AngloGold considers takeovers while it is in ''active de-hedging mode''


Peter Hambro: An encounter with Mr. Goldfinger

The mining boss explains why he exports
the precious metal from Russia with love

By Tim Webb
The Independent, London
Sunday, April 30, 2006

If Peter Hambro had his way, we would all swap our money ("paper
promises" as he calls it) for gold bars.

But where would we put these -- under our beds?

"Why not?" he replies, deadly serious. "You can put the gold
anywhere you like. If you put it in a vault, it's hard to get at and
the bank may not give you a key."

As executive chairman and founder of Peter Hambro Mining (PHM), a
gold mining company operating almost exclusively in Russia, he is
hardly likely to say, "Don't buy gold." But his forbears, who
founded two merchant banks that carry the family name, might have
raised an eyebrow at the thought of keeping it at home.

The Old Etonian seems to have an almost religious fervour about the
yellow metal (and you won't catch Hambro calling it that). "I
believe in gold. You couldn't be in it if you didn't believe," he

Could you imagine Lord Browne, the chief executive of BP, saying the
same about oil? Or Philip Bowman of Scottish Power saying, "I
believe in electricity"? Obviously not: oil and electricity are
useful, while gold -- what's the point of that?

In fact, Hambro is not alone in his enthusiasm. Gold prices are at a
25-year high (at over $640 per ounce). Gold has soared by more than
$100 in the past six months alone, helping PHM shares to treble in
value in a year. But doesn't he worry that all the jewellers in
India and elsewhere (who make up around 75 percent of the demand for
gold) may one day start selling, say, copper instead and that the
price of gold will plummet?

"I have incontrovertible proof!" Hambro declares before leaving the
boardroom of the company's Hyde Park Corner offices. Meanwhile Alya
Samokhvalova, his director of external communications, helpfully
explains that copper jewellery is unlikely to catch on.

"Here it is!" Hambro triumphantly exclaims as he re-enters the room,
slamming down a 2,000-year-old Roman gold coin from Belgium. "The
fact people were doing it 2,000 years ago suggests to me it isn't
going to change that much."

He also displays a motley collection of French promissory provincial
bank notes dating from the First World War, which belonged to his
grandfather, a general. "They're completely valueless as the
promises were broken. But that gold coin is still worth what it was."

Hambro agrees that the main reason for the surge in the gold price
is global financial uncertainty, primarily caused by America's
record current account deficit (over $800 billion, or 450 billion,
more than 6 percent of its GDP) and trade deficit. This borrowing is
unsustainable, Hambro says. Private Swiss banks have recently
increased their gold holdings -- traditionally a hedge against the
dollar or inflation -- from 3 percent of their assets to 7
percent. "These are smart people. There must be a reason."

It's not just the US government that is mortgaging itself to the
hilt. Gordon Brown is at risk of increasing public spending to
unsustainable levels, Hambro says. "I'm old enough to have seen it
before. It's similar to the Harold Wilson administration. Now half
the people are working for the government. I don't think you can go
on promising."

And he puts forward a highly practical reason to favour gold over
money: It cannot be eaten by ants. He recounts a story of a deal his
father did in the Middle East with a Bedouin who insisted on being
paid in cash. "Vast amounts of money was printed in the UK and
shipped out. But it was all eaten by white ants."

Apparently gold also helped the Allies win the Second World War.
Britain seized the reserves of Vichy France, which the French had
shipped to the island of Martinique to keep out of the Nazis' grasp.
The French gold helped pay for the Lend-Lease programme that
supplied US military equipment to Britain. "It definitely hastened
the end of the war, as we got America in much earlier than Churchill
could," Hambro says.

He does not offer any crystal ball predictions on the gold price,
but thinks "the best way to predict the price is to know where it
was." He quotes from "A Random Walk Down Wall Street" -- the book,
he says, taught him options theory. "If you were trying to find a
drunk in a field in the middle of the night, the best place to look
for him is where you last saw him." If gold prices fall, PHM will
just cut production, he says. "You can turn the tap off tomorrow."

Gold prices would have to fall a long way for the company to make a
loss: its costs are $125 per ounce. It reported profits last week of
$13.3 million for 2005 (this was down on 2004, but mainly because of
accounting changes and higher costs). The company aims to increase
production to one million ounces per year by 2010 from 249,000
ounces last year. Its shares are at an all-time high.

Unlike many other Western companies operating in Russia, PHM has not
been ripped off by local partners. Earlier this year Celtic
Resources, another UK-based gold mining company, gave up trying to
win back its stake in a gold field it had pledged as security to a
Russian bank for a loan. There are many other similar examples of
British firms coming a cropper.

Hambro says that PHM is different because, rather than taking
Russian partners, it has incorporated Russians into the company,
with senior managers also becoming shareholders.

Hambro has the air of a slightly old-fashioned, affable City gent.
If he weren't running the company, he says, he would be in his house
in Norfolk painting watercolours. But gold is a subject he takes
seriously. Describing his enthusiasm for it, he tells me: "You'll go
home and think, either this guy is completely mad or. ..." He tails
off. The choice is yours.


BORN 18 January 1945

EDUCATION Eton College


1964: Spicer & Pegler, accountants

1966: Hambros Bank

1967: Smith St. Aubyn, discount brokers and bankers. Became joint
managing director.

1980: head of bullion trading, Marc Rich Group.

1983-90: Mocatta & Goldsmid. Became deputy managing director.

1992: Peter Hambro Mining (formerly Zoloto Mining). Chairman since
1994. Production started in September 1999 and the company floated
on AIM in 2002.


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