Investment Column: Gold's lure as safe haven makes Hambro a buy

The price of gold - used as a safe haven at a time of dollar weakness and geopolitical uncertainty - has been bobbing around levels not seen since the late Eighties. Giant mining companies, and investors, have woken up to the opportunities available in the vast wildernesses of Russian.

The price of gold - used as a safe haven at a time of dollar weakness and geopolitical uncertainty - has been bobbing around levels not seen since the late Eighties. Giant mining companies, and investors, have woken up to the opportunities available in the vast wildernesses of Russian.

Combine these two, and it is no wonder that shares in Peter Hambro Mining, a little exploration group which has been looking for gold in Russia for more than a decade, have surged since their debut on the AIM market in 2002.

They were at a new high yesterday, up 21.5p to 547.5p, after the company posted a $16.3m (£9.1m) pre-tax profit for 2003, up from $9.4m. The reason was a 74 per cent increase in production at its first working mine in the far east of Russia, which was more than expected, and a much lower cost of production.

It is a mug's game trying to call the likely direction of the gold price. What is certain is that a further step up in production at the Pokrovskiy mine will occur in 2004, suggesting this one site should be valued at 328p a share.

Beyond that there is great excitement over a second set of deposits which the company's broker reckons is worth more than £5 a share. Even allowing for hiccups in commercialising that site, the share price looks undervalued still. Buy.