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May 22, 2022

Rosia Montana is a “good deal” for the Romanian government

Romanian government has got “an exceptionally good deal” when it acquired the minority stake in the Roşia Montană gold mining project. This is an opinion backed by more than two decades of expertise in the subject of mining taxation, across 50 countries all over the world. It is the opinion of James Otto, American professor and an internationally recognized authority whose work on natural-resources legislation is the standard for organizations as diverse as the United Nations or the World Bank.

With training in both civil engineering and law, Otto currently runs a consultancy specialized in helping companies and governments find an ever-elusive equilibrium: between creating opportunities in natural resources that investors find attractive, on the one hand, while ensuring countries get a fair share of the revenues to be earned from those opportunities, on the other.

As an academic, Otto has run the largest natural-resources law programs on both sides of the Atlantic. Most recently he was heading such a program in the United States, at the University of Colorado, after having done the same in at the University of Dundee in Scotland.

Throughout a career that has seen him travel all over the world, Otto has developed an unparalleled expertise in natural-resources legislation in the context of the needs of developing economies such as Romania.

Otto’s work is anchored in the belief in “the important role of law is to regulate man’s behavior in such a manner that the needs of today do not preempt the potential of tomorrow.” In other words, he has helped draft laws and he has trained negotiating teams, having advised numerous governments on how best to use the natural resources of their land to foster long-term, sustainable development.

His involvement with the Roşia Montană project goes back to 2008, when the mining company contacted him with request to produce a study of the Romanian taxation model as it pertains to the project. Since then, he has revised the initial study twice and he made it public last year.

“Since the mid 1980s, governments have shifted away from equity stakes in mining projects, and toward risk-free revenue streams through taxation,” Otto said in reference to the minority stake that the Romanian government owns in the Roşia Montană goldmine. He notes that while some governments in Wes African countries do take equity stakes in mining projects, these stakes are “almost always of 10% or less” – or about half of what Romanians currently own. Furthermore, he adds that it is important to remember that the Romanian taxpayers did not pay cash for this equity stake.

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