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ATHENS (Reuters) - Greece has suspended the mining operations of Canada's Eldorado Gold ELD.TO in northern Greece, saying the company violated contract terms, in a setback to one of the top foreign investment projects in the country.
The $1 billion project is considered a test case for Greece's ability to attract foreign investment to help revive its economy, but has been beset by problems due to opposition by local residents on environmental grounds.
Energy Minister Panos Skourletis said on Wednesday that the project had been halted but could resume if the company fulfills contract terms. The project includes gold mines already in operation and two factories under construction that will enable the company to process gold and other minerals in Greece rather than overseas. Greece, which has just secured its third international bailout, badly needs such projects to help diversify its ailing economy.
"We are recalling our approval of the technical studies, which will result in the halting of operations at Skouries and part of operations in Olympiada," Skourletis told reporters after meeting Prime Minister Alexis Tsipras. "The company has violated some terms."
Vancouver-based Eldorado Gold Corp took over the project in 2012, promising to invest $1 billion over the next five years as part of a plan to eventually source up to 30 percent of its global gold production in Greece.
An energy ministry source said the government considered Hellas Gold, Eldorado's Greek subsidiary, violated the terms of its contract by failing to provide authorities with details on its techniques which would make gold extraction safe.
Details of methods applied in Finland were supplied instead, and were not accepted, the source said without elaborating. Eldorado was not immediately available for comment.
The decision to halt operations is the latest twist in a long-running saga over the project in Greece's Halkidiki region. It has been dogged by controversy over the potential environmental impact and faced uncertainty after the leftist Syriza party of Prime Minister Alexis Tsipras came to power in January as the party had sided with residents during its election campaign.
In March the government revoked authorization to complete the construction of a processing plant at the Skouries site.
Residents of the area have been opposed to the project for years, fearing environmental damage. They have mounted repeated legal appeals against the development, with two such petitions rejected by Greece's highest court earlier this month.
Reporting by Lefteris Papadimas; Writing by Michele Kambas, editing by Deepa Babington and Susan Fenton