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19

Russia To Put Off Gold Tender

Russia puts off gold tender, prefers open auction

Russia said on Wednesday it would put off a tender for rights to tap Siberia's vast Sukhoi Log gold deposit until 2005.

Like many Western firms seeking to bid, it favoured an open cash auction.

Natural Resources Minister Yuri Trutnev also told Reuters the government might limit foreign participation in all "unique" tenders such as Sukhoi Log in a move likely to outrage foreign miners eager to do business in gold-rich Russia.

The government has for years debated tender terms for Sukhoi Log -- Eurasia's biggest gold deposit -- in a process mainly marked by disagreement between liberals and conservatives over whether to allow foreign firms to bid.

"It's been added into the privatisation plan for 2005," Trutnev said in the Siberian city of Irkutsk, just miles away from the deposit, which has over 1,000 tonnes in estimated gold reserves as of the last audit conducted in the 1970s.

"The ministry's position is that it should be an open auction," he said, adding that the tender would not take place until the second half of the year.

Industry insiders say Western firms prefer auctions as they see them as a more transparent way to take part in Russian tenders, unlike a closed-door tender.

However, any restriction on Western participation would undermine President Vladimir Putin's efforts to encourage foreign investment -- especially in light of an ongoing legal attack on oil major YUKOS (YUKO.RTS: Quote, Profile, Research) , analysts say.

"The new natural resources law...will include an option to limit foreign participation in tenders for unique deposits -- such as Sukhoi Log and Udokan (copper deposit)," Trutnev said.

The State Duma lower house is expected to give its initial approval to the law later this year, he added.