additional endorsements and approvals will not be required or that existing endorsements will not be the subject of legal challenge in the Romanian courts.

• While the Company understands there is no formal link between the receipt of remaining endorsements for the Industrial Area PUZ, the Historical Area PUZ and the EIA review process, it believes that these respective remaining endorsements are likely to be obtained on, or after, the issuance of the EP.

Archaeology and Preservation of Cultural Heritage

• An archaeological review of the historical mining activity at Roșia Montană is a critical step in the granting of the construction permits to build the Project. A number of archaeological discharge certificates are required for various parts of the proposed Project footprint. In order to obtain such discharge certificates, the Company has conducted an extensive program of exploratory and preventative archaeology in order to ensure that valuable historical relics in the area are uncovered and preserved.

• In July 2011, the Alba County Directorate for Culture and National Patrimony issued a new Archaeological Discharge Certificate ("ADC") to RMGC for the Carnic open-pit, which complemented those it already held for the Cetate and Jig open-pits. In January 2014, the Suceava Tribunal admitted a request for the temporary suspension of the ADC for the Carnic open pit and in April 2014, as noted below, a ruling of the Suceava Court of Appeal rejected an appeal against the January 2014 decision. The ruling is irrevocable.

• The Company continues to commit limited resources to preserve the important archeological areas that it has previously opened and restored. However, further restoration work has been put on hold until such time as the Government moves ahead with Project permitting.

Litigation

• Over the years, certain foreign and domestically-funded non-governmental organizations ("NGOs") have initiated a multitude of legal challenges against licenses, permits, authorizations and approvals obtained for the exploration and development of the Project. While a small number of these actions over many years have been successful, the vast majority have been, and continue to be, proved to be without merit in the Romanian courts.

• The publicly stated objective of the NGOs in initiating and maintaining these legal challenges is to use the Romanian court system not only to delay as much as possible, but ultimately to stop the development of the Project. Often an action will be taken by the NGOs on a particular issue in several different regional court jurisdictions, and such legal objection may be raised in separate cases seeking a suspension or cancellation of a particular license, permit or approval.

• Key developments that have occurred in legal proceedings concerning the Project in the first quarter of 2014 and certain upcoming court hearings in the second quarter of 2014 are as follows:
  • On 30 January 2014, the Suceava Tribunal admitted a request for the suspension of the ADC pursuant to an action filed by three NGOs. RMGC and others submitted an appeal against this decision to the Suceava Court of Appeal, but this appeal was rejected on April 15, 2014. The decision cannot be appealed further. The effect of the suspension of the ADC is temporary, pending the irrevocable conclusion of a separate legal action launched by NGOs seeking the annulment of the ADC, the next hearing of which is scheduled to be heard by the Buzau Tribunal on May 20, 2014. An irrevocable decision on the merits of this case may not be issued for several months and possibly into 2015.
  • On April 15, 2014, the Covasna Tribunal admitted a request filed by two NGOs for the annulment of the Strategic Environmental Assessment ("SEA") endorsement, which was issued by the Regional Agency for Environmental Protection of Sibiu in March 2011 in respect of the Industrial Area PUZ. The ruling is not irrevocable and is the subject of an appeal by RMGC and others. The hearing date of the appeal has yet to be scheduled.
  • On April 16, 2014, the Bacau Tribunal postponed the hearing of a claim initiated by two NGOs seeking the suspension of the SEA following the submission by the claimants' lawyers of the decision of the Covasna Tribunal on April 15, 2014 (see above). The next hearing of this suspension claim is scheduled for June 18, 2014.
  • The first substantive hearing of a claim by three NGOs seeking the annulment of the current urbanism certificate, UC-47, is scheduled to be heard the Bistrita Tribunal on June 5, 2014.
  • As previously reported, on April 1, 2013 the Bucharest Tribunal rejected an NGO claim which sought the disclosure of certain documents pertaining to the mining license. On October 2, 2013, the complainant NGO submitted an appeal against this decision to the Bucharest Court of Appeal and the next hearing of this appeal has been scheduled for June 6, 2014.

• Due to the inherent uncertainties of the judicial process, the Company is unable to predict the ultimate outcome or impact, if any, with respect to matters challenged in the Romanian courts. In all circumstances, the Company and/or RMGC will vigorously maintain its legal rights and will continue to work with local, county and federal authorities to ensure the Project receives a fair and timely evaluation in accordance with Romanian and EU laws. However, there can be no assurance that any claims will be resolved in favour of the Company, RMGC or the Project. The implications of a negative court ruling will only be known once such a decision is issued formally by the relevant Court and the position of the Government is assessed, and may have a material adverse effect on the timing and/or outcome of the permitting process for the Project and the Company's financial condition.

Other Legal Proceedings

• On November 12, 2013, RMGC initiated a defamation suit against the former director general of the Romanian Institute of Geology (IGR), Mr. Ştefan Marincea, in response to the completely ungrounded accusations made by Mr. Marincea before the Special Committee concerning the falsification of certain maps relating to the Corna Valley basin. The next hearing date of this case has been scheduled for May 21, 2014.

• In November 2013, RMGC was informed of an investigation by the Ploiesti Public Prosecutor's Office ("PPPO") into alleged tax evasion and money laundering on the part of the principals/key shareholder(s) of a group of companies including Kadok Interprest LLC ("Kadok Group"). The PPPO has extended its investigation of the Kadok Group to at least 100 other companies, including RMGC, that had entered into commercial business relationships with the Kadok Group. RMGC procured goods from the Kadok Group during 2012, all of which were received and paid for in full by RMGC, including related sales tax. RMGC no longer has any business relationship with Kadok Group. RMGC is continuing to cooperate fully with the PPPO and to provide evidence to the PPPO of its legitimate business dealings with the Kadok Group.

Outlook

• The Company's key objectives in the short term include to:
  
  • Continue engagement with the new Government;
    
  • Continue to highlight the key economic, environmental, social and cultural benefits brought to Romania by the Project in order to demonstrate the merits of the Project to all stakeholders;
    
  • Understand and progress to finalization and completion the measures required to obtain approval of the EP;
    
  • Continue appropriate stewardship of cash resources; and
    
  • Maximize shareholder value, while optimizing benefits of the Project to all stakeholders.
    

About Gabriel

Gabriel is a Canadian TSX-listed resource company focused on permitting and developing its world-class Roşia Montană gold and silver project. The exploitation license for the Project, the largest undeveloped gold deposit in Europe, is held exclusively by Roşia Montană Gold Corporation, a Romanian company in which Gabriel currently owns an 80.69 percent equity interest, with the 19.31 percent balance held by Minvest Roşia Montană S.A., a Romanian state-owned mining enterprise. Gabriel and RMGC are committed to responsible mining and sustainable development in the communities in which they operate. The Project is anticipated to bring over US$24 billion (at US$1,200/oz gold) to Romania as potential direct and indirect contribution to GDP. The Project will generate thousands of employment opportunities. Gabriel intends to build a state-of-the-art mine using best available techniques and implementing the highest environmental standards whilst preserving local and national cultural heritage in Romania.

For more information please visit the Company's website at www.gabrielresources.com.

Forward-looking Statements

This press release contains "forward-looking information" (also referred to as "forward-looking statements") within the meaning of applicable Canadian securities legislation. Forward-looking statements are provided for the purpose of providing information about management's current expectations and plans and allowing investors and others to get a better understanding of Gabriel's operating environment.

These forward-looking statements may include statements with respect to the future financial or operating performance of the Company and its subsidiaries, the perceived merit of properties, exploration results and budgets, mineral reserves and mineral resources estimates, work programs, capital expenditures, operating costs, cash flow estimates, production estimates and similar statements relating to the economic viability of a project, timelines, strategic plans, including the Company's plans and expectations relating to the Project, the anticipated outcomes of the application processes for permits, endorsements and licenses, including but not limited to the ongoing review of the environmental impact assessment, required for the Project, or other statements that are not statements of fact.

Any statements that express or involve discussions with respect to predictions, expectations, beliefs, plans, projections, objectives, assumptions or future events or performance (often, but not always, identified by words or phrases such as "expects", "is expected", "anticipates", "believes", "plans", "projects", "estimates", "assumes", "intends", "strategy", "goals", "objectives", "potential", "possible" or variations thereof or stating that certain actions, events, conditions or results "may", "could", "would", "should", "might" or "will" be taken, occur or be achieved, or the negative of any of these terms and similar expressions) are not statements of fact and may be forward-looking statements.

Forward-looking statements are based upon certain assumptions and other important factors regarding present and future business strategies and the environment in which the Company will operate in the future, which could prove to be significantly incorrect.

Forward-looking statements are inherently subject to known and unknown risks, uncertainties and other factors that may cause the actual results, level of activity, performance or achievements of the Company and/or its subsidiaries to be materially different from those expressed or implied by such forward-looking statements. These risks, uncertainties and other factors include, without limitation, the political and economic risks of operating in Romania, including those related to controls, regulations, political or economic developments and government instability in Romania; uncertainty of estimates of capital costs, sustaining capital costs, operating costs, production and economic returns; permitting risks, including the risk that permits and governmental approvals necessary to develop and operate the Project will not be available on a timely basis or at all, risks of maintaining the validity and enforceability of necessary permits and risks of replacing expired/cancelled permits and approvals; uncertainties relating to the assumptions underlying the Company's mineral resource and mineral reserve estimates, such as metal pricing, metallurgy, mineability, marketability and operating and capital costs; risk related to the acquisition of all necessary surface rights for the development of the Project, including the risk that the Company may not acquire all such rights, or acquire such rights at acceptable prices; risks related to the Company's ability to commence production and generate material revenues or obtain adequate financing for its planned exploration and development activities; risks of defective title to mineral property, including the risk of successful legal challenges to the validity of the Company's exploitation license; risks related to the Company's ability to finance the development of the Project through external financing, strategic alliances, or otherwise; litigation risks, including the uncertainties inherent in current and future legal challenges relating to the Project;
risks related to the availability of infrastructure, water, energy and other inputs; uncertainty inherent in litigation including the effects of discovery of new evidence or advancement of new legal theories, the difficulty of predicting decisions of judges and the possibility that decisions may be reversed on appeal; uncertainties relating to prices for energy inputs, labour, material costs, supplies and services (including, but not limited to, labour, cement, steel, capital equipment, reagents and fuel); risks related to changes in law and regulatory requirements, including environmental regulation; risks related to the subjectivity of estimating mineral resources and mineral reserves and the reliance on available data and assumptions and judgments used in interpretation of such data; risks related to currency fluctuations, particularly in the value of the United States dollar and/or the Canadian dollar relative to each other and to the Euro and the Romanian leu; risks related to the future market prices of gold and silver and other mineral and commodity price fluctuations, and volatility in metal prices; risks related to the need for reclamation activities on the Company's properties and uncertainty of cost estimates related thereto; risks associated with maintaining substantial levels of indebtedness, including potential financial constraints on operations; dependence on cooperation of state-owned joint venture partner in the development of the Project; risks related to the loss of key employees and the Company's ability to attract and retain qualified management and technical personnel; risks related to market events and volatility of global and local economic climate; taxation, including change in tax laws and interpretations of tax laws; mining and development risks, including risks related to infrastructure, accidents, equipment breakdowns, labour disputes or other unanticipated difficulties with or interruptions in development, construction or production; risks related to opposition to the Project from non-governmental organizations or civil society; share capital dilution and share price volatility; and increased competition in the mining industry.

Forward-looking information contained herein is made as of the date of this press release. There can be no assurance that forward-looking information or statements will prove to be accurate, as actual results and future events could differ materially from those anticipated in such information or statements. Accordingly, for the reasons set forth above, readers should not place undue reliance on forward-looking statements. The Company does not undertake to update any forward-looking statements, except in accordance with applicable securities laws.