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Barrick strives to limit access to sensitive documents in Blanchard lawsuit
By Peter Klinger
The Times, London
Tuesday, April 13, 2004
http://business.timesonline.co.uk/article/0,,9072-1072621,00.html
Gold fever is gripping the City, but instead of drill rigs
heading for Kalgoorlie or Anchorage, the new destination
is far-eastern Russia. Two AIM-listed stocks, Highland
Gold Mining and Peter Hambro Mining (PHM), are already
among Russia's biggest ten gold producers. And there
are others waiting in the wings.
The City showed its appetite for gold in Russia and former
Soviet Union states last month when Oriel Resources'
40.6 million float on AIM closed heavily oversubscribed.
Williams de Bro, the broking house, is working on 20
million to 30 million worth of listings, while WH Ireland,
which listed Highland Gold, is in the throes of listing
three Russian projects on AIM in a deal that could be
worth 50 million.
"You can buy gold assets in Russia with established
infrastructure still for peanuts," James Picton, a mining
analyst at WH Ireland, said.
Peter Hambro, who first invested in Russia a decade
ago, said: "I am amazed it's taken this long for people
to realise what a great place it is to invest in."
The world's global miners are slowly warming to the
hitherto off-limits region. Anglo American, the FTSE
100 mining house, intends to open an office in Moscow
this year. Barrick Gold, the Canadian gold giant, owns
10 percent of Highland Gold.
Last month Rio Tinto signed a joint venture agreement
with PHM to explore for gold. It is Rio Tinto's first
deliberate move into Russia.
While the world's major gold producers, wary of political
and legislative risks in Russia, have been slow to move,
the door has opened for a host of smaller companies to
make the most of the rich pickings.
Success in Russia has already made millions for the
likes of Peter Hambro -- a descendant of CJ Hambro, who
founded the namesake bank in 1779 -- and members of the
Fleming banking dynasty, which set up Highland Gold.
Lord Daresbury, the chairman of Highland, holds shares
worth 5.8 million. Lord Mackenzie of Framwellgate, who
sits on the board of newcomer Oriel, has 500,000 incentive
shares that are worth almost 500,000.
Roddie Fleming set up Highland Gold two years ago as a
vehicle to list the Mnogovershinnoe mine, which was
acquired as part of a management buyout from Roman
Abramovich, the Russian billionaire owner of Chelsea FC.
Neither Hambro, the executive chairman of his namesake
company and holder of a 13 percent interest, nor Lord
Daresbury are miners by background -- but they can see
the pot of gold in Russia. "There's a highly skilled
workforce, a huge amount of reserves, and resources
data from the Soviet era and a very low cost of
acquisition," Hambro said.
PHM's 1,200-strong workforce, in the eastern region of
Amur, is made up of locals.
Russia has massive, largely untapped gold reserves,
which were mapped extensively by the country's geological
survey teams in the days of the Soviet Union. The data is
available to potential investors and those who have used it
praise its accuracy, which limits the amount of costly
exploration that has to be undertaken. Add to that low
operating costs -- a factor of both low labour cost and
easily mined gold ore bodies -- and a gold price hovering
near seven-year highs, and the right projects become
worth backing.
GFMS, the London consultancy, says gold production in
Russia is increasing by 9 per cent a year, compared with
stagnating output in established markets such as Australia
and South Africa.
Western operators accounted for only 15 percent of Russia's
total gold output in 2002 but almost all of them featured in
the country's Top 20 producers table. The sector is led by
the Russian mining and metals giant Norilsk Nickel,
controlled by Vladimir Potanin, the oligarch. Kevin Foo,
whose grandfather worked in Ballarat, Australia, during the
gold rush in the late 19th century, heads Eureka Mining, a
spinoff of his Celtic Resources. He compares Russia with
Australia in the 1950s, when it was still possible to find
surface deposits. Russia has the added advantage of
substantial infrastructure.
"It is a bit of a rush but there's quite a few of us who have
been out there for 10 to 12 years grafting away," Foo said.
Bema Gold Corp, which is listed on the Toronto Stock
Exchange and AIM, acquired two gold projects in Russia
in 1998. Last year its Julietta mine produced 118,145
ounces at a cash cost of $148 (80) each. Gold is selling
at about $420 an ounce.
Bema credits its success in Russia with its ability to
secure land titles, helped by strong local partnerships on
the ground. It is a common thread linking Highland Gold,
PHM and their peers and is likely to be discussed by
delegates at the Russian Economic Forum in London
next weekend.
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