Gabriel Resources faces another set-back as Romanian court deals new blow to Canadian gold miner's plans

BUCHAREST, Jan 24 (Reuters) - Plans for Europe's largest open-cast gold mine -- a multimillion-dollar project by Canada's Gabriel -- suffered a setback on Thursday when a Romanian court ruled a local authority had improperly approved an urban plan attached to the project.

The Alba Iulia Court of Appeals ruled that decisions by a municipal body in Transylvania were procedurally flawed.

The court is expected to expand upon its reasoning in a month's time.

In the meantime, Gabriel Resources faces another hurdle to opening the Rosia Montana gold mine in central Romania in which it has invested more than $300 million. The company has faced other health and environmental concerns over the project.

A key environmental review required for the project was suspended by the environment ministry in September following a court challenge by non-governmental organisations. "The ... court ... admitted the exception of illegality for the decisions number 45 and 46 regarding urban plans issued by the local council of Rosia Montana in 2002," said court representative Cosmin Muntean.

(NGOs are becoming a real problem for the mining industry: Barrick Gold Chairman, Peter Munk complains rogue Environmental NGOs are Destroying the Mining Industry )

He said the court is expected to publish the decision together with its reasons, in the next 30 days.

"From our point of view the (court's) decision does not affect either the validity of the mining licence nor the ongoing authorization proceedings for the project," a statement from Rosia Montana Gold Corp, an arm of Gabriel, said.

"While waiting for the court of appeals decision, our company reserves the right to refrain from comment or decide a step."

Marius Liviu Harosa, a lawyer for the environmental group which challenged the validity of the urban certificate, told Reuters the court's decision may invalidate the urban certificate, therefore, scuppering the process.

Officials have said a parliamentary bill to ban the use of cyanide in mining could succeed, thus blocking the project.

Gabriel has defended the use of cyanide in mining, saying it is not cost-effective to develop Rosia Montana without it.

However, opponents of the project, including members of the ruling centrist cabinet, say cyanide is hazardous and its use could lead to a repeat of a 2000 disaster in which a Romanian mine polluted rivers that flowed into Hungary.

(See: Cyanide Leak Heads Towards Danube Killing Every Living Thing In Its Path)

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