Qatar sovereign wealth fund plans on gold buying spree

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Greece's Prime Minister George Papandreou (L) welcomes Qatar's Emir Sheikh Hamad bin Khalifa Al-Thani in Athens October 1, 2011. Investments from Qatar in Greece show trust in the debt-choked country's economy, Papandreou said on Saturday after meeting Sheikh Hamad bin Khalifa al-Thani. Photo - Panagiotis Tzamaros/Reuters

The Qatar royal family plans to spend up to US$10 billion (S$12.9 billion) buying stakes in gold producers through their sovereign wealth fund.

The fund is seeking to invest in a range of natural resources, but gaining access to physical gold is its top strategic priority.

On Sunday, Qatar Holdings, which controls the wealth of the Middle East state’s royal family, confirmed it would invest about $1bn in European Goldfields, a London-listed miner currently developing the largest gold-mining project in Greece.

“Qatar Holdings have done a systematic and detailed study of the gold sector,” said Ken Costa, who put the deal together. “They chose European Goldfields because [chairman] Martyn Konig is very experienced a 30-year veteran in the gold market.”

While Costa would not comment on future likely targets, the Qataris are known to have been focusing in particular on opportunities in Africa and Russia. The valuation of North American gold miners is said to be too high.

The gold price has increased every year for the last 10 years as investor concern about the devaluation of global currencies, particularly the dollar, mounts.

The price is up by 14 per cent this year, despite a recent correction, and currently sits at $1,623.97 an ounce after it hit a record high of $1,923.70 on 5 September.

However, shares in listed gold miners have underperformed this year, with European Goldfields shares down 41pc in the year to date. This is despite the company receiving the long-awaited approval for its mines from Greek authorities in July.

The Qatari fund has acquired a 9.9 per cent stake in European Goldfields from Greek construction group Ellaktor and one of its directors, Dimitrios Koutras. Qatar Holdings will also provide a $600m loan facility at an interest rate of 7 per cent.

Athens will be celebrating the bold investment move, as the southern European country teeters on the edge of default, as the deal represents a vote of long-term confidence in the troubled economy.

Qatar Holding was advised by Credit Suisse, with Lazard and Liberum Capital advising European Goldfields.

POSITIVE IMPACT

Ahmad al-Sayed, Qatar Holding’s chief executive, said: “Hopefully this will have a positive impact on the local (Greek) economy. Byinvesting in the company we are giving them the security of financing to start operating.”

The deal will provide a fillip for Greece, bringing 1,500 jobs to the north-east of the country.

The agreement is designed to give European Goldfields the working capital to push ahead with production at three key mines.

One of its most notable is the Olympias mine which is expected to produce between 100,000 and 200,000 ounces of gold a year.

Full production is scheduled to begin in the second quarter of next year.

The Qataris intend to invest as much as $5bn in Greece and have eyed the former Athens airport at Hellenikon.

It is up for sale as part of a five-year privatisation drive worth 50bn ($67bn).

The deal, subject to shareholder approval, was ratified at a meeting between George Papandreou, the Greek prime minister, and Sheikh Hamad Bin Khalifa Al-Thani, the ruling Emir of the state of Qatar, on Saturday.

Sources: telegraph, khilafah

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