The Economy Ministry has taken a sideswipe at Djevdet Chakurov's Environment Ministry, saying that Environment's behaviour regarding the Dundee Precious Metals (DPM) projects could jeopardise investment in mining in Bulgaria and cause the country a loss of revenue.

At issue is an investment proposal involving Chelopech Mining, a local subsidiary of Canadian company Dundee. There has been a protracted delay by the Environment Ministry on issuing decisions on large-scale projects at Chelopech and Krumovgrad, in spite of Dundee winning court actions ordering the Environment Ministry to issue decisions.

In early June, Dundee confirmed that it would seek a ruling against Bulgaria in the international court of arbitration, and said that it would approach the European Commission to intervene.

The issue was the subject of discussions in mid-June by Parliament's committee on the environment and by the legislature's anti-corruption committee.

After the environment committee meeting, the Economy Ministry - still headed by Roumen Ovcharov, pending his resignation taking effect - said that the 1999 concession agreement with Chelopech fully complied with Bulgarian law, and the concession terms were favourable for Bulgaria at the time the deal was signed.

Any change to the deal would require the consent of the investor, the Economy Ministry said.

The ministry said that it had been for this reason, and in connection with an investment proposal for increasing the gold output at Chelopech, that in early 2006 Ovcharov had proposed revising the method of calculating the concession charge payable by the concessionaire.

Later that year, Dundee agreed to a significant increase in the concession charge.

After an environment impact assessment for the Chelopech expansion project was approved, Environment Minister Chakurov was expected to grant final approval. It did not come on the ground that an Economy Ministry opinion was needed for the proposed technology. The Economy Ministry declared its approval of the investment proposal and the suggested technology but Chakurov has issued no decision, even after he was instructed to do that by the Supreme Administrative Court.

The Economy Ministry statement said that the current Subsoil Riches Act was clear about the implications of the cancellation of a concession agreement: the State owes hefty compensations to the concessionaire.

"The actions of the Environment Ministry in this case create a burdensome precedent which might have grave consequences for the investment climate in the Bulgarian mining industry and result in significant losses to the Budget," the Economy Ministry said.

At the anti-corruption committee meeting on June 14, Deputy Environment and Waters Minister Chavdar Georgiev said that the conditions of using underground resources by Dundee at Chelopech were disadvantageous to the Bulgarian state.

Reporting from Parliament, Bulgarian news agency BTA quoted Georgiev as saying that any proposed investment should meet environmental requirements.

"Care should be taken that the resources of that deposit are used most reasonably. The best technology should be found that can be applied to develop the site," he said.

DPM chief operating officer Laurence Marsland said that the way the Environment and Water Ministry had done the environmental impact assessment procedure for Chelopech was flawed and had not followed the procedures usual for the EU, BTA reported.

Georgiev reacted by saying that the procedure was totally transparent and clear to all.

Marsland said that when his company took over at Chelopech, the mine was in very poor condition. For this reason, Dundee had asked for a lower concession fee. The company made its offer according to EU requirements, he said.

Evdokia Maneva, a member of the environment committee, said that what she saw as a "long delay" in the ministry's decision on the environmental impact assessment was a means of exercising pressure on the company.

Georgiev rejected Maneva's statement, saying that each procedure was different from the next. "There has been no delay at all in this particular case. What we have is a tacit refusal by the Minister."

The concession fee was unduly low and the matter should be renegotiated, Georgiev said.

Speaking at a June 16 news conference, Dundee senior project manager Alex Nestor said that an analysis of the implementation of the Chelopech concession agreement by the Economy Ministry showed that the state's financial interest has been safeguarded. The analysis was conducted at the start of 2007 by Euro Pro Consult and had been given to the Government. Nestor gave journalists a copy of a summary of the analysis.

The concession fee paid in 2006 was nine million leva, and payments for the remaining period were expected to total 51.7 million leva, the document said.

Chelopech Mining's concession charge now is 1.5 per cent of the gross ore extraction. DPM have proposed increasing the charge to 2.15 per cent, and the proceeds from the balance to be fully channeled to the municipalities of Chelopech and Chavdar. The company also fully finances the cultural activities of these two municipalities. Nestor said that in 2007 the company made available one million leva to the municipality of Chelopech and 550 000 leva to the state.

He confirmed once again that the company planned to pay two per cent of its net earnings to a special fund to improve infrastructure in Bulgaria.

Nestor said that an analysis by the Environment Ministry that said that the deposit could bring benefits of $5 billion to $6 billion, had been done using non-professional methodology.

He said that Dundeed expected this year to produce between 70 000 and 80 000 tons of copper and gold concentrate from its Chelopech mine, similar to 2006's 70 108 tons.

In 2006, Dundee's sales revenue from the mine grew by 78.8 per cent year-on-year in 2006 to $93.5 million.