Russia and Kazakhstan expanded their gold holdings in December, seeking to diversify their reserves as the metal capped a 12th annual advance and investors raised holdings to an all-time high.

Russian holdings climbed 2.1 percent to 957.8 metric tons in December, taking the increase over 2012 to 8.5 percent, according to data on the International Monetary Fund’s website. Kazakhstan’s hoard expanded 1.7 percent to 115.3 tons last month, and surged 41 percent over the year, the data showed.

Nordgold is the product of fierce M&A activity conducted by Severstal amid stresses in the aftermath of the financial crisis that was split off into a separate entity in early 2012. Its production asset base consists of nine medium to small-sized operations in West Africa and the CIS, and extending mine lives is a priority. The operational travails caused the shares to de-rate to a 2013E EV/EBITDA of 4.1, though the sector overall has been trading at fairly low multiples. The consolidation of High River Gold is strongly value accretive, but does little to expand the free float. We initiate coverage of Nordgold with a HOLD recommendation and assign a target price of $5.05 per share - a re-rate will mainly be contingent on operational improvements and a stronger focus on returning cash to shareholders.