How to make a fortune from Russian gold

How to make a fortune from Russian gold - at Moneyweek.co.uk - the best of the week's international financial media.

The former Soviet Union is no longer "off limits" to investors, says Emily Parkinson in Shares. Groups such as Canada's Barrick and AngloGold Ashanti have recently "bought large stakes in smaller Russian-based miners as a way of accessing Russia's vast untapped gold reserves". Moreover, because the Communists saw it as their duty to extract minerals from under the ground, regardless of cost, grade, profitability, and so on, it also boasts "some of the most rigorous geological data in the world".

Investors cottoned on to this last year, driving up the prices of UK-listed gold producers, among them Celtic Resources Holdings (CER), by anything from 56% to 145%. Even so, Celtic is still undervalued. Although its output was a "relatively modest" 37,000 oz in 2003, its Nezhdaninskoye prospect is a "world scale" resource, with around 17 million ounces (Moz) of reserves (in the Russian B, C1 and C2 categories) and approximately 28Moz of resources (including the speculative Russian P category). That makes it the 16th-largest resource in the world and the second largest yet to be developed. It also compares with Newmont and Barrick - two of the world's largest gold miners - which have total reserves and resources of 135Moz and 128Moz respectively. Yet these companies have market values of $20bn and $15bn, compared with just $276m for Celtic.

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