Russia's Top Silver Miner Looks To Acquire New Domestic Gold and Silver Assets

Russian gold and silver miner Polymetal will use its spare cash to buy production assets in the former Soviet Union, rather than build a large reserve base, the company's chief executive said on Thursday. Vitaly Nesis said Polymetal had about five companies on its shortlist of potential acquisitions and would retain a conservative approach with regard to its long-term production growth as rival miners rein in ambitious expansion plans.

"It makes sense to concentrate on a few key assets that can generate cash flow. Other companies are now bridging the gap between reality and earlier promises," Nesis told Reuters in an interview.

Gold, which traditionally performs well in times of economic strife as a safe-haven alternative to equity and currency investments, is worth nearly 40% more than its 13-month low in October. It is trading at around $940 an ounce.

High-quality gold projects, said Nesis, should not be affected by the global financial crisis. The depreciation of the ruble against the U.S. dollar should also help Russian miners, whose costs are denominated largely in their local currency.

"People mined the market and promised unrealistic things. They are using the crisis as a pretext to cut back on earlier promises," the 32-year-old executive said on the sidelines of Adam Smith Conferences' CIS Precious Metals Summit.

Polymetal produced 285,000 ounces of gold last year, nearly 5 percent of Russia's total output. The company plans to produce between 280,000 ounces and 300,000 ounces in 2009.

"We're shooting for something like 1 million ounces of gold equivalent by 2011 or 2012, although that will depend on silver prices," Nesis said. Polymetal, Russia's largest silver miner, produced 17.2 million ounces of silver in 2008.