Barrick on Prowl for Russian GoldBarrick on Prowl for Russian Gold
MOSCOW (Reuters) - Barrick Gold Corp., the only Western major big in Russian gold, wants to mine up to 20 percent of its output in the ex-Soviet bloc in five years, its head said on Friday.
Barrick has yet to start producing gold in this part of the world. But it has been preparing the ground actively in past months for its future expansion in the world's biggest virgin land for gold mining.
"As an objective, I would say, five years from now, I would like to see something in the order of 15 to 20 percent of our production come from this region," Barrick CEO Greg Wilkins told Reuters in an interview.
"It's not worth the effort and energy to come in and expect something less than that."
Wilkins, in Moscow to open a new Barrick office, said that would be roughly 1 to 1.5 million ounces (up to 47 tonnes) in annual production. Barrick, the world's No. 3 gold company, produced 152 tonnes of the metal in 2004.
By comparison, Russia's No. 1 gold producer, Norilsk Nickel's Polyus, produced 34 tonnes last year.
Russian gold has attracted much foreign investment in recent years due to high global prices for the metal and low production costs here.
Although Soviet-style bureaucracy and complex laws mar Russia's appeal for investors, the existence of basic infrastructure and available geological research give miners a head-start over rivals in more unexplored parts of the world.
Big Western companies have so far been more cautious with Russia, where the investment climate has deteriorated after the Kremlin's breakup of oil major YUKOS and other steps by the government that Westerners have perceived as hostile.
But Wilkins, whose company's mine network stretches from Peru to Tanzania, said political risk was not a deterrent.
"We are used to actually dealing with many different kinds of regimes. So it doesn't put us off," he said. "The challenge is going to be in being able to navigate through the investment climate here and understand how it all works.
"We look at the globe and we decide where we think ... the best opportunities are for new investments in the gold-mining industry and measure that against the relative risks.
"Russia came out ahead of many other countries."
INDIRECT EXPOSURE
Toronto-based Barrick already has exposure to Russia through a 13.9 percent stake in Britain's Highland Gold Mining (HGM.L), a small-cap miner operating in Siberia.
It also has a small stake in Celtic Resources Holding Plc., another small-cap with mines in Russia and Kazakhstan.
"We are always on the lookout for other ones," Wilkins said but declined to say whether Barrick was in talks with any other firms to further its exposure to Russia.
He said his company wanted to spend $10 million on exploration in Russia this year and was particularly interested in its gold-rich Pacific regions as well as Central Asia. Its total exploration budget for this year is $120 million, he said.
But the big battle lies ahead: Eurasia's largest undeveloped gold field, Sukhoi Log in Siberia's Irkutsk region with tentative reserves of more than 1,000 tonnes of gold.
After many delays, the government is preparing to auction Sukhoi Log next year. Almost all Russian mining companies and many Western ones have expressed interest in the asset, whose development costs are estimated at over $1 billion.
Wilkins said Barrick was likely to tie up with a local company if it decides to bid.
"It's a very large gold deposit. It would be a very good asset once it's developed. So we have interest in it," he said.
"When I am thinking about a $1.5 billion project ... the idea of having a partnership arrangement and sharing some of that capital cost I think actually is quite prudent. So I think we would be quite interested in forming a consortium with good partners here in Russia."
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04/15/2005 08:49
RTR