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Financial Times: Hambro Mining hit as Russia warnson licences: ‘Mr Mitvol… seen by some… as a maverick and publicity-seeker..’

By Rebecca Bream in London and Arkady Ostrovsky in Moscow: Published: November 30 2006 02:00 | Last updated: November 30 2006 02:00

Shares in Peter Hambro Mining, the London-listed, Russia-based gold producer, fell 14 per cent yesterday after a Russian government environmental watchdog threatened to revoke some of its mining licences.

Oleg Mitvol, deputy head of Rosprirodnadzor, the Russian natural resources ministry’s environmental watchdog, said he would check PHM’s gold production against its declared resources, as part of a crackdown on companies that do not develop projects fast enough.

Mr Mitvol, who is seen by some commentators as a maverick and publicity-seeker, also said he had filed to have five of the group’s mining licences revoked.

PHM said that it had not yet been contacted by the Russian government and that it was confident that conditions at its mines met Russian environmental and safety standards. It also said its resources figures were accurate.

The company said it no longer owned three of the cited licences and that the remaining two gold licences, for exploration projects, were not a major part of PHM’s business plan.

PHM is listed on London’s Aim market, but produces all of its gold from mines in the far east of Russia. This year it expects to produce 250,000 ounces of gold, and aims to produce 1m ounces by 2009.

The sharp drop in PHM shares, which fell as much as 19.2 per cent before closing 13.9 per cent down at £10.25, indicated how concerned investors are about Russian political risk.

The threat to withdraw licences from PHM is likely to be seen as the latest action by the Russian government against a foreign project in the natural resources sector.

In September, Mr Mitvol led threats to withdraw a key permit from the Royal Dutch Shell-led Sakhalin-2 project in eastern Russia because of alleged environmental breaches.

That provoked widespread concern among international energy groups.

The government has also warned ExxonMobil, the operator of the Sakhalin 1 project, of more inspections and threatened to cancel a key licence of TNK-BP, the Anglo-Russian oil venture.

But it is not just foreign companies that are the focus of Russian government pressure.

Last month, the natural resources ministry threatened to revoke 19 licences belonging to Lukoil, Russia’s biggest oil producer, because of a failure to to develop fields fast enough.

PHM said Mr Mitvol’s comments came “out of the blue”, but that it welcomed any official inspection of its operations.

“We are not aware of any material violations,” said Peter Hambro, executive chairman of PHM.

The group said more information would surface tomorrow, when Russia’s natural resources minister was due to return to Moscow.

Copyright The Financial Times Limited 2006

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