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MosNews: Investor Confidence Shaken by Actions of Russia’s Environmental Watchdog

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Created: 22.12.2006 15:57 MSK (GMT +3), Updated: 17:14 MSK

Peter Hambro, executive chairman of Peter Hambro Mining, which develops gold deposits in Russia, said that a recent spat with Russia’s environmental watchdog Rosprirodnadzor had greatly damaged investor confidence in the country and set the company back.

MosNews has reported that the Russian environmental watchdog raised doubts over gold miner’s licenses about three weeks ago. But several days ago, just as he was being attacked by his direct superior, deputy head of Rosprirodnadzor Oleg Mitvol said that all of Peter Hambro’s license issues were resolved and that the company could continue its operations.

Despite being given a clean bill of health from Russia’s Natural Resources Ministry, Peter Hambro remained bitter over problems that environmental agency’s actions created for the company. Over three weeks of uncertainty as much as 300 million pounds of its value were wiped off the shares, which are traded at London’s Alternative Investment Market (AIM).

“Slowly but surely since we have listed [in April 2002], we have built up trust. And at a stroke, by one press conference, all that has collapsed. No amount of press releases saying ’you’re good’ or ’we’re not stealing’ will affect it. It’s a question of going back and rebuilding investor trust again. It will take a very long time,” he was quoted by The Guardian as saying.

The paper also reported that the miner’s plight coupled with Shell’s reluctant deal with Russia’s state-controlled gas monopoly Gazprom have left investors concerned about the current business climate in Russia. They are asking how the country’s authorities can so easily put pressure on big firms.

“The important message to get across is the damage it does to Russia plc, it has increased the cost of capital, probably by 2 percent,” Mr Hambro said. “I don’t think they understand the incredible power of a nuance in a nervous market.”

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