Peter Hambro: Banker, trader, magnate: a man with the Midas touch

The old-school businessman shares the secrets of his success

(BLOOMBERG)

Unlike the socially useless bankers that sparked the global financial crisis, Peter Hambro – himself a scion of a famous banking dynasty, and now a gold mining magnate in his own right – knows both the price, and the value of things.

Halfway through our meeting in his office, which overlooks the back garden of Buckingham Palace, he throws two gold coins, attached to a money clip, across the table. The clip belonged to his father who used it when travelling through the Middle East in the 1950s. "He knew that if ever he got into trouble, this was his plane ticket home," Mr Hambro Jnr, now 65, says.

Sadly, the money clip is not a freebie, and it has to be handed back. With gold prices at all-time record highs of nearly $1,350 an ounce, the coins would now buy a first-class ticket anywhere, with change to spare.

"Everyone should own a little bit of gold – it's wealth insurance," says Mr Hambro. "I said earlier this year that gold would hit $2,000 by Christmas, but it worries me; I'm scared of a much higher gold price – because it means my belief in the collapse of the world's financial system will be becoming more true. In Indonesia they are using gold as a medium of exchange again – it's pointing in that direction again.

"I can't see any way out of the mess created by the politicians without inflation. They've got to borrow so much money that the only way they can pay it back is by devaluing the currency – it's the only way out. And if you have fixed interest, you are going to get hit."

Of course, taking out a little bit of "wealth insurance" and buying gold would do no harm for Petropavlovsk, the Russia-based gold mining group that Mr Hambro set up in 1994, and which is now knocking on the door of the FTSE 100.

After a distinguished career in the City, which included spells at the family firm and a period working for the US financier Marc Rich, who ran into problems with the US regulators and fled the country, Mr Hambro's attention switched to gold.

In 1990 he turned his experience as a bullion trader, and the money he had made, into a gold mining investment company before establishing the imaginatively named Peter Hambro Mining. The company listed on the Aim market, and has now become one of the biggest London-listed gold producers, changing its name last year to reflect the Russian focus of its operations.

The company was the marriage of Mr Hambro's money and the gold assets of Pavel Maslovskiy, a Russian entrepreneur who in the early 1990s was looking for capital to invest in his interests in the South-east Amur region of Russia, close to the Chinese border.

"I had got back to Moscow having been at a lunch where we got through 18 bottles of vodka. I was thinking to myself, 'I am never going to invest in this stupid country'," he says.

"The lady that was taking me around said there was one more person I had to meet, so I said 'my love, I'm sorry it's been fascinating but you must be out of your mind if you think I'm going to be putting my money into this.' But then she said that this guy had 25 grams-a-tonne. That's something I liked – you can make money at half a gram."

The two men talked in Russia and met again at Mr Hambro's country house a few months later. A deal was eventually signed over a glass of wine in Mr Hambro's back garden. The only contract that has ever been signed between the two was some scrawlings on a scrap of paper, which Mr Hambro admits is now lost.

The nature of the deal reflects what might be described as Mr Hambro's old school approach to business. And the list of what he doesn't like in modern business is long.

The interview came on his first day back in the office after his summer holiday, and without prompting, he launched a tirade against the amount of paperwork he had to do to prepare for a board meeting later that week.

"The crazy thing is that I was away for two weeks and I reckon I did at least three hours work every day," he says. "And the awful thing is if it was fun work I wouldn't mind, but now the constraints on what you have to do are enormous. We ran wonderful companies in this country for years and years and years, and now we've got these stupid supervisory bodies – there's just the endless stream of it."

Mr Hambro blames the increased threat of litigation for the weight of paperwork. "You have to tick every box, just in case some smartarse lawyer comes along. It's the class action – what's the stuff called – and results-based litigation. It's the lawyers that advertise on Classic FM the whole time," he says.

"In the old days, you just did things sensibly because you were worried about your reputation."

His annoyance at regulation manifests itself in his attitude to the way in which company performances are now judged. As many as 20 City analysts cover Petropavlovsk, and while most executives would see such a strong following as a mark of success, for Mr Hambro, it is an obstacle that adds to the complication of running his company.

"You get these peaks of interest every quarter, and you've got to worry about where we are with the analysts. We measure ourselves not against our budget, but against the analysts' forecasts, which is nuts. It isn't my job to worry about the share price, it's my job to produce cheap ounces of gold."

Indeed, but increasingly gold is only half the story. IRC, Petropavlovsk's iron ore spin-off, is expected to list in Hong Kong later this month, raising $590m. Mr Hambro says he is not sure whether Petropavlovsk will be known in the future as a gold producer that has iron ore interests, or the other way around.

In many ways, it doesn't matter. Mr Hambro yesterday moderated his price expectation for gold, saying that in fact it was likely to hit $1,500 by the end of the year but, like most producers, Petropavlovsk can happily survive at half that.

The iron ore unit, which is run by Mr Hambro's son Jay, is a helpful by-product of the gold company – the two metals are often found together – and with longer-term demand from neighbouring China likely to remain robust, IRC has the chance to thrive.

Mining has been compared to a lobster pot – it is easy to put money in, but hard to get it out. The point is highlighted by the fact that Mr Hambro didn't take a salary from the company for the first eight years.

Since then Petropavlovsk has become a £2bn company, in which he still holds a 5.7 per cent stake. So one thing is certain, Peter Hambro's wealth is insured. And it is highly unlikely he'll ever have to sell his gold coins to fund a flight.

The CV: Peter Hambro

At work After leaving Eton College, Mr Hambro went into the City working initially for Hambro Bank. He swiftly moved on to Smith St Aubyn, a discount house, and became its managing director in the 1970s. After a spell on his own as an investor in gold mines, he founded Peter Hambro Mining in 1994.

At play Mr Hambro is a sportsman, finding time for golf, fishing and sailing. His other passion is art and a number of his paintings adorn the walls of Petropavlovsk's offices. He is also a keen researcher of his family's history. When Société Générale bought Hambro Bank, he asked the French bank to return the family crest that hung in Hambro's offices.