Peter Hambro: He's never been to Harrow, he can carve a ham and he's struck gold in Russia

After 40 years in the City, the mining entrepreneur and scion of the Hambro banking dynasty has a tale or two to tell Jason Nissé
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The Independent Online

Peter Hambro attributes the success of the gold mining group he created to his family. It's not a question of connections, or the old school tie (Hambro did go to Eton, though), or even his membership of the merchant banking dynasty. No, it is something more deep-seated. "I'm sure there is some strange inherited gene," he says. "The guy who founded Hambros Bank made all his money from cornering the market in black crêpe when the King of Denmark died." That was back in 1780.

History is important to Hambro. Last Thursday he hosted a party at Somerset House to celebrate the 10th anniversary of the creation of Peter Hambro Mining (PHM). This followed a party two weeks earlier at the Pokrovskiy Rudnik mine in Amur province in the far east of Russia, the purchase of which formed the cornerstone of PHM's success. A group of 150 employees, investors and contacts travelled from Moscow to Blagoveshchensk, the regional capital, and then took the 10-hour train ride to the mine. All in all, over 700 people joined in the festivities, which Hambro describes as a "very Russian affair".

It isn't the only anniversary he is celebrating this month. There is something more personal. On 1 October 1964, a 19-year-old in a pinstripe suit turned up at the offices of accountants Spicer & Pegler for his first job in the City. Among his tasks was auditing the books of Cazenove, the blue-blooded stockbroker. "I was paid £375 a year."

At the time, his father was head of corporate finance at Samuel Montagu, a direct rival of the family's own merchant bank. This did not stop Peter joining Hambros in 1966. He started as a cashier in the West End office and then moved to the foreign exchange department, where, as he puts it, "I fell in love". Hambro found he had a natural affinity with the fast-paced world of trading, and for the next 25 years this was, essentially, his life.

But not at Hambros. "My cousin Jocelyn, who was chairman at the time, took me aside and said that while I could do well at Hambros, he had three sons who would always be ahead of me. But he had another firm, Smith St Aubyn, the discount house. And there I would have a chance of getting to the top."

(Although he left Hambros, as the eldest son of the senior branch of the family he retains the rights to the company name. He does not use them, but when Société Générale bought the bank, he asked it to return the family crests that hung in Hambros' offices.)

Discount houses were traditional money market brokers. Partners at discount houses would wear top hats as they went about their business. They would rarely be in the office before 9.30am or after 4.30pm, and never on a Friday afternoon. "They used to say that the only qualification to join Smith St Aubyn was that you had never been to Harrow and knew how to carve a ham."

Hambro stayed at Smith St Aubyn for 14 years, and by the end of his time the business had changed beyond measure as it diversified into international money broking. Hambro moved on too, working first for commodities trader Gill & Duffus and then the colourful financier Marc Rich, who put him in charge of his gold bullion operation. Rich later ran into problems with the US regulators, who accused him of illegal trading and tax evasion. This led to Rich fleeing the US in 1983, returning only recently after a controversial pardon by Bill Clinton in one of his final acts as President of the US.

Hambro had already seen the writing on the wall and left to join gold traders Mocatta & Goldsmid in 1983. This was the beginning of the Russian connection. "I was made head of sales and marketing for the whole group," he recalls. "I worked out that it was just as much trouble to do business with little companies as it was to deal with countries." He pursued deals with Russia, China, Hungary, Romania and South Africa and reaped the reward. Mocatta was soon the Soviet Union's largest conduit for gold sales.

Standard Chartered bought control of Mocatta in 1989 and Hambro soon found that being part of a big international bank was stifling. He set up in partnership with the US mogul Jim Walter, who had just sold his corporation for $2bn, and they began financing gold mines. They started in Australia, moved to France and then, with the break-up of the Soviet Union, became involved in Russia.

"I was introduced around by my friends from the glory days of trading gold with Mocatta," Hambro recalls. "These guys wanted to become entrepreneurs and the only entrepreneur they knew was me."

Through a contact at the Russian Ministry of Mines, Hambro was introduced to Pavel Maslovsky. A professor of plasticity (an advanced form of metallurgy), he had contacts in Amur from his childhood and had found a potential gold deposit, which at that point was little more than a large depression where people had tried low-grade mining. Maslovsky also knew there were some highly skilled mining engineers and geologists out in Amur who could work on the project.

"I went out there to have a look," says Hambro. "It was quite obvious it was something way out of the ordinary and he had put together a fantastic management team."

Hambro raised $5m for the project - in a vehicle he originally called Eponymousco ("for those who know their Latin") - and five years later the first gold started coming out of the ground. He admits he didn't receive a penny out of Peter Hambro Mining in the first seven years of its life. "Luckily, I had quite a bit of money from earlier deals. And there was a bit of family money."

The investment, though, has proved its worth since then. These days, Pokrovskiy Rudnik is producing over 200,000 ounces of gold a year with a target of a million by the end of the decade. PHM has investments in a couple of other joint ventures and some deposits, but the original deposit is its backbone.

Yet for a company with such a successful mine, its shares - listed on London's Alternative Investment Market - are still quite lowly rated, valuing PHM at just under £400m. This irritates Hambro, who questions why gold miners operating in Russia are valued at a massive discount to those in other parts of the world.

This discount has not gone unnoticed. The gold majors, which had shunned Russia until recently, are now starting to become excited. So would Hambro sell out?

"At the wrong price, everything is for sale," he laughs. "Except the wife." That must be a relief for her.


Born: 18 January 1945

Education: Eton College

Career (1964): Spicer & Pegler, accountants

1966: Hambros Bank

1967: Smith St Aubyn, discount brokers and bankers - became joint managing director

1980: Marc Rich Group, head of bullion trading

1983-'90: Mocatta & Goldsmid - became deputy managing director

1992: Peter Hambro Mining. Chairman, since 1994, of the Russian gold mining company, formerly called Zoloto Mining. Production started September 1999. Floated on the Alternative Investment Market in 2002.