Hambro toughs it out in gold gloom How nasty were the unpleasant ones? "I don't blame them," says Hambro. I can't control the share price. What I can do is to produce gold and hopefully do so profitably, and slowly but surely people are realising that we were the first to really react to this issue. The issue he speaks of is the falling gold price, which has been responsible for the drop in the company's shares - which hit a low of 67.25p in July - and concern about the company's financial viability. With a market capitalisation of £222m - based on Friday night's closing price of 119.5p and debts of $1.15bn (£735m) - commentators have questioned if the firm might be in danger of breaching its banking covenants. But amid such market consternation, Hambro has not stood idly by. Before the gold price slumped again earlier this year, Petropavlovsk locked in half its production for just over a year at $1640 an ounce and is now hedged against gold price movements until next July. "It de-risks the business," says Hambro. It gives us the ability to do what we need to do. You can't suddenly turn around a business which is moving the whole cubic capacity of Buckingham Palace every 90 minutes. It's like turning a supertanker. You have to give yourself time to stop, to think and to be organised, which is what we did by selling forward. Petropavlovsk has used its price protection to introduce a cost-cutting programme, reducing the workforce by 780 to 15,000, cutting salaries and eradicating 2013 executive bonuses. It is aiming to save 10pc to 15pc of its handling and mining costs by reducing capital expenditure on the development of the group's pressure oxidisation system. That is expected to save $150m this year, while the company is also shutting down development on some other projects and reducing stocks of lower-grade ore, diesel and cyanide. The group is committed to reducing its debt to under $1bn by the year-end. Other gold miners are now following suit in reducing costs, which Hambro believes offers hope for a gold price recovery. "One of the things I think will support the gold price is that costs have gone up to such an extent that production will fall," he says. Across the world you're seeing people shutting down and putting projects in mothballs and once you do that they're quite difficult to restart. For us to restart our pressure oxidisation will only take us about nine months from the day we decide to do it. But a lot of the heavy lifting stuff in the jungles; you can't restart that in a hurry. Hambro, 68, set up the then Peter Hambro Mining in 1994 after working in accountancy, banking and gold trading. After the USSR collapsed, he invested in former Russian state-owned gold mining assets, travelling to Kazakhstan and meeting Pavel Maslovsky, who had paid $1m for gold mining rights in the Amur, in Russia's south-east. The two men put a combined $5m into the company, which borrowed to build four major gold mines. It floated on the Alternative Investment Market in 2002, and paid just $155,000 to licence its best area, which has since produced 100m ounces of gold. Petropavlovsk is now the second largest producer of gold in Russia. Hambro believes the lower gold price will drive consolidation in the gold mining industry, where there are 600 producers in Russia alone. As gold miners restructure, there's also been talk about Petropavlovsk's executives pouncing on the weak share price and taking the company private. "It's the question everybody asks," Hambro admits. But it's quite a lot of money for me. Even at this low level, it's hundreds of millions of dollars that I don't have. Wouldn't a move private solve the distraction of the public listing and make it easier to run the business? Hambro sighs. "The actual cost of being listed isn't huge," he says, "but the stress from the market interferes with the day-to-day running of the business. Then there's the corporate governance and the amount of forms you have to fill in and the fact that you can't do this and can't do that. For the time being, we have to reduce the debt. That's what the shareholders want. The shareholders did want production. Now they want less debt. Hambro says he is comfortable with Petropavlovsk's banking covenants and believes that, with three years of gold reserves and a successful exploration record, the company is well-positioned to benefit from moves to hedge against inflation. "I'm still convinced that every country other than Norway is in a situation where they have borrowed too much from future generations and the only way they can pay it back is through inflation," he says. Governments are devaluing the money in your pocket every year. Gold bugs must hope he is right.