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News from Reuters

Tuesday, October 14, 2003

By Nicole Mordant

VANCOUVER, British Columbia (Reuters) - Barrick Gold Corp.'s planned $159 million investment in a Russian gold miner does not signal the start of a rush into other gold ventures in the region, the Canadian producer said on Tuesday.

But the intended purchase of a 29 percent stake in Highland Gold Mining Ltd. does provide a good vantage point to watch developments in an increasingly investment-friendly area, the company said. And, with Barrick a Russian newcomer, it is a low-risk vehicle, the world's No. 3 gold producer said.

"The primary driver here is: let's get a window of opportunity to see what else is there," said Vince Borg, a spokesman for Toronto-based Barrick.

"It does not necessarily mean that we will go into Russia big time tomorrow. These things take time and we will watch as they develop," Borg told Reuters.

Barrick announced on Tuesday that it will buy a 10 percent stake in Highland Gold for $43 million in cash. It will pay a further $116 million, also in cash from its well-stocked purse, for another 29.6 million shares that Highland Gold will issue.

In total, Barrick ends up with 29 percent of the enlarged share capital of one of Russia's biggest gold producers. But with output of some 194,000 ounces a year, Highland Gold's production is only a drop in the bucket compared with Barrick's 5.5 million ounces in annual deliveries.

Barrick's protestation that it was not targeting a major move into Russia could be overstated, a Toronto-based gold analyst said, pointing to the expected auction next year of Russia's mammoth-sized Sukhoi Log gold deposit.

"The Highland purchase price isn't cheap. But at the end of the day, the jewel in all this could be Sukhoi Log. Barrick already being there could enhance its potential of acquiring that," said the analyst who asked not to be identified.

According to a study by Paul Burton of the "World Gold" publication, the Russian government-owned Sukhoi Log is the world's second biggest undeveloped gold deposit, boasting an estimates resource of 46 million ounces.

IMPROVING INVESTMENT CLIMATE

"What has crystallized this (purchase) is the evolving investment climate in Russia," Borg said.

Russia this month secured investment-grade status for its sovereign debt. Several big deals in the natural resources sector have also been clinched recently, notably oil senior BP Plc.'s $7 billion-plus investment.

Ian McLean, spokesman for Bema Gold Corp. , an aspirant mid-sized gold producer that has been active in Russia since 1998, told Reuters there had been major improvements in that country's legal and tax system over the past five years.

What have also improved, McLean said, are attitudes in North America toward investments in Russia, where Bema operates the Julietta Gold Mine and is drilling on another project.

"I don't think you can discount the fact that Kinross and Bema have operated mines in that region for some time with some degree of success. That doesn't hurt," he said, alluding to another Canadian gold producer with operations in Russia.

Barrick's Borg said staff would be seconded to Russia, beefing up its, until now, low-key monitoring office in the region. Barrick also gets the right to appoint two directors to Highland Gold's board.

Shares in Barrick ended a touch firmer on the Toronto Stock Exchange on Tuesday, up 3 Canadian cents at C$24.88, slightly underperforming an overall stronger gold board.

($1=$1.32 Canadian)

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