Russian tensions could hit businesses, Hambro warns


Peter Hambro, the executive chairman of the second-largest gold producer in Russia, has said that the current diplomatic tension between the UK and Russia risks making it harder to do business in the country. UK could expel Russian diplomats in Lugovoi standoff - paper. 

Political tensions are mounting as the British Government is due this week to respond to Moscow's refusal to extradite Andrei Lugovoi. Lugovoi is wanted by the UK authorities in connection with the murder of Alexander Litvinenko, his fellow ex-KGB officer. There is speculation that if Russia does not hand over Lugovoi, the expulsion of Russian diplomats could follow.

Peter Hambro Mining, the biggest pure gold play listed on the London Stock Exchange, is a Russian animal, created with Russian partners to exploit open-pit reserves bought for $1 million in 1994. It is now worth almost $2 billion. The group has offices in London, Moscow and Blagoveschensk. Hambro said: “At an operating level there's no effect, but it makes the business environment harder - there's no doubt that the perception of foreigners, and in particular of Britons, has changed.” He added: “With all our assets in Russia, it makes life difficult.” The news came as the Aim-listed mining group unveiled a 24% rise in attributable gold production, to about 134,300 oz per year, in the six months to the end of June, and said it was on track to meet its 283,000 oz per year target for 2007.

As investor confidence in the battered dollar falls, gold is regaining some of its shine. The yellow metal has clawed back 2% in the last month, to $666.5 an ounce. Hambro said: “I think there's a chance that in the short term we could see a rally in the dollar, but between now and Christmas it could go lower - but I'm not a currency expert. Gold, I can see hitting $700 an ounce comfortably by the end of the year.”

In a trading statement today, the group announced that the average realized gold sales price was $652 an oz, which is 14% higher than the same period last year. The group revealed that production for the Pokrovskiy mine rose 25% on the previous year, with unit costs at the mine increasing in line with Russian inflation and the group's budget. Hambro said: “We are currently on budget and on time with the development of all projects except Malomir as announced earlier this year, where the postponed production date is the result of good news on the potential of the deposit, and the first of our new production deposits, Pioneer, is on target to commence production in September 2007, as expected.” (

The UK could expel a number of Russian diplomats following Moscow's refusal to extradite businessman Andrei Lugovoi, the main suspect in the murder of former security officer Alexander Litvinenko, a respected British paper said Monday. David Miliband, the UK foreign secretary, is scheduled to address parliament this afternoon to allegedly propose “tough” measures against Russia in what could possibly become the most serious major diplomatic standoff between the two countries in recent years.

The Financial Times Monday cited a well-placed ministerial source as saying the British response would be “heavy” and might include the expulsion of several Russian diplomats for the first time since 1996. “The danger for the UK is that expulsions may trigger a 'tit-for-tat' response by Moscow, as has often happened in similar disputes,” the paper said.

Andrei Lugovoi, a former security officer, was accused by the Crown Prosecution Service on May 22 of murdering Litvinenko, who fled to the UK in 2000 claiming his life was in danger in Russia. Russia considers the Alexander Litvinenko murder case a purely criminal matter that should not be politicized and involve the UK Foreign Office. London has refused Moscow's alternative offer to try Lugovoi in Russia. Downing Street earlier said it "did not have full confidence" that the trial “would meet the standards of impartiality and fairness we would deem necessary.”

Litvinenko died last November, aged 44, three weeks after being poisoned at London's Millennium Hotel, presumably with radioactive Polonium-210, weeks after receiving British citizenship. UK authorities have yet to present his official death certificate. Lugovoi, who met with Litvinenko on the day of his poisoning, has denied responsibility and claimed in May that he had evidence linking Britain's MI6 to the murder of Litvinenko and his employer, fugitive Russian tycoon and Putin critic Boris Berezovsky, who he said were MI6 agents. (

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