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. Last Updated: 07/27/2016

Banks Hope To Strike Siberia Gold

Russia, an untapped gold mine, could dazzle world bullion markets if plans by Moscow and Western banks to finance Siberian producers get off the ground, bankers and analysts said Friday.

"Russia isn't a major gold player at the moment. It's not South Africa. But everyone knows that its Far East is just full of the stuff," a senior Western analyst in Moscow said.

The recent rally in world gold prices could spur interest in Russian reserves. Gold soared to a six-year high of $416.25 an ounce Friday at London's afternoon fix.

Russia, with the world's third-largest proven gold reserves behind South Africa and the United States, produced about 132 tons of gold in 1995, far below South Africa's 522.4 tons. Banks financed only five tons of Russia's output.

Moscow-based Inkombank said Friday it was leading the charge to substantially increase that figure. "We consider commercial banks the best placed to help the gold and silver industry," Inkombank's Dmitry Ignatyev said.

The bank has contracts to finance 400 kilograms of output and talks with Rothschilds and German banks on financing were under way, it said. Inkombank wants to finance 20 tons of production in 1996.

"They [foreign banks] say they're ready to help us invest if some of our gold can sit in their banks as a guarantee. It's a question of confidence, but it suits us," Ignatyev said.

He said Russia's gold-producing regions in Siberia were pleading with Moscow banks to use their output as a lure to attract investment and financing.

Several foreign firms have already moved into Russia's gold market and talks are under way with others, including Britain's Lonrho plc and South Africa's Gencor Ltd., according to Roskomdragmet, Russia's state committee for precious metals and stones.

The European Bank for Reconstruction and Development is considering lending $20 million to a production complex near Lake Baikal in Siberia.

"Foreign investments in developing Russian metals deposits have been almost exclusively for gold deposits, as they promise the quickest and safest return on investment," Richard Levine of the U.S. Geological Survey said at a metals conference in Vienna this week.

Russian gold could send prices swinging wildly if bank financed output puts reserves on to world markets.

But metals analysts said the sector has some way to go.

The Russian Gold Club, linking a few select producers, banks and state metals organizations, also hopes to win financing for producers and open up the domestic market.