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UPDATE 1-Russia to sell 30 tonnes of gold to c.bank

Published 11/18/2009, 01:09 PM
Updated 11/18/2009, 01:15 PM
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* Operation will not be repeated in 2010

* Gokhran to buy 62 bln rbls worth of diamonds in 2009-10

By Darya Korsunskaya

MOSCOW, Nov 18 (Reuters) - Russia's state repository Gokhran will sell 30 tonnes of gold to the central bank in 2009 instead of offering it to the market, Russia's finance minister said on Wednesday, adding that the operation will not be repeated in 2010.

Alexei Kudrin also told reporters that Gokhran will use the funds raised from the operation to buy 31 billion roubles ($1.08 billion)worth of diamonds from state miner Alrosa and may purchase the same amount again in 2010.

The government had planned to sell 20-50 tonnes of gold to help plug a budget deficit in the first major sale since the fall of the Soviet Union.

Thirty tonnes would represent 0.5 to 1.25 percent of global consumption of the metal, which soared in price to a record high this month, but the open sale was later cancelled after information about it leaked.

Under a government order signed at the start of the year, Gokhran is allowed to sell precious metals worth 44.4 billion roubles ($1.52 billion) in 2009.

Analysts had initially been sceptical of the open sale plan, which would come at a time when the central bank has been steadily raising the share in its reserves of gold -- seen as a safe haven in times of turmoil and global dollar weakness.

Alrosa has a 25 percent share of the global diamond market and the government pledged $1 billion in support this year to help it ride out a steep global decline in demand for gemstones in the wake of the global economic crisis.

Alrosa, the main rival to De Beers, produces one quarter of the world's rough diamonds and is one of the main sources of income for Russia's Yakutia region, home to 950,000 people.

The company plans to cut its debt by $1 billion by the end of this year by selling energy assets and taking advantage of renewed demand for its gems in recent months.

Alrosa has an outstanding Eurobond issue maturing in November 2014. (Reporting by Darya Korsunskaya, Writing by Dmitry Zhdannikov, Moscow Newsroom, + 7 495 775 12 42)

($1=28.71 Rouble)

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