italaw16120.pdf

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[Page 1307]

INTERNATIONAL CENTRE FOR THE SETTLEMENT OF

INVESTMENT DISPUTES

- - - - - - - - - - - - - - - - - - - - - - -x
In the Matter of Arbitration	:
Between:	:
GABRIEL RESOURCES LTD. and GABRIEL	:
RESOURCES (JERSEY) LTD.,	:
	:	Case No.
Claimants,	:	ARB/15/31
	:
and	:
	:
ROMANIA,	:
	:
Respondent.	:
- - - - - - - - - - - - - - - - - - - - - - -x	Volume 7

VIDEOCONFERENCE:

HEARING ON THE MERITS AND JURISDICTION

Sunday, October 4, 2020

The World Bank Group

The hearing in the above-entitled matter came on at 8:00 a.m. before:

PROF. PIERRE TERCIER, President of the Tribunal

DR. HORACIO A. GRIGERA NAÓN, Co-Arbitrator

PROF. ZACHARY DOUGLAS, Co-Arbitrator

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Also Present:

MS. SARA MARZAL YETANO

Secretary to the Tribunal

MS. MARIA ATHANASIOU

Tribunal Assistant

Court Reporters:

MR. DAVID A. KASDAN

Registered Diplomate Reporters (RDR)

Certified Realtime Reporters (CRR)

B&B Reporters

529 14th Street, S.E.

Washington, D.C. 20003

United States of America

[email protected]

[Page 1309]

APPEARANCES:

Attending on behalf of the Claimants:

MS. ABBY COHEN SMUTNY

MR. DARRYL LEW

MR. BRODY GREENWALD

MR. PETR POLÁŠEK

MR. HANSEL PHAM

MS. GABRIELA LOPEZ STAHL

MR. FRANCIS LEVESQUE

MS. DARA BROWN

White & Case, LLP

701 13th Street, N.W.

Washington, D.C. 20005

United States of America

Representing Gabriel Resources Ltd.:

MR. DRAGOS TANASE

MR. SIMON LUSTY

MR. RICHARD BROWN

MS. RUTH TEITELBAUM

Representing Roșia Montană Gold Corporation:

MS. CECILIA JAKAB

MS. ELENA LORINCZ

MR. MIHAI BOTEA

[Page 1310]

APPEARANCES: (Continued)

Attending on behalf of the Respondent:

DR. VEIJO HEISKANEN

MR. MATTHIAS SCHERER

MS. NORADÈLE RADJAI

MS. LORRAINE de GERMINY

MR. CHRISTOPHE GUIBERT de BRUET

MR. DAVID BONIFACIO

MR. BAPTISTE RIGAUDEAU

MS. EMILIE MCCONAUGHEY

MS. VICTORIA LECLERC

MS. STELA NEGRAN

MR. GREGORY GAILLARD

MR. KEN KOTARSKI

Lalive

35, rue de la Mairi

CH - 1207 Geneva

Switzerland

DR. CRENGUTA LEAUA

DR. STEFAN DEACONU

MS. ANDREEA SIMULESCU

MS. LILIANA DEACONESCU

MS. ANDREEA PITURCA

MS. IONELA MIHAILA

Leaua Damcali Deaconu Păunescu- LDDP

10 Zborului Street, sector 3

030595, Bucharest

Romania

[Page 1311]

C O N T E N T S

PAGE

PRELIMINARY MATTERS ... 1312

WITNESS:

DR. JAMES C. BURROWS

Direct presentation ... 1323

Cross-examination by Ms. Cohen Smutny ... 1371

Redirect examination by Mr. Guibert de Bruet ... 1409

Questions from the Tribunal ... 1414

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P R O C E E D I N G S

PRESIDENT TERCIER: All right. We can now start the official part of this Hearing.

Good morning, good afternoon, everybody. I have the honor to open the Day 7 and last day of the Hearing in the ICSID Arbitration Case 15/31 between Gabriel Resources Limited and Gabriel Resources (Jersey) Limited versus Romania.

I would like, like always, first make the hoping that you had good rest and that you are in good shape for this last day that is as important as the previous one.

Secondly, yesterday, I studied with satisfaction that this Hearing has taken place in an excellent spirit, and I hope very much that it will be also the case today.

I will start with a few administrative points or procedural points, the first one by thanking our Court Reporter for sending off the final draft of Day 6.

Secondly, concerning the time, I first apologize that I forgot to give the floor to our

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Secretary, but she wrote to you and gave the time. I would like to recall that Claimant used 10 hours, 48 minutes and 35 seconds, and the remaining time, 3 hours, 11 minutes and 25 seconds. Respondents used 12 hours and 21 minutes and 9 seconds, remains 1 hour, 38 minutes and 51 seconds. And the Tribunal has used 1 hour 32 minutes and 13 seconds and remains 1 hour, 57 minutes and 47 seconds. You have a comment to this, Claimants?

MS. COHEN SMUTNY: No, no comments from Claimants. Thank you.

PRESIDENT TERCIER: Respondent?

DR. HEISKANEN: No comments, Mr. President.

PRESIDENT TERCIER: Thank you.

Point No. 3, we have received a moment ago Respondent's position/submission concerning so-called alleged "claims." I acknowledge receipt of them. We know that for the procedure Claimant has now a final opportunity to comment, but we have not fixed a time limit.

Mrs. Cohen, what would be for you the time limit you would suggest?

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MS. COHEN SMUTNY: Claimants have not had an opportunity to review the letter that was just sent. A couple of days, two or three days' time would be enough. I'm sure we don't require more than--maybe Wednesday should be fine.

PRESIDENT TERCIER: Respondent, do you have an objection?

DR. HEISKANEN: Well, we heard a protest on the part of the Claimants when we asked two days a couple of days ago. I think two days would be an appropriate time for the Claimants to come back. That would be equal treatment.

PRESIDENT TERCIER: Mrs. Cohen?

MS. COHEN SMUTNY: I think we can file this on Wednesday, and--well, I mean, it could be even early in the day. Equal time is not objectionable.

PRESIDENT TERCIER: Okay. The Arbitral Tribunal will then decide and communicate to you after the break.

The fourth point, you remember yesterday I invited counsel for both Parties to liaise, if possible, in order to have already a first exchange in

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the question of the PHB. Have you an opportunity to speak about it?

Mrs. Cohen.

MS. COHEN SMUTNY: No, we have not yet had the opportunity to speak.

One proposal would be that perhaps the Parties can confer over the week ahead and see if there is a basis for agreement, and perhaps revert to the Tribunal a week from Monday or some time period approximately a week.

PRESIDENT TERCIER: Dr. Heiskanen?

DR. HEISKANEN: Our preference would be to discuss the process going forward, all of it today, with the Tribunal. We would be available to discuss with the Claimants' counsel during the meal break today to see whether there is a possibility of having a common basis and come up with a joint proposal to the Tribunal. Our strong preference would be to discuss, even if the Parties are not able to confer today, although we are available to confer today, the proceedings going forward at the end of the Hearing today with the Tribunal.

[Page 1316]

PRESIDENT TERCIER: Mrs. Cohen?

MS. COHEN SMUTNY: We certainly can endeavor to speak between the Parties during the day today and see where we get.

PRESIDENT TERCIER: Okay. Good.

Have you another point before starting with the examination of Dr. Burrows?

On Claimants' side.

MS. COHEN SMUTNY: I'm sorry, I didn't hear the question.

PRESIDENT TERCIER: I'm sorry. My question was whether you have a request or point that you would like to raise before starting the examination of Dr. Burrows?

MS. COHEN SMUTNY: Well, my understanding is that Dr. Burrows will make a direct presentation first.

PRESIDENT TERCIER: Yeah, I know. Sorry, that was not my point. Probably I'm not clear enough. You have, generally speaking, another request or point concerning the proceeding that you would like to raise?

[Page 1317]

MS. COHEN SMUTNY: Not at this time. We acknowledge that Dr. Burrows circulated further errata.

PRESIDENT TERCIER: Yeah, yeah.

MS. COHEN SMUTNY: We assume that there is nothing of substance in the errata, and that it's just typos and things of that nature, but we haven't had the opportunity to review it given that it was just sent, so we reserve our right if there is something substantive that requires a response, but we're not expecting that there would be anything.

PRESIDENT TERCIER: I will come to it in a moment, come back to it in a moment. But no special requests on your side, Dr. Heiskanen?

DR. HEISKANEN: Nothing further from us, Mr. President.

PRESIDENT TERCIER: Okay. If my co-Arbitrators have not a point that they would like to mention, I can start now with the examination of Dr. Burrows.

DR. JAMES C. BURROWS, RESPONDENT'S WITNESS, CALLED

PRESIDENT TERCIER: Good morning,

[Page 1318]

Dr. Burrows. Welcome in these proceedings. You will be heard as an expert. As such, you are invited to read aloud the Declaration that you must have received or have on your screen.

Please, Dr. Burrows.

THE WITNESS: I solemnly declare upon my honor and conscience that my statement will be in accordance with my sincere belief. I will not receive or provide communications of any sort during the course of my examination.

PRESIDENT TERCIER: Thank you.

Because of the rather special feature of this Hearing, the Arbitral Tribunal has ruled on a few points concerning the Experts' examination. I would like to just read three to you.

First, no person shall be present in the room with the testifying expert. Can you confirm that there is nobody else in the room?

THE WITNESS: At the moment, there is an IT person, and he's leaving right now.

PRESIDENT TERCIER: Okay. Secondly, communication you have already mentioned.

[Page 1319]

Then you must remain visible at all times during the examination. Which is easy to control.

And you shall not use a virtual background or in any way prevent or limit the recording of the remote venue from which you are testifying.

Is it clear?

THE WITNESS: Yes, it is.

PRESIDENT TERCIER: All right. Dr. Burrows, you have prepared for this Arbitration two reports.

THE WITNESS: Yes.

PRESIDENT TERCIER: The First Report, Expert Report, of Dr. James C. Burrows is dated 22nd of February 2018 and you have prepared a Second Report dated the 24th of May 2019.

Now, we have received a certain number of communications concerning the list of errata. The first was communicated on the 26th of September by Mr. Guibert de Bruet, and the e-mail states "Dr. Burrows has identified a few items he wishes to correct in his Expert Reports and which he lists in the attached errata list. These corrections require the Amendment of Exhibit CRA-212.1 to .3, CRA-13 and

[Page 1320]

CRA-214."

"And then, moreover, and having first sought the Claimants' approval, Dr. Burrows submits two new exhibits to the record, namely CRA-305 and CRA-306, which is referenced in the Second Report, but mistakenly omitted to produce."

Claimants have not objected to it, but has requested a red line version of it.

That was the first set with errata to the First Report and errata to the Second Report.

Now, we have received a second set of corrections. This has been sent, according to the date here, on the 3rd of October, also by Christophe Guibert de Bruet, again, "a few additional items that he wishes to correct in his Second Expert Report and which he lists in the attached errata." And we have received not only the list but also a clean, red-lined versions of Dr. Burrows's Second Expert Report.

Now, Mrs. Cohen, a moment ago just added that, in principle, Claimants have no objections to the second list, assuming that there is nothing material in it, and you reserve the right to correct

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it. Am I right, Mrs. Cohen?

MS. COHEN SMUTNY: Yes, correct. If it's merely correcting typographical errors, there is no objection.

PRESIDENT TERCIER: Thank you very much.

Now, question to you, Dr. Burrows: Can you confirm the content of the two Expert Reports that you have prepared, of course, with the errata, or do you wish to make some comments or corrections to it?

THE WITNESS: No. The current clean versions are the correct versions, and I would like to add, I do regret having to submit the errata, but I can confirm that there are no substantive changes. The vast majority are either typos or, in many cases, identifying exhibits or correcting references to exhibits. Pretty much everything is just of that nature. There is no material or substantive changes, nothing that affects any results.

PRESIDENT TERCIER: Thank you very much, Dr. Burrows.

Now, you know the procedure how we will proceed. You have first your presentation. You know

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that you can use one hour. For this presentation, you have communicated demonstrative exhibits--four, I think--demonstrative exhibits, and I have received and assume my co-Arbitrators have also received. For me, it was a printed version of your PowerPoint presentation.

Did you communicate also an electronic version of this presentation? I don't know, counsel for Claimant--sorry, counsel for Respondent.

MR. GUIBERT de BRUET: Yes, Mr. President. This has been sent.

SECRETARY MARZAL YETANO: And, Mr. President, I confirm that I received it and transmitted it seven minutes ago.

PRESIDENT TERCIER: Okay, good. Fine. In that case, you will make your presentation, and then we will have the cross-examination and the redirect. I recall that the Members of the Tribunal have the right to ask questions whenever they consider it is useful or opportune.

Is it clear for you, Dr. Burrows?

THE WITNESS: Yes.

[Page 1323]

PRESIDENT TERCIER: In that case, you have the floor.

DIRECT PRESENTATION

THE WITNESS: Thank you.

First page.

Next page, please.

I won't dwell on my qualifications. I think they're self-explanatory. My professional training is as an economist. I have worked for over 50 years with Charles River Associates. At various times, I've led the metals and minerals practice. I also have led our litigation or dispute resolution practice. I was CEO of the company for 15 years, during which I took the Company public, so I have experience as a public company's CEO for 10 years. And then I returned to consulting a little bit over 10 years ago. I've co-authored or authored five books on minerals and metals and I've served as an expert in dozens of disputes.

Next page.

I've summarized our assignment here: Analysis of the valuation of the losses allegedly

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sustained by the Claimants, including an analysis of the valuation applied by the Claimants' quantum expert, and the preparation of an expert report in support of Romania's submissions on the merits.

Next page.

This will summarize the assumptions that I have made that applied all the valuation and quantum estimates I provided here. I was instructed by counsel to use the Claimants Valuation Date as July 29, 2011.

And the valuation standard is Fair Market Value. The price at which a hypothetical, well-informed buyer and a hypothetical, well-informed seller would voluntarily transact, as of the Valuation Date, under no compulsion to buy or sell. And I believe this was also the standard used by Compass Lexecon.

Next page, please.

So, between Compass Lexecon and CRA, these are the methods we used. The predominant method I used is cash-flow analysis. The discounted-cash-flow analysis. This is the predominant method used by

[Page 1325]

corporations and finance experts for valuation. It was rejected by Compass Lexecon, which I will discuss later.

Compass Lexecon used Public Market Capitalization as their primary method. I believe for this matter--this method is unreliable because of incorrect information available to the public as of the Valuation Date and because of the effects of the gold price spike at that time.

Next page.

Both Compass Lexecon and I use market multiples as a check on value. This provides valuation by inference from values of comparison properties. This method, in my opinion, has very, very low reliability for Mineral Resources because the economic characteristics of mineral properties vary enormously from property to property, and even within properties.

Furthermore, in the case of Compass Lexecon, the comparison properties it used are not comparable to the Projects, as I will discuss later.

Compass Lexecon also used P/NAV, namely

[Page 1326]

Price to Net Asset Value. This applies P/NAV ratios calculated by analysts of a number of companies, and takes the median of it and applies it to the Roșia Montană NAV or DCF calculated by Compass Lexecon. I believe the results of this analysis are very unreliable. There are no corrections for it for difference across analysts and input assumptions, and the properties included in the sample are not comparable to Roșia Montană, as I will discuss later.

[Redacted]

Finally, both Compass Lexecon and I report historical costs. This valuation method is sometimes used for Exploration Properties. The available data in this case are inadequate to measure direct expenditures on the Projects. And we know that some expenditures were redundant or inefficient.

Next page.

I'm turning now to the Discounted Cash Flow part of my presentation.

Next page.

[Page 1327]

Discounted Cash Flow is used to estimate an investment's present value expressed in the form of its future cash flows discounted at a rate or a cost of capital that reflects the risk of the cash flows compared to other investments.

Next page.

Now, the steps of the DCF valuation are to estimate the costs of capital for the Project, the projected cash flows of the Project based on projections of production and sales of gold and silver; prices of gold and silver; and costs of production. And then to calculate the present discounted value of the net cash flows from these earlier calculations.

Now, a guiding principle is that future cash flows are less valuable than current cash flows, and that the future cash flows are discounted using an appropriate cost of capital for the Project being valued.

Next page.

I won't go through the details here, but as you know, Claimant owned 80.69 percent of the shares

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of RMGC. RMGC effectively owned the Project Rights, so to estimate of value to the Claimant of the properties, we had to first estimate the value of the properties and then take account of side payments, income streams that flow from RMGC to the Claimant and do that properly accounting for the proper percentages and et cetera. That's all basically provided in detail in the exhibits that do the calculations, and the result is the NPV of the Company's ownership of RMGC shares.

Next page.

My methodology for cost of capital is based on established methodology of both finance and industry experts. I computed DCFs using a cost of capital of 10.2 percent. This includes an estimate of the Country Risk Premium of Romania, which I estimate to be 3.37 percent, and this rate was calculated as being equal to the premium of Romanian euro-denominated ten-year sovereign bonds over the ten-year German euro-denominated sovereign bond, namely the "sovereign yield spread," as it's called. That's assumed to reflect the additional country risk

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of operating in Romania.

Now, I'm still on cost of capital. Compass Lexecon's argument is incorrect that, CAPM, the Capital Asset Pricing Model, is unreliable due to unstable gold betas in my discount rate assumptions. Companies and financial experts routinely use CAPM even if betas vary over time. Betas for most companies are unstable over time. Compass Lexecon does not provide a showing that betas of gold companies are especially unstable compared to other companies. Compass Lexecon's purported evidence of instability on Page 41 of their presentation is misleading because it includes data for years after the Valuation Date, namely it includes data for 2012 to 2018. And during the end of that period, betas became more unstable than at the beginning.

PRESIDENT TERCIER: Dr. Burrows, may I just interrupt you? Because I think there is a problem, sorry for interrupting you, but the problem was a slide that Professor Grigera Naón now received.

Professor Grigera Naón, you have a special?

ARBITRATOR GRIGERA NAÓN: This morning, I

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received a set of slides. Now that I'm checking them, I notice that these slides do not correspond to Dr. Burrows's testimony, but they have delivered to me again Behre Dolbear's slides from September the 30th, so there is a mistake. I think I can cope with this by looking at the slides as they are presented right now, but I wanted to indicate that I haven't received the hard copy of Mr. Burrows's presentation this morning.

PRESIDENT TERCIER: Respondent, could you make a comment to that?

MR. GUIBERT de BRUET: Well, on behalf of the Respondent, we obviously apologize for the confusion. We will try to have a copy of the slides delivered to Professor Grigera Naón as soon as possible.

ARBITRATOR GRIGERA NAÓN: Thank you.

PRESIDENT TERCIER: Thank you very much.

Dr. Burrows, sorry for the interruption. It starts just a few sentences before so that you can follow, and you can go forward.

Please.

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THE WITNESS: All right. I'm going to repeat the last point.

Compass Lexecon's purported evidence of instability is misleading because it includes data on betas for years after the Valuation Date, namely 2012 to 2018, and betas were more unstable towards the end of that period than they had been earlier. But, regardless of their degree of stability, betas leading up to the Valuation Date are still the best measures of risk and the Measures that would be used by most major companies and financial experts.

The next page I summarized, Compass Lexecon's arguments about DCF not being advisable, and my arguments of why this is wrong.

Compass Lexecon argues that the betas of gold stocks are unstable. My answer is that the betas of gold-mining stocks were relatively stable during the 2009 to 2013 period.

Second, Compass Lexecon argues that gold is a safe haven and historic value, and that somehow this means you can't use DCF, which is a silly claim because this feature is already reflected in the

[Page 1332]

projections of the price of gold which are an input to the DCF valuation.

Finally, Compass Lexecon argues that gold company stocks neither face the same risks nor behave in the same fashion as general equities, and that they do not have a clear correlation with the general market. This claim is not supported by any of the literature cited by Compass Lexecon. Two of the three articles submitted conclude the returns on gold mining stocks are positively correlated with general stock market returns, and a third finds a significant positive correlation with the stock market and positive betas for gold index funds. So, Compass Lexecon has provided no support for any of its arguments.

Continuing on Discounted Cash Flow.

Next page.

The cost and production assumptions in my DCF analysis were based on the 2012 SRK Technical Report with certain adjustments; and, as you may know, Compass Lexecon also used the 2012 SRK Technical Report but did not make the assumptions--the

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adjustments I made.

The first adjustment was to make a number of adjustments based on Behre Dolbear's Expert Report. Those are in the bullets below. I also increased closure costs by 10 percent based on the testimony of Dr. Dodds-Smith.

And I assumed RMGC operating costs are equal to actual operating costs through 2014 and to the reduced 2014 expenditure rate from 2014 to April 2018.

Next page.

The 2012 SRK Report did not take into account the blasting restrictions. The 2012 SRK Report simply updated the 2009 Micon Report without changing resource estimates or mine production.

I understand from the evidence that Behre Dolbear provided at the Hearing that SRK did not take into account the applicable blasting restrictions. Thus, SRK did not take into account the effect of the blasting mitigation measures on the Project costs and production rates.

There is evidence in this Hearing Behre Dolbear estimated that production levels will be

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reduced by as much as 70 percent and that the economics of the Project will be correspondingly reduced. And I conclude that lower discounted Present Value would result because of delayed revenues and higher per unit costs resulting from smaller economies of scale.

Next page.

Moving on more on Discounted Cash Flow.

Next page.

As this chart shows, there was a speculative bubble in gold prices in 2011. The chart shows the price of gold from 2007 through 2017, and 2017 through 2018. And it also shows projections I'm going to talk about later, the first one is projections based on the survey of gold-mining executives, the second is the median of the long-term prices projected by analysts. Those projections are in the 1100 or in the 1138 to 1180 range, substantially below the peak price in July 2011. And, as it turns out, they were prescient. The gold market actually did return to those levels in those succeeding years.

Next page.

[Page 1335]

My long-term goal in silver price projections for DCF are based on consensus industry projections. The first set was the median long-term projection of gold prices as of the Valuation Date of 24 gold-mining analysts. This projection reflects gold industry expectations about price. There is also a survey conducted by PwC once a year, so I had a survey at the end of 2010 for 2011 and the end of 2011 for 2012. I took the average of those two surveys and that came out at $1,180 per ounce. Unfortunately, there is no survey near the Valuation Date.

Now, I used the highest estimate of long-term gold prices, namely $1,180 per ounce, and I believe that no major--or very few, if any, major mining companies would use a price anywhere near the spot price of gold or the futures price in July 2011 to evaluate an investment. These projections on this page reflect a consensus of both analysts and the industry about gold prices.

Next page.

Compass Lexecon alleges that my projection of gold prices is based on an outdated 2010 survey.

[Page 1336]

Now, this is incorrect. As I mentioned just before, the PwC survey is conducted in late 2010, November-December, and late 2011, so there is no survey for July. So, I took the average of the two surveys. Now, I didn't just take this in isolation, I also considered the analysts' progressions which came out with a price very close to the average of the PwC projection. I picked the highest, but I could have picked the analysts or anything in between. I think that was an entirely reasonable approach.

Next page.

Compass Lexecon also incorrectly argues that I should have used the forward price of gold on the Valuation Date. The futures price of gold, over $16,000 per ounce as of the Valuation Date reflected a very significant price spike in the gold market. Few, if any, mining companies would make an acquisition based on the short-term price spike of this magnitude. This is confirmed by the fact that both analysts and gold company executives projected gold prices well below the gold futures estimates.

Next page.

[Page 1337]

PRESIDENT TERCIER: Dr. Burrows, if I may, just invite you to slow down a bit for our Court Reporter and for us also, please.

THE WITNESS: Yes, I apologize.

Compass Lexecon's summary of analyst gold price projections based on its P/NAV analysis is incorrect. Compass Lexecon, for its NAV calculations, incorrectly assumes the price projections used in the analysts' P/NAV analyses represent long run market price projections. The analyst assumptions about price in P/NAV analyses are often arbitrary. The price assumptions along with the discount rate assumptions used need to be the same for each property evaluated, but there is no need for them to be realistic long-term projections. They just need to be the same. That's how methodologies work.

[Redacted]

[Page 1338]

[Redacted]

[Page 1339]

[Redacted]

[Page 1340]

[Redacted]

Moving on to--still on Discounted Cash Flow, I had some assumed timelines for the expropriation and counterfactual scenarios. I assumed based on instructions from the lawyers, from counsel, no delays or additional costs or additional NGO litigation implying with a Chance Finds Protocol and obtaining 100 percent of the necessary permits and real estate rights. In other words, I assume that none of these events would cause any additional delays.

The Environmental Permit, the Building Permit, and other administrative acts would not be challenged in court by third parties.

Now, under this timeline, the Building Permit would be issued in 2018 and production would begin in April 2022.

In the actual scenario, next page, this is a

[Page 1341]

scenario in which the Tribunal--after the Tribunal finishes this proceeding, Gabriel continues--the Company continues developing the mine. I make the same assumptions as in the earlier scenarios; and, under this timeline, production would begin in February 2026.

Now, this timeline is already out of date because, clearly, it's unlikely the Tribunal will be issuing an award or making a determination in October, so this time would have to be adjusted to take into account the actual ending of this proceeding.

Next page.

In the expropriation scenario--this is the one where I assumed that the properties actually were expropriated on July 29, 2011--and by "properties" I mean the RMGC rights to those properties--the DCF value of the Project would be $156 million, this uses my cost assumptions based on Behre Dolbear and CMA. The timeline I'm using based on counsel instructions. The price projections I've already described, and the discount rate of 10.2 percent.

The value of RMGC equity would actually be

[Page 1342]

zero, but the value of the Project to the Company would be 156 million because of a stream of payments that would be made by RMGC through the Company, the Management Fee and partial repayment of RMGC debt.

Now, I also made a calculation of effectively the cost of delay. So, if the legal outcome of this case indicates that the Company was harmed because its ability to develop the Project was delayed, I use a difference between the counterfactual scenario which is the same timeline as the expropriation scenario, and what I call the "actual scenario," namely the scenario in which the Company continues developing the property after this proceeding. The NPV of the first scenario is 235 million, NPV of the second scenario is 109 million, resulting in an estimated cost of delay of $126 million.

Now, these are fairly involved calculations. I summarized the actual tables in these DCF scenarios in Appendix B. And, of course, there's additional detail in all the exhibits in my Report.

Turning to the Public Market Capitalization,

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Compass Lexecon uses a company's Public Market Capitalization to estimate the Enterprise Value of its ownership of RMGC shares. [Redacted]

[Redacted]

Compass Lexecon also failed to adjust for non-financial assets owned by the Company, including the Company's ownership share of property, plant, and equipment, reported by Compass Lexecon to be $53.2 million. Any value attributed by investors to the Baisoara property, any value attributed by investors to the Company Management, and any value attributed by investors to the ownership of the Company's shares by Newmont.

RMGC reported that it spent $105 million in property purchases between 2002 and 2008. The value to future developers of the Project of the RMGC Land Rights would be very high. Clearly, the Project could not be developed without control of those land rights. So, if someone else were to try to develop the property later, RMGC would be in a position to demand

[Page 1344]

a very high price for those Land Rights.

RMGC also possessed knowhow with respect to the properties which would have significant value to any future developer.

Next slide, I'm still on public market cap.

[Redacted]

[Page 1345]

[Redacted]

[Page 1346]

[Redacted]

[Page 1347]

[Redacted]

[Page 1348]

[Redacted]

[Page 1349]

[Redacted]

[Page 1350]

[Redacted]

[Page 1351]

[Redacted]

[Page 1352]

[Redacted]

[Page 1353]

1 Moving on, next page.

2 Now I'm talking about Public Market

3 Capitalization, or I'm still talking about Public

4 Market Cap. A useful benchmark is the Company's

5 purchase of Foricon shares of RMGC in July 2011. This

6 purchase implied a value of the Company's shareholding

7 in RMGC of $791 million.

8 Next page. [Redacted]

9 [Redacted]

10 [Redacted]

11 [Redacted]

12 So, I'm going to move on now to Public

13 Market--excuse me. I'm still on Public Market

14 Capitalization.

15 Next page.

16 Claimants' estimate of the surrogate market

17 capitalization for the new Valuation Date of

18 September 6, 2013 is flawed. Compass Lexecon

19 estimates the surrogate value by extrapolating the

20 2000--extrapolating the Company's market

21 capitalization on July 29, 2011 to September 6, 2013

22 using three alternative gold share price indexes. And

[Page 1354]

1 the one they picked, the one they use, is the S&P

2 Index. [Redacted]

3 [Redacted]

4 [Redacted]

5 [Redacted]

6 [Redacted]

7 [Redacted]

8 [Redacted]

9 The next slide summarizes the data on the

10 indexes used. The VanEck and Philadelphia Indexes

11 have companies that are substantially larger than TSX,

12 and they should not be regarded or considered. In the

13 TSX Global Gold Index, as of 2011, the companies had

14 an average value of $4.494 billion; the MVIS

15 Index--the MVIS Index companies had an average value

16 of $0.793 billion; and Gabriel's 90-day average market

17 cap on July 29, 2011, which we of course argue was

18 inflated, was $2.617 billion, pretty much exactly in

19 between the MVIS and TSX Indexes.

20 [Redacted]

21 [Redacted]

22 [Redacted]

[Page 1355]

1 [Redacted]

2 [Redacted]

3 [Redacted]

4 Next page.

5 As I noted, the value of the Company as of

6 July 2011 is halfway between the TSX and MVIS Indexes.

7 Extrapolating the value of the Company, it would,

8 therefore, would be appropriate to use the average

9 returns of these two indexes.

10 [Redacted]

11 [Redacted]

12 [Redacted]

13 [Redacted]

14 [Redacted]

15 Now, here I show the development of

16 Gabriel's market cap, both actual and indexed to the

17 MVIS Index, between January 2010 and the end of 2013.

18 Next page.

19 If the Company's capitalization had declined

20 during this period in proportion--starting from the

21 Valuation Date in proportion to the index of the gold

22 share prices, it would have been $706 million on

[Page 1356]

1 December 31, 2013, versus the actual market cap of

2 $282 million. [Redacted]

3 [Redacted]

4 [Redacted]

5 [Redacted]

6 [Redacted]

7 [Redacted]

8 [Redacted]

9 [Redacted]

10 [Redacted]

11 [Redacted]

12 [Redacted]

13 [Redacted]

14 [Redacted]

15 Next page.

16 [Redacted]

17 [Redacted]

18 [Redacted]

19 [Redacted]

20 [Redacted]

21 [Redacted]

22 [Redacted]

[Page 1357]

1 [Redacted]

2 [Redacted]

3 [Redacted]

4 [Redacted]

5 [Redacted]

6 [Redacted]

7 Now, Compass Lexecon also adds an enormous

8 Acquisition Premium of 35 percent to the public market

9 cap of the Company. Adding an Acquisition Premium is

10 not a standard feature of valuation analysis. Adding

11 an Acquisition Premium is only justified if there is

12 additional value to the buyers, such as synergies.

13 None of the valuation textbooks I reviewed state that

14 an Acquisition Premium should be added to the Fair

15 Market Value of an asset. The references provided by

16 Compass Lexecon are all to valuation textbooks that

17 describe the results of transactions--the results of

18 transactions, and not that companies should be valued

19 by their market cap. Applying a 35 percent premium is

20 inconsistent with the efficient markets assumption

21 relied on by Compass Lexecon. If markets were

22 efficient, companies would already be priced to

[Page 1358]

1 include that.

2 The addition of an Acquisition Premium to

3 value is inconsistent with the fact that the vast

4 majority of companies are not sold in any particular

5 year.

6 Next page.

7 I think I may be running short on time, so I

8 think I'm going to skip this page.

9 There is no basis to add an Acquisition

10 Premium to the value of the Projects. For a buyer to

11 pay a premium above the public market cap of an asset,

12 it must perceive a value that is not already

13 incorporated in the value, such as synergy, or

14 asymmetric information, such as belief that the

15 resources are greater than disclosed to the public.

16 The Compass Lexecon examples of transactions

17 at a premium all involved identifiable synergies. All

18 four transactions at a premium identified by

19 Mr. Jeannes had identifiable synergies.

20 Finally, Compass Lexecon didn't provide any

21 information on synergies or other additional values of

22 the Projects to potential buyers.

[Page 1359]

1 Moving on to market multiples. The market

2 multiples method is analogous to the valuation of

3 real-estate properties using values of comparable

4 properties. And I think--I'm sure everybody listening

5 to this is familiar with that, and I think everybody

6 would agree that, if you want to value a condo in an

7 expensive neighborhood in Paris, you wouldn't use as a

8 comparable vacant farmland or the value of a

9 comparable in a slum in New York City or the value of

10 a ski chalet. But that's effectively what Compass

11 Lexecon did by including many properties that were not

12 comparable in its valuation analysis.

13 Next page.

14 Identifying similar comparison properties

15 for a mineral property is difficult and often

16 impossible because of the huge variation in geologic

17 and other characteristics across mines, and even

18 within a mine. As few, if any, properties will be

19 comparable with respect to all relevant factors, using

20 a market multiples approach may require adjustments to

21 allow property values to be compared on an

22 apples-to-apples basis, just like real estate

[Page 1360]

1 appraisers will adjust for things like number of

2 bathrooms, square footage, and other characteristics

3 so that they can compare different property values on

4 a consistent basis. This was not done by Compass

5 Lexecon.

6 Next page.

7 Compass Lexecon bases its market multiples

8 valuation on a sample of 77 non-producing gold-mining

9 companies. This sample is large, but it includes many

10 properties that are not comparable. That would be

11 like including estimates of farmland value when you're

12 estimating the value of a condo in a rich neighborhood

13 in Paris. You would get more observations, but they

14 would be--they wouldn't be comparable, and the results

15 would be unreliable.

16 The next page.

17 For example, Compass Lexecon includes

18 properties that are much more advanced than Roșia

19 Montană. These properties have lower risks and much

20 of their investment costs have already been incurred.

21 Compass Lexecon also includes many

22 properties that have substantial non-gold production

[Page 1361]

1 and are therefore not comparable.

2 Compass Lexecon--next--does not control for

3 numerous other factors that affect value, such as

4 capital costs per ounce, operating costs per ounce,

5 time profile of expected production, risk profile,

6 including country risk.

7 My market multiples analysis--next page--was

8 focused on identifying the most comparable comparison

9 properties to the Roșia Montană Project. I used

10 transparent, reasonable screening criteria, and

11 criteria which could hardly be argued with in terms of

12 whether a property is comparable. For example, you

13 certainly shouldn't include properties that are

14 brownfield or properties under construction.

15 I ended up with four public company

16 comparison projects, but these have already passed

17 through all these screens, so they're more comparable

18 than any of the Compass Lexecon--than the Compass

19 Lexecon comparison projects, and I started with the

20 same list they had. So, what I screened out were the

21 properties that didn't fit this criteria.

22 I did the same thing with transactions--next

[Page 1362]

1 page--and Compass Lexecon didn't identify any

2 comparable transactions.

3 I then adjusted the comparison properties to

4 reflect differences in their economic factors. I

5 adjusted for the cash-flow projections to reflect

6 Roșia Montană economic factors and I used the

7 resulting changes in value per ounce for the

8 comparison projects to compute adjusted market

9 multiples. For example, if a buyer buys a property

10 for $100 per ounce, but the Roșia Montană Project has

11 a timeline that's twice as long as the property bought

12 and that would reduce the value in half, I would say

13 that the buyer that was buying Roșia Montană would

14 only pay $50. [Redacted]

15 [Redacted]

16 Turning to the next page.

17 [Redacted]

18 [Redacted]

19 [Redacted]

20 [Redacted]

21 [Redacted]

22 [Redacted]

[Page 1363]

[Redacted]

[Page 1364]

1 [Redacted]

2 Now, turning to P/NAV, the Compass Lexecon

3 sample, P/NAV sample, results in upward-biased value

4 estimates. This sample is actually more biased, much

5 more, than the one they use for market multiples. A

6 majority of companies in this sample have producing

7 properties. It should be patently obvious to anyone

8 that a producing property is worth a lot more than a

9 property that's just a Development Property. So,

10 49--48 of their 66 observations are properties that

11 are patently overvalued relative to Development

12 Properties such as Roșia Montană.

13 This sample also included a majority of

14 non-producing companies with properties in countries

15 with very low country risk, such as Canada, the United

16 States, and Australia. And obviously those properties

17 are worth more because of that factor.

18 On net--the net result is that the Compass

19 Lexecon sample only includes eight companies out of

20 the 66 which are both non-producing and in areas of

21 higher country risk, such as Romania.

22 It also includes many--the sample also

[Page 1365]

1 includes many companies that are not comparable in

2 other important respects. 17 had both open-pit and

3 underground deposits, and four companies had less than

4 50 percent production from gold.

5 [Redacted]

6 [Redacted]

7 [Redacted]

8 [Redacted]

9 [Redacted]

10 [Redacted]

11 [Redacted]

12 Now, the cost estimates were low, because

13 Compass Lexecon doesn't include the additional costs

14 identified by Behre Dolbear, and the cost of capital

15 is too low. Compass Lexecon assumes the cost of

16 capital is 5 percent. It does not even add the

17 country risk factor for Romania, which it should have.

18 So, even under its analysis, it should have used

19 8.37 percent.

20 There are also numerous additional technical

21 flaws in the Compass Lexecon P/NAV analogy which I

22 will not go into in detail.

[Page 1366]

1 So, next page.

2 Next page.

3 Compass Lexecon's calculation of the P/NAV

4 value for the Project, purportedly using my

5 assumptions about cost and timeline, is incorrect.

6 They claim they come up with a value on those

7 assumptions of $2.702 billion, $2.702 billion--and a

8 stand-alone value of $1.5 billion. The first number

9 is the value to the Company.

10 [Redacted]

11 [Redacted]

12 [Redacted]

13 [Redacted]

14 [Redacted]

15 Now, I used the Company's P/NAV method--next

16 page--I know you have it there--excluding producing

17 companies, which clearly biases the numbers up, using

18 the expropriation costs and timeline projections, and

19 applying a discount rate of 8.37 percent, which is

20 consistent with the Compass Lexecon analysis when

21 adjusting for country risk, and I get a resulting

22 P/NAV estimate for the Project, the Project itself, of

[Page 1367]

1 $174 million and $544 million for the value to the

2 Company.

3 Now, I would remind the Tribunal that the

4 value to the Company is higher than the value of the

5 Project because there are a number of side payments

6 made by RMGC to Gabriel that come off the top on cash

7 flow. So, the Project, after accounting for those

8 transfer payments, is lower than the actual value to

9 the Company.

10 Turning to historical costs, awarding

11 appropriate historical costs can restore Claimants'

12 financial position to where it was before it began its

13 investment. Now, any award based on appropriate

14 historical costs needs to deduct the value of assets

15 not expropriated, including the value of Land Rights

16 and other real estate needed for minerals development

17 of the Project by future license-holders, or,

18 alternatively, the value of any such real estate for

19 other purposes, the value of real estate not essential

20 for mineral development, the value of other financial

21 assets such as equipment, and the value of know-how in

22 the Projects.

[Page 1368]

1 Next page.

2 Compass Lexecon calculates total

3 expenditures during the period from 1997 to 2016 based

4 on the Company's consolidated financial statements.

5 These statements include many expenditures not

6 directly related to the Project. Adjusting for these

7 items and adding certain other items such as

8 Management fee, income and interest, and foreign

9 exchange gains, and deducting the value of equipment

10 reduces the estimate of expenditures to

11 $615.2 million.

12 Next page.

13 RMGC data available for 2003 to 2014 also do

14 not provide detailed data on expenditures directly

15 related to the development of the Project. Total RMGC

16 expenses during 2003 to 2014 were $209.9 million on

17 operating activities and $326.1 million on investing

18 activities, for a total of $535.9 million.

19 [Redacted]

20 [Redacted]

21 [Redacted]

22 [Redacted]

[Page 1369]

1 [Redacted]

2 [Redacted]

3 Finally, turning to interest, pre-judgment

4 interest, if any damages are actually awarded, should

5 be equal to the risk-free rate. Any Award to

6 Claimants is not being loaned on the same risky basis

7 as those which banks extend when they make loans.

8 Any Award in this matter, if any, would be

9 pursuant to the Canada-Romania and UK-Romania

10 Treaties. Because there is no risk of not collecting

11 a valid Award and because Claimants are not exposed to

12 systematic risk in that Award, namely undiversifiable

13 risk inherent in the overall market, Claimants are not

14 entitled to a rate of interest that compensates it for

15 both the time value of money and risk. The time value

16 of money is equal to a risk-free interest rate, best

17 represented by the U.S. Treasury bill rate from the

18 Valuation Date.

19 And that concludes my direct testimony. I

20 have included some backup exhibits in the appendixes.

21 Thank you.

22 PRESIDENT TERCIER: Thank you very much,

[Page 1370]

1 Dr. Burrows.

2 May I ask our Secretary the time that had

3 been spent by the Expert?

4 SECRETARY MARZAL YETANO: Approximately 59

5 minutes.

6 PRESIDENT TERCIER: Okay. Good.

7 Now, in Claimants' side, I don't know who

8 will conduct the cross-examination.

9 MR. GUIBERT de BRUET: Just before that,

10 Mr. President, if--I think I saw that Professor

11 Grigera Naón had received the slides. I just wanted

12 to confirm that he had; again, with my apologies.

13 ARBITRATOR GRIGERA NAÓN: Yes, I did, with

14 some consideration by using the hard copy that you

15 delivered to me by Slide 47. Thank you very much.

16 PRESIDENT TERCIER: Okay. Good.

17 I reiterate my question: Mrs. Cohen, who

18 will conduct the cross-examination?

19 MS. COHEN SMUTNY: I will be doing that,

20 Mr. President.

21 PRESIDENT TERCIER: Thank you very much.

22 You have the floor.

[Page 1371]

1 MS. COHEN SMUTNY: Thank you very much.

2 CROSS-EXAMINATION

3 BY MS. COHEN SMUTNY:

4 Q. Good morning, Dr. Burrows.

5 A. Good morning.

6 Q. Good morning. I'm Abby Cohen Smutny,

7 counsel for the Claimants.

8 As a theoretical matter, you do not dispute

9 that the market capitalization may be a reliable

10 metric for valuing a gold-mining company?

11 A. Yes, under certain circumstances, I would

12 not dispute that.

13 Q. In some--

14 A. Under some circumstances.

15 Q. Right.

16 In some circumstances, it may be the most

17 reliable method available?

18 A. If the market has full information on the

19 Projects.

20 Q. You have provided expert opinions on

21 valuation and other investment-treaty cases; I think

22 you mentioned that during your presentation?

[Page 1372]

1 A. Yes.

2 Q. You have relied on a market capitalization

3 measure in other cases?

4 A. I'm trying to remember. I'm not sure I

5 have, but if you know of one, let me know. They tend

6 to blend together.

7 Q. Yeah. It was a public hearing in Eco Oro

8 versus Colombia. Did you rely on--

9 A. Yes, that's correct. That's the one I'm

10 trying to think of. Yes, I did.

11 Q. Yes.

12 A. And in--

13 Q. Did you--

14 (Overlapping speakers.)

15 A. In that case, I looked for a public market

16 cap that was clean, that was not the affected by later

17 information, and I assumed in that case that the

18 market had the correct information. I had no evidence

19 that it didn't, so I took a value and I extrapolated

20 it to the Valuation Date.

21 PRESIDENT TERCIER: Dr. Burrows, could you,

22 just in the interest of time, just limit yourself to

[Page 1373]

1 answering the questions that have been asked of you,

2 please?

3 THE WITNESS: Yes, sir.

4 BY MS. COHEN SMUTNY:

5 Q. Thank you.

6 So, you consider that Gabriel's market

7 capitalization as of the Valuation Date is not a

8 reliable evidence of the value of the Project Rights

9 because of facts that are specific to this case; is

10 that right?

11 A. That's correct.

12 Q. You say that there is, between 2010 and

13 2012, a speculative bubble in the price of gold; is

14 that right?

15 A. Yes.

16 Q. You say this is a result of a significant

17 divergence between the prices in the spot and futures

18 market and the price expectations of virtually all

19 industrial participants in the gold market; is that

20 right?

21 A. Yes, I believe that's correct.

22 Q. You say that, whereas the spot price for

[Page 1374]

1 gold on the Date of Valuation was, I believe,

2 approximately $1,600, price projections of surveyed

3 mining executives, for example, was in the range of

4 approximately $1,100, and the median production of

5 gold-mining analysts was also about $1,100; is that

6 right?

7 A. I think you meant to say "projection," not

8 "production."

9 Q. You're correct.

10 A. But yes, that's correct. Yeah.

11 Q. Yes. Thank you.

12 So, that's the differential; yes?

13 A. Yes.

14 Q. Gold prices today are up again, over $1,900

15 an ounce; is that right?

16 A. Yes.

17 Q. You agree that--you agree that gold-mining

18 analysts are a source of information to actual and

19 potential investors in gold-mining companies?

20 A. Yes, they are.

21 Q. You say in your First Report that it is

22 quite possible that buyers and sellers of Gabriel

[Page 1375]

1 Canada's stock were valuing Gabriel using the high

2 spot prices of gold instead of the much lower

3 expectations of knowledgeable industrial participants

4 in the gold mining business--

5 (Overlapping speakers.)

6 Q. --with the result that Gabriel Canada's

7 public market capitalization was far above what large

8 mining companies would pay for the assets of Gabriel

9 Canada. Does that sound right?

10 A. Yes; yes, I believe that's quite possible,

11 but that's--daily traders, I think, got carried away.

12 It does not necessarily reflect what a company would

13 pay for a gold mine where they have to rely on very

14 long-term price projections.

15 Q. You don't dispute, however, the possibility

16 that investors in Gabriel Canada, some investors in

17 Gabriel Canada, may be--may have been making

18 investment decisions based on the lower expectations

19 of analysts or other knowledgeable industrial

20 participants, do you? Would you dispute that?

21 A. No, they may have. I don't know exactly who

22 was buying and selling. I don't know what went into

[Page 1376]

1 their calculations.

2 Q. You referred to real property surface rights

3 that RMGC had that you say had--you say the market

4 might have valued--

5 A. Yes.

6 (Overlapping speakers.)

7 Q. --in Gabriel Canada; right?

8 A. Yes.

9 Q. And you say that, even if RMGC does not

10 develop the Project, anyone else who wishes to do so

11 would need to acquire these surface rights, and RMGC

12 could extract most or all of the economic value of

13 those assets from a future developer; is that right?

14 A. I believe that is correct.

15 Q. And that would depend on the State

16 permitting the mine--it would depend on the State

17 permitting the mining of the Project; right?

18 A. Yes.

19 Q. You don't dispute--

20 A. Well, let me clarify that slightly.

21 Another mine development company might

22 decide to, for example, acquire RMGC, even if the

[Page 1377]

1 State had not given to permission to develop the

2 property, on the expectation that it could get it

3 developed, so another buyer might not necessarily need

4 to have a new set of approvals to decide it wants to

5 buy RMGC and its Land Rights.

6 Q. The new buyer would require an expectation

7 that the State would permit the Project to proceed?

8 A. Yeah, I believe so.

9 Q. You don't dispute Compass Lexecon's

10 observation that Gabriel's movable and

11 immovable--pardon me. Let me say that again. Bit of

12 a tongue twister.

13 You don't dispute Compass Lexecon's

14 observation that Gabriel's movable and immovable

15 property, property plants, and equipment, you don't

16 dispute that, as of June 2011, that amounted to about

17 USD 50 million?

18 A. No, I don't dispute that, because I think

19 the number is $53.2 million, if I recall correctly.

20 Q. I think that's right. Yes, thank you.

21 You also point to the Baisoara property?

22 A. I do.

[Page 1378]

1 Q. You don't dispute that Gabriel disclosed

2 prior to the Valuation Date--March 2011,

3 actually--that Baisoara did not have Resources or

4 Reserves?

5 A. I do not dispute that.

6 Q. You cite as one of Gabriel Canada's assets

7 that may have been valued, Newmont Mining's backing,

8 the fact that Newmont was a shareholder?

9 A. Yes.

10 Q. Investors might value Newmont's backing

11 because they would expect that, with Newmont on board,

12 the Projects were more likely to be more successful;

13 right?

14 A. Yes.

15 [Redacted]

16 [Redacted]

17 [Redacted]

18 [Redacted]

19 [Redacted]

20 Q. Yeah.

21 You were instructed to assume that RMGC

22 would have been unable, without expropriation, to

[Page 1379]

1 obtain all land-use rights necessary for proceeding

2 with the Roșia Montană Project; right? That was your

3 instruction?

4 A. Well, yes and no. There was a timeline that

5 I was given, and I was instructed to assume that

6 timeline.

7 Q. So, you do not offer an opinion as to

8 whether RMGC would have been able to obtain all

9 necessary land-use rights?

10 A. I haven't explored that in detail myself. I

11 have certainly seen statements to the effect that many

12 landowners were unwilling to sell, and even that

13 Gabriel disclosed it might have to use expropriation,

14 so that seems like a reasonable statement to me.

15 Q. But did you not independently verify the

16 reasonableness of these--

17 A. No.

18 (Overlapping speakers.)

19 Q. You didn't independently verify that?

20 A. I didn't do my own investigation, but those

21 assumptions seem entirely reasonable to me.

22 Q. You were instructed to assume that the

[Page 1380]

1 earliest date on which RMGC could have received a

2 Construction Permit for the Roșia Montană Project was

3 April 2018?

4 A. Yes.

5 Q. You do not offer an opinion as to when RMGC

6 could have received a Construction Permit; right?

7 A. Not--not an independent opinion, no.

8 Q. Right.

9 You do not have expertise to offer an

10 opinion on that topic?

11 A. No, I don't.

12 Q. You state that the earliest date at which

13 production could have been initiated was April 2022--

14 A. Correct.

15 Q. --in order to account for time to obtain

16 financing and for completing construction?

17 A. Yes.

18 Q. Does that sound right?

19 A. Yes.

20 Q. You do not offer an opinion regarding how

21 long it would take to obtain financing for the

22 Project?

[Page 1381]

1 A. No. Not an independent opinion.

2 Q. Right.

3 You observe in your First Report,

4 Paragraph 61--if you wish to review it, take a look at

5 it.

6 A. Hold on for a second.

7 Q. Maybe we could put that up.

8 In Paragraph 61, I'm referring to: "Of

9 course, Gabriel Canada had access to significant

10 amounts of capital already." I see it starts at the

11 bottom of the page. "Of course, Gabriel Canada had

12 access to significant amounts of capital already,

13 raising over"--continue the paragraph, please.

14 A. What paragraph number is this?

15 Q. This is Paragraph 61. I'm sorry. The way

16 it's being blown up, it's hard to see.

17 A. No, I'm sorry. I was in the wrong report.

18 Excuse me.

19 Q. Sorry. So, this is the First Report?

20 A. Yeah.

21 Q. Paragraph 61. "With respect to attracting

22 capital financing for the Project, of course, Gabriel

[Page 1382]

1 Canada had access to significant amounts of capital

2 already, raising over $700 million through the

3 issuance of equity and warrants," et cetera. "Compass

4 Lexecon states that, as of the Valuation Date, five

5 institutions had significant holdings of Gabriel

6 Canada shares, providing these institutions with

7 incentives to provide or facilitate access to capital

8 to facilitate additional value creation."

9 And you referred to a presentation of Scotia

10 Capital, but also noted: "Gabriel Canada had several

11 financing alternatives to proceed in developing Roșia

12 Montană in a go-it-alone strategy."

13 This is your--

14 A. I'm sorry, I'm just trying to--

15 (Overlapping speakers.)

16 Q. Go ahead. I'm sorry.

17 A. Yes, those are all correct quotations.

18 Q. It's a comment regarding--it's a comment

19 regarding the ability of Gabriel to attract financing

20 for the Roșia Montană Project development?

21 A. Yes.

22 Q. You also heard testimony earlier this week

[Page 1383]

1 from Mr. Jeannes that, if a major or senior company

2 were to acquire the Project Rights, it could

3 self-finance the Project?

4 A. I heard that.

5 Q. With regard to timing in your Second Report,

6 you also referred to permitting for cyanide storage

7 and transport, and you rely on reports given by other

8 experts about that process; is that right?

9 A. That's correct.

10 Q. You do not have expertise to offer an

11 opinion on the permitting requirements for cyanide

12 storage and transport?

13 A. That's correct.

14 Q. You did not conduct an independent

15 assessment as to whether Gabriel's estimated timeline

16 to initiate production for Roșia Montană was

17 reasonable?

18 A. No, I did not.

19 Q. You're not offering an opinion on whether

20 Gabriel's estimated timeline was achievable?

21 A. No, I'm not--not an independent opinion.

22 I'm relying on counsel, plus Behre Dolbear.

[Page 1384]

1 Q. Right. So, when you say--

2 A. And plus the other experts that had opinions

3 on topics related to that.

4 [Redacted]

5 [Redacted]

6 [Redacted]

7 [Redacted]

8 [Redacted]

9 [Redacted]

10 [Redacted]

11 [Redacted]

12 [Redacted]

13 [Redacted]

14 [Redacted]

15 [Redacted]

16 [Redacted]

17 [Redacted]

18 [Redacted]

19 Q. You do not have the expertise to assess the

20 amount or the significance of the archaeological

21 investigation that was done at Orlea, do you?

22 A. That's correct.

[Page 1385]

1 [Redacted]

2 [Redacted]

3 [Redacted]

4 [Redacted]

5 [Redacted]

6 [Redacted]

7 [Redacted]

8 [Redacted]

9 [Redacted]

10 [Redacted]

11 [Redacted]

12 [Redacted]

13 [Redacted]

14 [Redacted]

15 [Redacted]

16 [Redacted]

17 [Redacted]

18 [Redacted]

19 [Redacted]

20 [Redacted]

21 Q. You were instructed by Respondent's counsel

22 as to what the Chance Finds Protocol provides?

[Page 1386]

1 A. Yes, and also by what I read about it in the

2 expert opinions.

3 Q. You do not have the expertise to assess

4 whether the instruction you were given was correct?

5 A. No.

6 Q. You do not offer an opinion as to the terms

7 of the Chance Finds Protocol?

8 A. No.

9 Q. You do not have any expertise to assess the

10 possible impacts of adhering to the Chance Finds

11 Protocol?

12 A. No. I relied on the expert testimony and

13 counsel instructions.

14 Q. You accepted, but did not independently

15 verify any of the Behre Dolbear-based adjustments that

16 you accepted; is that right?

17 A. That's correct.

18 [Redacted]

19 [Redacted]

20 [Redacted]

21 [Redacted]

22 [Redacted]

[Page 1387]

[Redacted]

Q. Are you aware that Respondent's Expert, Mr. McCurdy, stated in his Report that a pervasive mining industry backdrop of Project Sponsors' inability to complete projects on time and within budget, materially high cost overruns, and Project delays prevailed through the time the Project was being defined and developed?

A. Yes, I listened to that testimony, and I read his Expert Report.

Q. And you also heard the testimony of Mr. Jorgensen of Behre Dolbear, who also described cost overruns in the industry leading up also to the 2011 time period?

A. Yes.

Q. You described in your presentation the DCF measure of value of the Roșia Montană Project that you called the "expropriation scenario," which incorporates various timeline and cost assumptions. I think in your Report, you said it yielded a value of

[Page 1388]

$168 million; in your presentation, you were mentioning $156 million.

Perhaps there have been some errata, or I might be confused of the numbers, but that's a DCF analysis that is incorporating many of the various assumptions and reliance and instruction that we have just been discussing; is that right?

A. That's correct. I'm not sure why there would be a change. I would have to go check the numbers, but there was a change, I believe, between our First and Second Reports, a slight change.

[Redacted]

[Page 1389]

[Redacted]

Q. You also explain in your Second Report that the DCF measure implies a value of Gabriel of $2.12 billion, since the 2009 costs were increased in 2011 by using mining cost indices; in other words, even with costs higher, according to indices, that DCF measure--

(Overlapping speakers.)

A. Can you point me to that paragraph?

Q. Yes.

Let's look at your Second Report, Paragraph 85, Note 73. Footnote--yes, yes. I was referring to the footnote--I'm sorry--

A. I see. I'm reading it.

Q. Footnote 69. My apologies. Not 73, 69, clarifying that, with assumed higher costs, that DCF comes to $2.12 billion. You're explaining that here?

A. Yes.

Q. And you explain that these DCF measures assume a 10.2 percent discount rate; is that right?

A. Yes.

Q. These DCF measures do not assign any value

[Page 1390]

to the Bucium Projects?

A. No. I think I actually say that somewhere, but yes, you're correct. This is just for Roșia Montană.

Q. You don't dispute that rights, even contingent rights, to develop a mineral resource property may have market value?

A. Yes, I agree with that.

Q. You recall that Bucium contained two deposits: Rodu-Frasin and Tarnita?

A. Yes.

[Redacted]

[Page 1391]

[Redacted]

[Page 1392]

[Redacted]

Q. Let's turn to--if we can show Exhibit C-2588. This is a Competent Person's Report prepared by Behre Dolbear in 2005. We looked at this report earlier in the week with Mr. Guarnera. This is--if we look at page--

A. I'm having trouble reading that page.

Q. Yes, Page 93--this is Exhibit C-2588. We're going to look at Page 93. This is--if you would like, either--we're showing it on the screen, of course. I think have you access, if you want--

(Overlapping speakers.)

A. Yeah, it's just hard for me to read it.

Q. Could you pull up--blow that up so it can be more easily seen? Well, maybe start with the first page so Dr. Burrows can see--yeah--just to look at what this document is.

A. Now I can read it.

Q. Okay. And let's turn to Page 93, second

[Page 1393]

full paragraph.

You might recall this, Dr. Burrows, because Mr. Guarnera was also--

A. Yes.

Q. --asked about this--

A. Yes.

Q. --this "rule of thumb" that Behre Dolbear explains for valuing properties, which was derived from--the "rule of thumb" was derived from a large database of approximately 400 transactions which showed a relationship, a "rule of thumb" relationship, between prices for these transactions and the then-current per-ounce gold price.

A. Yes.

[Redacted]

[Page 1394]

[Redacted]

PRESIDENT TERCIER: I'm sorry I have interrupted you, but I would like to recall you that

[Page 1395]

you should somewhere suggest a break, if it's made somewhere. Just finish your set of questions, and we can then--

MS. COHEN SMUTNY: Actually, why don't we break here? It's a good time for a coffee break. I'm sorry I lost track of time there. Apologies. This is a good time.

PRESIDENT TERCIER: It's a good time?

MS. COHEN SMUTNY: Yeah.

PRESIDENT TERCIER: Good. In this case, we will have 15 minutes' break, and start again 4:00 p.m. Swiss time.

Dr. Burrows, I would remind you that you are under testimony and that it is not allowed for you to have any contact with other people.

Do you understand?

THE WITNESS: Yes, I understand that.

PRESIDENT TERCIER: Okay. Good. So, we begin again in 15 minutes.

THE WITNESS: Okay. Thanks.

(Recess.)

PRESIDENT TERCIER: So, Mrs. Cohen, you have

[Page 1396]

the floor.

THE WITNESS: I wonder if I could make a slight correction to an answer I just gave?

BY MS. COHEN SMUTNY:

[Redacted]

Q. Fair enough.

This is Behre Dolbear's "rule of thumb"; and, according to Behre Dolbear, this is a "rule of thumb" that's derived from a database of approximately 400 transactions reflecting what buyers would pay, apparently. So, according to Behre Dolbear, this is a rule of thumb that's derived from review of actual transactions, including with respect to resource; right?

A. I believe that's what they say.

Q. Let's move on to the next subject.

[Page 1397]

You accept, don't you, that I believe you described in your presentation the fair-market-value standard that it is based on a hypothetical transaction where neither the buyer nor the seller is under any compulsion to transact; is that right?

A. Yes.

Q. You discussed in your Second Report, Paragraph 94, I believe, Gabriel's purchase of RMGC's shares held by a minority shareholder Foricon. I believe you also discussed that in your presentation this morning?

A. Yes.

Q. And you suggest that it provides--that transaction, you suggest, provides evidence of the Fair Market Value of the Project Rights held by RMGC?

A. I think what I said is that's a useful benchmark.

Q. You did not mention this transaction in your First Report.

A. No.

Q. Dr. Burrows, did you review the Transcript of the December 2019 Hearings--

[Page 1398]

A. Yes.

Q. --that were held in this case?

A. Yes.

[Redacted]

[Page 1399]

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[Page 1400]

[Redacted]

[Page 1401]

[Redacted]

SECRETARY MARZAL YETANO: Excuse me, Mr. President, I think your mic is open.

PRESIDENT TERCIER: Sorry, it was me. I apologize.

THE WITNESS: All right. I see what's on the screen.

BY MS. COHEN SMUTNY:

Q. I think I'm sorry--one of the difficulties--and I beg the Tribunal's indulgence, one of the difficulties of the remote setting is that just coordination is a little bit more challenging. Everyone is very spread apart, so I just need to make sure that the person who is operating our screen share sees the sentences that we should review.

PRESIDENT TERCIER: Take your time.

MS. COHEN SMUTNY: Yeah, apologies that this is slow, but I would like Dr. Burrows to be able to see--it's really just a few paragraphs on these two pages.

PRESIDENT TERCIER: No problem. Take your

[Page 1402]

time.

And Dr. Burrows should also have the time to read it properly.

THE WITNESS: Okay. I read what's on the screen.

Is there a question?

BY MS. COHEN SMUTNY:

Q. There is a little bit more. Just one second.

A. Okay.

(Pause.)

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B&B Reporters

001 202-544-1903

[Page 1408]

Mr. President, there are no further

questions.

PRESIDENT TERCIER: Thank you.

I give the floor to Respondent.

MR. GUIBERT de BRUET: Mr. President, could

we take about 5 to 10 minutes to confer and see

whether we have any questions on redirect?

PRESIDENT TERCIER: This was what I was

about to offer to you.

Yeah, okay. So, we take 10 minutes, and in

10 minutes, we will listen to the cross-examination,

yep--to the redirect. Sorry.

(Recess.)

PRESIDENT TERCIER: Dr. Heiskanen, you have

the floor.

DR. HEISKANEN: It will be Mr. Guibert de

Bruet.

PRESIDENT TERCIER: So, good. Mr. Guibert

de Bruet.

MR. GUIBERT de BRUET: Thank you, Mr.

President.

REDIRECT EXAMINATION

[Page 1409]

BY MR. GUIBERT de BRUET:

Q. Dr. Burrows, you were taken to Paragraph 61 of your First Report, if we could go there.

A. Yes.

Q. And you were shown the sentences that reads "Compass Lexecon states that, as of the Valuation Date." I think there may be an issue with the paragraph numbering, so if you go a little bit further, yes, you can see it right there towards the middle of the bottom of the page.

A. Yes, I see it.

Q. Could you read to yourself the sentence that starts thereafter. Starting "any impact on value of potential synergies."

A. "Any impact on value of potential synergies with a buyer derived from cost savings and corporate overhead costs should be excluded. Such savings relate to Gabriel Canada's corporate functions and not the value of the Claimants' investments in the Projects."

Q. And my question is, could you please explain to the Tribunal why you refer to Compass Lexecon and

[Page 1410]

Scotia Capital's views regarding Gabriel Canada's
access to capital?

A. If you'd just hold on for a minute. I just
want to reread the whole paragraph.

(Pause.)

A. Related to my overall argument about Gabriel
Canada not providing any evidence of synergy
opportunities, and my conclusion that any impact on
the value of potential synergies from cost savings in
corporate overhead costs to be excluded. I guess
that's the extent of it.

[Redacted]

[Page 1411]

[Redacted]

5 MR. GUIBERT de BRUET: Why don't we ask a

6 more specific question.

7 BY MR. GUIBERT de BRUET:

8 Q. You mentioned, Dr. Burrows, that you relied

9 on both expert evidence and instructions from counsel.

10 Could you please clarify which assumptions about the

11 timeline come from expert evidence?

12 A. Well, there was expert evidence on the

13 duration of litigation under the Romanian system.

14 There was expert evidence on how long it would take to

15 expropriate real estate. There was expert evidence

16 from Behre Dolbear on the time for construction and

17 the time required to get the financing and complete

18 the pre-construction activities.

19 So, I relied on a number of other experts

20 for the various assumptions.

21 Q. And could you clarify which assumptions

22 about the timeline came from counsel?

[Page 1412]

A. The four-year delay from April 2012 to April 2016, which was consistent with--when I say from counsel, counsel instructed me to use that timeline. But it was also consistent with the Expert testimony I read about how long litigation should take in Romania.

The timeline after that was from Behre Dolbear. Again, I was instructed to use it, but I also read their testimony and agreed with it.

Q. You were asked a question--

A. And I should finish that the timeline for acquiring real estate was consistent--was consistent with the Behre Dolbear testimony but also came from other witness testimony.

[Redacted]

[Page 1413]

[Redacted]

Q. Thank you, Dr. Burrows.

MR. GUIBERT de BRUET: No further questions.

PRESIDENT TERCIER: Thank you very much, Mr. Guibert de Bruet.

Do my co-Arbitrators have a question to the Expert?

Professor Grigera Naón. Are you speaking? You're on mute.

ARBITRATOR GRIGERA NAÓN: Can you hear me now?

[Page 1414]

PRESIDENT TERCIER: Yes.

QUESTIONS FROM THE TRIBUNAL

[Redacted]

[Page 1415]

[Redacted]

[Page 1416]

[Redacted]

[Page 1417]

[Redacted]

[Page 1418]

[Redacted]

18 [Redacted]

19 PRESIDENT TERCIER: Thank you.

20 Professor Grigera Naón, another question?

21 You should put your mic.

22 ARBITRATOR GRIGERA NAÓN: My only question,

[Page 1419]

1 Mr. President. Thank you very much.

2 PRESIDENT TERCIER: Okay. Professor

3 Douglas, do you have a question or questions?

4 ARBITRATOR DOUGLAS: Plural, yes. Not many,

5 but I was wondering if somebody could bring up C-128,

6 which is the SRK Report, the 43-101, and turn to

7 Page 76, where the economic analysis starts.

8 Now, I'm not sure if you had a chance--I

9 mean, you've obviously commented on this in your

10 Reports, I think in particular about the cost

11 assumptions in the DCF that was done by SRK in 2012.

12 You also made the point that this is what

13 happens in these types of disclosures: They do a DCF.

14 But I really wanted to ask you if you've had an

15 opportunity to look at the DCF closely, and I wanted

16 to get a feel for what really explains the difference.

17 Obviously, there are different Valuation Dates, but in

18 terms of the headline points, what explains the

19 difference between yours and the one that SRK did with

20 the Valuation Date later than the next year?

21 PRESIDENT TERCIER: Dr. Burrows?

22 THE WITNESS: Okay. I can't see what's on

[Page 1420]

1 the screen. I'm trying to see if I can upload it.

2 ARBITRATOR DOUGLAS: Well, if you want to go

3 to the conclusion, you will see the figures they come

4 up with at Page 90. That's Paragraph 22.5.

5 THE WITNESS: Again, I'm just looking at a

6 laptop at a distance, and I can't see--if somebody

7 could highlight it, maybe--

8 ARBITRATOR DOUGLAS: It's on the screen now,

9 as if by magic.

10 Well, actually, just as a preliminary point,

11 when you say that it's standard that they do a DCF in

12 these disclosures, is that a regulatory requirement,

13 or is that just a practical--a matter of practice?

14 THE WITNESS: As part of the 43-101

15 guideline or requirements, you have to show, when they

16 declare Reserves, that they're profitable.

17 Now, one interpretation of that is if they

18 make a dollar in profit, in which case you don't need

19 to do a DCF. But what I often find in these reports

20 is that they do a DCF as part of the determination

21 that this is a profitable deposit, and you can declare

22 Reserves because the definition of "Reserves" includes

[Page 1421]

1 the fact that it's going to be profitably extracted.

2 That's why you need a Technical Report. It has a mine

3 model and basically has a block model and goes through

4 all the analysis to show that, yes, we can pay for all

5 the costs of getting this to the ground and milling it

6 and getting it to the buyer, and we'll earn enough

7 money from that to return our capital and make a

8 profit, or make lots of capital.

9 Now, they come up with that number. There

10 are a number of differences between what they do and

11 what I do. They, of course, have a much more

12 accelerated production rate than we do. We also

13 adjusted their costs upward based on the Behre Dolbear

14 Report and CMA Report. We used a lower price of gold,

15 and they had a very low discount rate of--their basic

16 result was using a 5 percent discount rate, which

17 creates a substantial value, and they reported one at

18 14 percent, which came out at $397 million. The

19 discount rate we used was 10.2 percent, so that result

20 would be closer to the 397 than the 1.836. So, that's

21 the range of differences.

22 They also did their analysis as

[Page 1422]

1 of--effectively, as of Q2 2012, whereas we did

2 everything as of Q--as of July 31--July 29, 2011. So,

3 there are a number of kind of differences, and I would

4 say the biggest--well, the three big ones: We had a

5 significantly longer time scale, and that's material.

6 They had first pour, I believe, in early 2017, but

7 that's starting from 2012. We had first pour of 2022

8 starting from 2011. So, that's a six-year difference.

9 Six years at 10 percent is not quite double, but

10 it's--I can't do the math in my head, but it's pretty

11 close to double. It's maybe 1.85 or 1.9. So, our

12 numbers would be reduced almost by 2 just from that

13 factor alone.

14 And then we had higher costs.

15 And as well as the higher costs, we had a

16 different assumption about ramp-up, lower production

17 in the ramp-up that came from Behre Dolbear, and lower

18 recoveries.

19 So, there are a number of differences in the

20 details, but the big ones would be the extra time, the

21 somewhat higher costs, the difference in the discount

22 rate, and the difference in the gold price.

[Page 1423]

1 ARBITRATOR DOUGLAS: Can you just remind me

2 the difference of the gold price? What gold prices

3 did you use in--

4 THE WITNESS: We used--I believe we used

5 $1,180.

6 ARBITRATOR DOUGLAS: Right. Okay.

7 THE WITNESS: And they used $1,200. It's

8 not a big difference. So, that would probably not be

9 the big driver.

10 ARBITRATOR DOUGLAS: Okay. Yeah.

11 THE WITNESS: It's--the timeline is

12 important, and the cost differences are important,

13 because the cost differences come right off the cash

14 flows. So, those would be the two big drivers.

15 ARBITRATOR DOUGLAS: Okay. That's very

16 helpful. Thank you very much. No further questions.

17 THE WITNESS: And the discount rate, because

18 they use 5 percent, which is very low.

19 ARBITRATOR DOUGLAS: Right. Well, they give

20 different--

21 THE WITNESS: They give different ones.

22 I find in the two 43-101 Reports that the

[Page 1424]

1 common "rule of thumb" is 5 percent, no matter what

2 the risks are, so that's just--again, just a

3 benchmark. It's not a really serious estimate of cost

4 of capital.

5 ARBITRATOR DOUGLAS: Okay. Thank you very

6 much.

7 THE WITNESS: You're welcome.

8 PRESIDENT TERCIER: I have, personally, no

9 further questions, Dr. Burrows, so we are at the end

10 of your examination.

11 I would like to thank you very much for your

12 presence, for your answers, and so this part of the

13 Hearing is closed.

14 (Witness steps down.)

15 PRESIDENT TERCIER: Now, we have to look at

16 the open issues and what we will do now first thing

17 then for the next step of the procedure.

18 Without having taken a contact with my

19 co-Arbitrator, but I will certainly intervene in case

20 I'm wrong or if they have other points, I would say

21 the open issues for me are the following.

22 The first one: We have to decide whether

[Page 1425]

1 Claimants should submit its submission to--its answer

2 to the alleged new claims on Tuesday or on Wednesday.

3 The Arbitral Tribunal will decide.

4 Second point--and this is important--you may

5 remember that on the first day, Mr. Polašek raised a

6 certain number of objections--if I'm not mistaken,

7 nine objections--concerning elements that had been

8 introduced in the Opening based on different positions

9 taken by the Parties on the right to use these

10 elements. In the meantime, the Arbitral Tribunal, by

11 majority, has decided, not only once, but twice,

12 because it decided also on the Request for

13 Reconsideration.

14 Now, my question to Claimant is whether they

15 maintain the objections and still wish to develop

16 them, as was envisaged, but of course the idea is not

17 to go back on the rules that have been adopted by the

18 Arbitral Tribunal.

19 I don't know if you want to answer right now

20 or if you want to have time. I think we should

21 introduce a break also for me to discuss with my

22 co-Arbitrator. I don't know.

[Page 1426]

1 Mrs. Cohen Smutny, can you answer right now,

2 or would you take the time to discuss it with your

3 team?

4 MS. COHEN SMUTNY: Thank you. We will take

5 the time to confer and revert to you after doing so.

6 PRESIDENT TERCIER: Okay. Good.

7 The third point is the question of the

8 Post-Hearing Briefs. I would like to recall that, at

9 the end of September hearing, we discussed it, and

10 it's within the Transcript, and then the Arbitral

11 Tribunal wrote a letter on 17 December 2019.

12 I read to you point 3(b): "After discussing

13 with the Parties on the issue of Post-Hearing Briefs

14 and Closing Arguments, the Arbitral Tribunal decided

15 that it shall at this stage submit to the Party a list

16 of questions. This list of questions and the manner

17 in which the Parties shall be invited to file their

18 answers shall be communicated to the Parties in due

19 course." I know this has been done in Procedural

20 Order No. 27.

21 And now the second paragraph: "The Arbitral

22 Tribunal's decision on having a list of questions at

[Page 1427]

this stage of the proceeding will not deprive the
Parties of an opportunity to file Post-Hearing
Arguments following the second Hearing, which may deal
also with the questions raised in the first hearing.
These shall take place in the form of written
Post-Hearing Briefs."

This is where we are, and this is a point
that the Arbitral Tribunal would like the Parties to
discuss. I think it would be good; indeed, I know
that there is a disagreement between the Parties as to
whether this should be made later in writing. I would
personally prefer, but again, I'm speaking under the
control of my co-Arbitrator, that after this break I
will propose to you--or during the break that we will
propose to you, you can have a first contact so that
we can, not decide, but possibly agree, or see what
are the main points.

For me, these are the three open issues. I
don't know if you have further on your side. Do my
co-Arbitrators? I see another question.

Professor Grigera Naón? No.

Professor Douglas? No.

[Page 1428]

Now, on your side, Mrs. Cohen Smutny, do you
have another point that the Arbitral Tribunal should
decide upon?

MS. COHEN SMUTNY: Well, I think, just to be
clear, there is a housekeeping issue relating to the
confidentiality of the Hearing Transcript and the
streaming that will be done for the public access, and
so I just want to make a point that we've not
forgotten about that, and we do need to--the Parties
will need to verify what segments of the session
should be considered confidential.

It seems to make sense that perhaps, once
the Parties receive--I'm not exactly sure how this
will happen--Ms. Marzal, will the Parties receive
video? I mean, usually we receive audio recordings.
With this kind of session, perhaps we were receiving a
different type of file, but at that point the Parties
should be able to, similar to reviewing a Transcript,
review and indicate what time periods one might
consider closed for confidentiality. It just seems
that that sort of process should be followed before we
do streaming.

[Page 1429]

PRESIDENT TERCIER: Dr. Heiskanen?

DR. HEISKANEN: Yes. We don't have any
further issues beyond those that the President already
listed. And, of course, Mrs. Cohen Smutny is
absolutely right that these confidentiality issues and
review of the Transcript needs to be done, and
probably it's best the Parties try to agree on a
timeline for that between themselves.

PRESIDENT TERCIER: Okay. So, I see that we
know now where we are.

My proposal to you is now to have a break,
because I would like also to have a short discussion
with my co-Arbitrators, and then come back and have
the answer to the two--if possible, to the questions
that I've raised.

Would half an hour, Mrs. Cohen Smutny, be
sufficient for you?

MS. COHEN SMUTNY: Yes. I think maybe one
question that would help the Parties' discussions
regarding Post-Hearing Briefs--and maybe this is
something that the Tribunal is not ready to indicate,
but it would be probably be helpful for the Parties to

[Page 1430]

have an understanding of whether the Tribunal
anticipates presently posing additional questions to
the Parties, because there is an efficiency issue.
Sometimes one prepares a Post-Hearing Brief and, at
the same time, also responds to certain questions.

So, if we're discussing schedule and
possible ways of handling it, it would be helpful to
the Parties to know if the Tribunal is in a position
to give guidance on what we might expect.

PRESIDENT TERCIER: Okay. We have not a
Final Decision, but we have already discussed it
partly. You remember also that it was in answer to on
the part of Dr. Heiskanen's question, whether the
Tribunal will ask questions right now.

Our position, which is a tentative position,
was to say it is an enormous file, and we have to
digest it in particular after this Hearing, so I can
tell--for the time being, I have not the impression
that we are already in a position to prepare a list of
questions; that it would be probably be better for us,
once we have the Post-Hearing Briefs, to see what
other point or points on which we would like to have

[Page 1431]

some further answers. This could be done in a second
round--or why not in a virtual hearing?--just to
clarify this question.

But again, this is really provisional
answers. Do my co-Arbitrators agree with the way I
resumed our position?

Professor Grigera Naón? You have to
unmute--to put your mike.

ARBITRATOR GRIGERA NAÓN: Okay. I do agree
with that view, Mr. President.

PRESIDENT TERCIER: Okay. Professor
Douglas?

ARBITRATOR DOUGLAS: Completely agree.
Just one thing that the Parties might
consider, because I have seen it happen in a few other
cases, and it's worked quite well. Instead of having
long, discursive Post-Hearing Briefs which prevent new
narratives of old things, another option is to have
the Post-Hearing Briefs in the form of a series of
propositions with references to everywhere on the
record which establishes that proposition, in the
estimation of the Party. And it cuts down on length,

[Page 1432]

and that's an extremely useful document to have when
one is drafting the Award.

But I'll just throw that out there for the
Parties to consider. I have seen it happen in a few
cases, and it's worked quite well.

PRESIDENT TERCIER: Thank you very much,
Professor Douglas.

Dr. Heiskanen, you have a comment, a double
comment, a comment first of my proposal to introduce
now a 30 minutes' break so that you can have a first
contact with your opponent to just see whether you can
agree already--I don't know what is your last
position--and make a comment on the suggestions that
have been made?

Please, Dr. Heiskanen.

DR. HEISKANEN: Yes, I agree it would be
useful to have a break first for the Parties to
discuss and see whether we can agree on basic
principles.

And we will also consider Professor
Douglas's suggestion.

PRESIDENT TERCIER: Thank you very much. In

[Page 1433]

that case, we have half an hour. We will start again
at 5:30. May I invite my colleagues to go now on our
special link?

Thank you very much. We will see you--

MS. COHEN SMUTNY: Sorry, in one hour or
half an hour?

PRESIDENT TERCIER: What I did say? I said
half an hour; right? Is it sufficient or is it too
short?

MS. COHEN SMUTNY: It may be too short if
we're also going to try to speak, the Parties
especially, because it's not so easy. We're not in
the same room.

PRESIDENT TERCIER: Okay.

DR. HEISKANEN: One hour may be safe.

PRESIDENT TERCIER: Okay. Good. So, I was
about to make a compromise, but I retire my
compromise.

And you have one hour, so we will meet again
at 6:00 Swiss time. Thank you very much.

(Recess.)

PRESIDENT TERCIER: The first point, just a

[Page 1434]

comment made by Professor Douglas, he heard counsel
for Respondent tried to transmit to him a printed
version of the PowerPoint, but I think the building
was closed, so there is no problem; is that correct?
You have another point you wanted to comment,
Professor Douglas? Am I right?

ARBITRATOR DOUGLAS: No. In relation to the
PowerPoint yesterday as well because I'm in an office
building which is not open on the weekend. So, if
they arrive at some point during the course of the
week, that would be great. If not, then I can use the
electronic versions.

Thank you.

PRESIDENT TERCIER: Okay. Fine.

The second point concerning the Decision of
the time allotted in which Claimant should answer on
the so-called "new claims," the Tribunal has decided
that the response should be submitted not later than
Wednesday by noon Washington time.

Thirdly, the question of the objections that
had been raised during the first day.

Mrs. Cohen Smutny.

[Page 1435]

MS. COHEN SMUTNY: I think Claimants, as
we've stated, maintained their objection. However,
whether there is any further point that needs to be
made or argued, I think Claimants need some time to
digest the presentations that were made at the
Hearing; and, if there is anything more to say, we
will say it, but for the record, Claimants maintain
their objection, but I'm not sure if there is anything
more that needs to be done on that issue.

PRESIDENT TERCIER: Okay. Dr. Heiskanen?

DR. HEISKANEN: We have no comment.

PRESIDENT TERCIER: Good.

The fourth point, I forgot to invite you to
agree on the correction of the Transcript. May I
invite the Parties to liaise after this Hearing in
order to decide when this should be done and how we
would be, of course, very extremely grateful if you
could make a joint proposal and will be also grateful
if you follow David Kasdan's instructions.

I think no comment to that; it seems to me
clear. Or David, you wish to make a comment?

(Pause.)

[Page 1436]

PRESIDENT TERCIER: Next point, the PHB,
shall I give the floor--the Arbitral Tribunal will
also discuss it but first to listen to the position of
the Parties.

Ms. Cohen Smutny.

MS. COHEN SMUTNY: Well, my understanding is
that the Parties have some conditional agreement, but
perhaps it's better that Respondent express its
position because maybe that's where there is not
complete agreement. We understand Respondent has a
proposal, and then we can see where we are.

PRESIDENT TERCIER: Good. Dr. Heiskanen?

DR. HEISKANEN: Yes.

The Respondent's main position is, or
primary position is, that there should be an oral
closing in this matter, which would then bring this
process to an earlier end, and would be most
cost-efficient. Our proposal would be that the
Tribunal first send any questions they may have to the
Parties after these two hearings, and there will be a
hearing held at an agreeable time in the coming weeks
or months, a two-day hearing. The first day, the

[Page 1437]

Parties will make their oral closings, then second
day--incorporating their answers to the Tribunal
questions, and then second day for rebuttal, and that
would be the end of the matter.

We have spoken with the Claimants' counsel,
and our understanding is they don't agree to this
proposal. We still submit it to the Tribunal for a
decision as our primary position. But, in the event
the Tribunal prefers Post-Hearing Submissions, we have
an agreement with the Claimants that there would be
two rounds of Post-Hearing Submissions, first round
early February. The Claimants have suggested a
date--I believe it was for 4 February. We were still
checking on our side whether that is an agreeable
date. And the second round towards the end of March.

I believe the proposal was 26 March. We're still
checking on our side if that is still feasible, but in
principle there is agreement on two rounds of
Post-Hearing Submissions.

And we have also agreed--and I speak under
the control of the opposing counsel--we have agreed on
a page limit or, rather, word limit of 70,000 words

[Page 1438]

for the first round and 35,000 words for the second
round, which would translate in terms of the format
that the Respondent has been using into 200 and 100
pages respectively, although it may be a bit less for
the Claimants, given the formatting.

And it's also a sort of understanding--I'm
not sure there is a full agreement--at least
Respondent is prepared to make its Post-Hearing
Submissions in the form of propositions on the issues
that the Tribunal needs to decide and then citing
relevant evidence in the body of the Report, at least
the key evidence. Of course, it's for each Party to
decide how they want to apply this propositions
approach.

But that's where we're, to the extent I
spoke about the Parties' agreement, I spoke under the
control of the opposing counsel.

PRESIDENT TERCIER: Okay. Mrs. Smutny, can
you confirm? Can you comment?

MS. COHEN SMUTNY: Yes. I can confirm that
the Parties are agreed--well, Claimants agree to
Post-Hearing Briefs. Claimants are willing to agree

[Page 1439]

to two founds, early February 70,000 words, later in
March--March 26 or thereabouts--35,000 words response.
These are terms that Claimants would agree.

Take note also of the suggestion that
propositions and organized evidence would be most
helpful, and so Claimants consider that the Parties
should take that on board in the spirit of that,
but--not to be formally required, but the Parties
should present as they consider helpful.

From the Claimants' point of view, it's
already been clearly established that there will be
written Post-Hearing Briefs. So, from the Claimants'
point of view, this has already been decided, and
there is no reason to revisit that, and should not be
revisited. For us, the question was simply whether we
have one round or two rounds. Claimants were willing
to agree to two rounds as Respondent proposed. So,
that's the Claimants' position.

PRESIDENT TERCIER: Okay. So, the Arbitral
Tribunal has taken note of the Parties' position. We
had a discussion. I cannot hide the fact that the
limit should be less than what you are about to agree

[Page 1440]

upon or you agreed, but we will come to you. And the
idea of propositions seems to be acceptable and seem
to be a good proposal. The Arbitral Tribunal will
communicate to you its Decision in the coming days and
some details the way we will do it. We will decide
also on the first and main proposal made by Respondent
of Closing Argument.

Do we co-Arbitrators have a question at this
juncture?

Professor Douglas?

ARBITRATOR DOUGLAS: No. No further
questions. Thank you.

PRESIDENT TERCIER: Professor Grigera Naón?

ARBITRATOR GRIGERA NAÓN: No further
questions, either.

PRESIDENT TERCIER: Good.

DR. HEISKANEN: Mr. President, if I could
add something about the page limit, certainly it would
be good if it would be less, but if we incorporate
some of the key evidence in the body of the
Submission, given the extensive volume of evidence
that has been heard in the two hearings, it's very

[Page 1441]

difficult to do it in less than 200 pages. The
proposition approach also drives that.

PRESIDENT TERCIER: Okay. We will see.

Fine.

The next point is the question of the
confidentiality. It is our Secretary Sara's
specialty. I have been told that you will be handling
the recording soon, very soon; am I right, Sara?

SECRETARY MARZAL YETANO: Yes. I believe we
would be able to provide a copy of the video-recording
this week, sometime next week.

PRESIDENT TERCIER: Okay. So, the Parties
will have an opportunity to make their proposal.

My last point is to ask you whether you have
at this juncture an objection to the way this Hearing
has been conducted or request, or new requests.

On your side, Mrs. Cohen Smutny?

MS. COHEN SMUTNY: Claimants have nothing
further to add on that issue.

PRESIDENT TERCIER: Thank you very much.

Dr. Heiskanen?

DR. HEISKANEN: Nothing further from us

[Page 1442]

either, thank you.

PRESIDENT TERCIER: Thank you very much.

Do my co-Arbitrators have a point they would
like to raise? Doesn't seem to be--Professor Douglas?

ARBITRATOR DOUGLAS: Just to thank both
Parties' counsel.

PRESIDENT TERCIER: Okay. I will do.

Of course, now the last point, I express my
gratitude. I will first express my gratitude to the
IT people, Mrs. Al-Tashi in particular. It has worked
very well, and I would like to thank you all not only
from ICSID but also in the counsel offices.

I would also like to thank our, who are no
more here, Witnesses and Experts for their very
valuable contribution.

I would like to thank the Parties, of
course, where they were just present and did not
intervene. I can confirm that it would be, of course,
impossible for the Tribunal, and it was an assumption
of Dr. Burrows, to render the Award in October 2020,
permitting time. It is, of course, a very difficult
case. We are aware of it, we will take it extremely

[Page 1443]

seriously, but you can imagine that we will have to
digest this and to come with an award as soon as it
seems feasible.

I would like to thank our Court Reporter.
He's always extremely discreet, but he's always here,
and thank you very much, David.

My thanks also to Sara who organized
everything. Thank you very much, Sara. It was really
good. It was from a technical point of view really
good. We could express ourselves even if I still
consider that it is not really ideal or I miss a
little bit the in-person hearings, but really it was
well-done, and thank you again, Sara.

I would also extend the thanks to your
daughter, your family and to all families of the
people present here that accepted that we work also
over the weekend.

I would like to thank the assistant to the
Tribunal, Maria. She's always extremely discreet, but
very efficient, and this is for me also, of course, an
important fact.

And, finally, I would like to thank my

[Page 1444]

co-Arbitrators for their valuable contribution. I
look forward to working further with them. I'm sure
they will also be indulgent as far as necessary, and
we will now in the coming weeks and month work tightly
together.

Thank you very much to all of you. I wish
you a very good Sunday, even if Sunday is already
largely past. Thank you very much, and goodbye,
everybody.

DR. HEISKANEN: Thank you, Mr. President.

And on behalf of the entire team on the Respondent's
side, thank you to the Tribunal for your time and for
your dedication to the case. Thank you to the
Secretary of the Tribunal and the ICSID Secretariat
for a very efficient; a virtually efficient hearing.

PRESIDENT TERCIER: Okay. Good that you say
it because I think in my list I forgot to thank the
counsel, so a horrible omission. It is late, and I
cannot read my notes, so I would really like to thank
the counsel very much not only for the extremely
professional way they conducted this case but also for
the excellent spirit in which it has taken place.

[Page 1445]

Sorry for this last omission. I hope it will also be
on the Transcript. Thank you very much again. And
again, goodbye, everybody.

DR. HEISKANEN: Thank you.

MS. COHEN SMUTNY: Goodbye, everybody.

(Whereupon, at 12:26 p.m. (EDT), the Hearing
was concluded.)

[Page 1446]

CERTIFICATE OF REPORTER

I, David A. Kasdan, RDR-CRR, Court Reporter, do
hereby certify that the foregoing proceedings were
stenographically recorded by me and thereafter
reduced to typewritten form by computer-assisted
transcription under my direction and supervision; and
that the foregoing transcript is a true and accurate
record of the proceedings.

I further certify that I am neither counsel for,
related to, nor employed by any of the parties to
this action in this proceeding, nor financially or
otherwise interested in the outcome of this
litigation.

Signature

DAVID A. KASDAN