MineWeb and Sinclair comment on Tuesday''s fall in gold

Section:

By Maria Golvnina
Reuters via The Moscow Times
Tuesday, April 13, 2004

http://www.themoscowtimes.com/stories/2004/04/13/049.html

Miners are competing for a Siberian field believed to
contain 1,000 tons of gold.

Western gold explorers may have learned a lot about
doing business in Russia after a flurry of deals in this
gold-rich country, but a battle for the richest prize --
a huge goldfield in Siberia -- is still to come.

Driven by high gold prices, Westerners seeking a
new El Dorado have eagerly invested in Russia, home
to some of the world's biggest virgin gold fields.

Despite remnants of Soviet-style management and
legal hurdles with regional bosses, Russia seems
attractive to investors at a time when growth at the
top end of the global mining industry is difficult or
expensive to achieve.

In the past month alone, at least three listed Western
miners have announced ambitious expansion plans
in Russia.

"There's much activity going on. Everyone is moving
quickly to do new projects," said Slava Smolyaninov,
metals analyst at NIKoil investment house. "Gold
prices are high. ... Besides, demand for gold is high
from China."

But the real battle for the Sukhoi Log deposit near the
Siberian city of Irkutsk lies ahead. Eurasia's biggest
untapped gold mine has reserves of about 1,000 tons
of the precious metal.

A number of Western miners, including Canada's giant
Barrick Gold and Britain's Highland Gold Mining, in
which Barrick has a stake, have expressed interest in
Sukhoi Log.

Giant Norilsk Nickel, with annual turnover of $5 billion,
and Russian metals firm Polimetall, which expects to
come in second after Norilsk in terms of gold output
this year, are clear favorites in the contest, analysts
say.

But some industry insiders said foreign firms still have
a chance provided the tender is held in the form of a
public cash auction.

"We can simply outbid the Russians. And we foreigners
are prepared to do so," one Western industry source
said.

Russians are seen by analysts as having a stronger
chance of winning in a closed tender, in which contenders
submit sealed bids with detailed investment plans.

The government has yet to announce the details of the
tender.

Analysts expect it to take place some time this year,
following several years of closed-door talks on how to
handle one of the biggest non-oil privatizations in Russia.

"At least foreigners can learn more about how to work in
Russia by taking part in that tender," Vitaly Nesis, head
of Polimetall, Russia's top silver producer, said.

In the meantime, Western miners continue to move in.

On March 23, the world's second biggest miner, Rio Tinto,
took its first step in Russia with a deal to explore a
potentially big deposit in the Far East.

Just a week later, the head of Highland Gold, a firm that
has spearheaded a fresh wave of foreign investment in
Russian gold, said it wanted to buy more gold assets in
the Far East and possibly Kazakhstan.

Last week, Britain's Peter Hambro Mining extended its
reach in Russia after it bought a gold mine in Arctic
Russia with estimated reserves of about 13 tons.

Another sign of growing Western investor interest in
Russian mining came with the debut of Oriel Resources
on London's junior stock market.

Oriel, a nickel and gold producer involved in ex-Soviet
states, raised 40.6 million pounds ($75 million) from the
sale of new shares at 65 pence apiece from its hugely
oversubscribed initial public offering on London's
Alternative Investment Market in March.

"We feel perfectly comfortable operating in this foreign
environment ... getting things done on the ground and
working through the bureaucratic systems in various
countries in the ex-Soviet Union," Oriel's managing
director Stephen Dattels said in London.

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