Of all the precious metals, gold is the most popular as an investment. Investors generally buy gold as a hedge or safe haven against any economic, political, social or currency-based crises. These crises include investment market declines, burgeoning national debt, currency failure, inflation, war and social unrest. Speculators also buy gold early in a bull market and aim to sell it before a bear market begins, in an attempt to gain financially
– A precious metal is a rare, naturally occurring metallic chemical element of high economic value, which is not radioactive (excluding natural polonium, radium, actinium and protactinium). Chemically, the precious metals are less reactive than most elements, have high lustre are softer or more ductile, and have higher melting points than other metals. Historically, precious metals were important as currency, but are now regarded mainly as investment and industrial commodities. Gold, silver, platinum, and palladium each have an ISO 4217 currency code.
The best-known precious metals are the coinage metals gold and silver. While both have industrial uses, they are better known for their uses in art, jewellery and coinage. Other precious metals include the platinum group metals: ruthenium, rhodium, palladium, osmium, iridium, and platinum, of which platinum is the most widely traded.
– A metal is deemed to be precious if it is rare. The status of a “precious” metal can also be determined by high demand or market value. Precious metals in bulk form are known as bullion, and are traded on commodity markets. Bullion metals may be cast into ingots, or minted into coins. The defining attribute of bullion is that it is valued by its mass and purity rather than by a face value as money.
Many nations mint bullion coins. Although nominally issued as legal tender, these coins’ face value as currency is far below that of their value as bullion. Bullion coins’ minting by national governments gives them some numismatic value in addition to their bullion value, as well as certifying their purity.
The level of purity varies from issue to issue. 99.9% purity is common. Note that a 100% pure bullion is not possible, as absolute purity in extracted and refined metals can only be asymptotically approached. Many bullion coins contain a stated quantity of the marginally-impure alloy. In contrast, the Krugerrand is one of many historic and modern bullion coins of 22 Kt Crown gold – with a stated content (usually one troy ounce) of “fine gold” – with the other component(s) of the alloy making the coin heavier than one ounce in total. Still more bullion coins, e.g. British Sovereign, state neither the purity nor the fine-gold weight on the coin, but are recognized and consistent in their composition and many historically stated a denomination in currency, e.g. American Double Eagle.
Gold bullion bars are real, tangible assets, and throughout history, have been an ideal store of value and an excellent hedge against inflation, deflation and political uncertainty. They are extremely liquid investments, easily stored and transported, and can be a uniquely private way to preserve one’s wealth.
Gold Exchange Traded Funds (EFTs)
– EFTs are a certificate that represents a portion of gold held in a bank vault. One purchases a specific amount of gold and receives a certificate to establish one’s holding. As the price of the gold in the vault changes, the value of one’s holding changes correspondingly. The advantages of this system are that one can buy gold at virtually spot price. The disadvantage is that it is considered an investment and there are tax considerations such as profit taking and capital gains to consider.
Gold stocks Investing in the shares of a gold mining company can be profitable but the value of the shares depends on many factors, not just the value of gold. A mining company is projecting to produce a certain amount of gold over the life of the mine and this is what give’s it its value. If the mine falls short then the share value can fall short. Even an adverse movement in the currency exchange rate of the country in which the mine is situate can cause a drop in the value of the gold bring produced by the mine.
-Gold Futures is a deal to trade gold at terms (i.e. amounts and prices) decided now but with a settlement day in the future. That means you don’t have to pay up just yet (at least not in full) and the seller doesn’t need to deliver you any gold just yet either. Usually this is the arena of the trader rather than the investor.
The Gold Standard
-The gold standard is a monetary system in which the standard economic unit of account is a fixed weight of gold. Three distinct kinds of gold standard can be identified. The gold specie standard is a system in which the monetary unit is associated with circulating gold coins, or with the unit of value defined in terms of one particular circulating gold coin in conjunction with subsidiary coinage made from a lesser valuable metal. The gold exchange standard may involve only the circulation of silver coins, or coins made of other metals, but the authorities will have guaranteed a fixed exchange rate with another country that is on the gold standard, hence creating a de facto gold standard, in that the value of the silver coins has a fixed external value in terms of gold that is independent of the inherent silver value. The gold bullion standard is a system in which gold coins do not actually circulate as such, but in which the authorities have agreed to sell gold bullion on demand at a fixed price in exchange for the circulating currency.
The London Fix
-In London, the price of gold is ‘fixed’ twice daily at 10.30 am and 3.00 pm at the premises of N.M. Rothschild & Sons, whose representative chairs the process.
The other four “fixing seats” are currently held by Deutsche Bank AG, HSBC Bank USA, Société Générale and ScotiaMocatta. Any other market participant wishing to trade must do so through one of these five dealers.
The fix is based on the original 1919 principle: “The principle to be maintained with regard to the sale of gold in the free market in London is that everyone attending the gold fixing is entitled to buy or sell gold on equal terms with everyone else present… It is also agreed that only one price shall be quoted and shall represent the price at which all supplies can be absorbed”
Clients place orders with their counter-parties, who are either the five fixing members, or another bullion dealer who will be in touch with a fixing member and the client himself while the fixing proceeds.
The fixing members net-off all orders before communicating their individual net interest at the fixing. The fix begins with a suggested “trying price”, reflecting the market price prevailing at the opening of the fix. This price is relayed by the fixing members to their dealing rooms who are themselves in touch with all interested parties.
Any market participant may enter the fixing process at any time, or adjust or withdraw his order according to his/her view of the price relayed. The gold price is adjusted either up or down until all the buy and sell orders are matched and the price is declared fixed.
Sometimes, if it is impossible to strike a balance, the price will be fixed at the discretion of the Chairman, an event called “fixing on discretion”. All fixing orders are transacted on the basis of this fixed price. These fixing prices are quoted immediately through the various news and business information wires or channels as well as the many gold information websites. The fix is therefore regarded as a full and fair representation of all market interest at the time.
Our objective is to normalise the gold industry in the countries that we operate in and thereby enrich the lives of our business partners, our suppliers and the host countries as a whole through job creation, increased mining efficiency and the eradication of the uses of hazardous chemicals in the final mining processes thereby fulfilling the commitment that we all have to a better future for our children.
To fully understand the intricacies and minutiae of the total gold mining sector, especially in Africa, intense research was done to fully understand, comprehend and appreciate the activities of the following disciplines:
- The formal mining sector;
- The small and informal mining sector;
- The informal miners operating without jurisdiction and licenses;
- The formal and informal trade including the trade routes;
- The legal and illegal export and export routes of gold;
- Trading and smuggling syndicates and their modus operandi;
- Paramount chiefs and community Leaders in various regions.
- Furthermore, during the research period, emphasis was placed to constantly be on the alert and always vigilant and cognizant of the dangers involved, not only to personnel, but also to the integrity of the Company should anyone, either be associated or otherwise be involved with people with dubious intent.
Scammers and swindlers in virtually all facets of the economies of Africa, especially the gold producing countries, run widespread and are virtually epidemic. Not only do these tricksters deceive and con buyers from abroad but they also con the local miners.
It must then also be acknowledged that there are, conversely so, a large number of legitimate traders and dealers in gold who are, due to their ruthless experience, extremely skeptical towards any potential trader and the trade as such.
It must then also be acknowledged that there are, conversely so, a large number of legitimate miners, mining communities, mining villages, traders and dealers in gold who are, due to their ruthless experience, extremely skeptical towards any potential trader and the trade as such. Even within war torn countries, there are legitimate mining villages and communities which livelihood and daily bread depend on their mining activities.
GEA buys gold in predominantly the following formats:
- Alluvial Gold
- Gold Nuggets
- Doré Gold or Doré Bullion
Gold in this format is also referred to as “Gold Dust”, “Alluvial Dust”, “Alluvial Concentrate” or “Raw Gold” and has the attributes of gold coloured sand. Alluvial gold, depending on the source, sometimes produce solid pieces of gold (referred to as nuggets) with an inconsistent form or appearance.
Alluvium (from the Latin, alluvius, from alluere, “to wash against”) is gold deposits in soil or sediments deposited by ancient or pre-historic river beds or current rivers or running water. Alluvium is typically made up of a variety of materials and base metals, including fine particles of silt and clay and larger particles of sand and gravel. This raw format of Gold is the preferred feed stock for the Dancor Process™ to refine Gold as it also the most cost effective to refine.
Purity levels of Gold in this format range from 65% up to 94% depending on the area or country of origin.
This format of gold is normally produced by the Informal Mining sector also known as the Small Miners. The methods of mining employed to obtain or» mine” alluvial gold count amongst, in the majority cases, the most environmentally destructive method.
Part of our Social Responsibility Program is to introduce, implement, assist and educate miners in modern mining techniques as well as the rehabilitation of exhausted mining sites.
Exporting gold in this format is unwise as the contents of a box could, by drilling holes in the box, easily be extracted and substituted with sand. Most of the current LMBA affiliated refineries do not accept alluvial Gold as it complicates the current pyrometallurgical refining processes employed.
Gold in this format is also referred to as “Buttons” and consistently looks like a gold button or half round droplet weighing approximately five grams.
Nuggets are produced by the melting of a constant amount of alluvial dust in the presence of charcoal (carbon), glass or borax as a method to rid the alluvial dust of impurities thus increasing the purity level of resultant button. This however is a very labour intensive and time consuming process on the part of the Miners.
Purity levels of Nuggets vary from 84% to 96% depending on the country of origin.
Nuggets are also produced subsequent to the introduction of Mercury to alluvial concentrate. The resultant amalgam is then melted to produce a button.
To rid African Gold producing countries of the dangerous, disastrous and indiscriminate use of mercury not only forms part of our Social Responsibility Program but also ranks very high in our Objectives and Mission.
Exporting gold in this format can be done but not advised as, as in the instance of alluvial gold, the contents of a box could easily be substituted with brass or other metal.
Doré Gold or Doré Bullion is an impure alloy bar of gold and silver produced at a mine that will be refined to high purity metal. The median for gold doré vary between 65% and 90% gold purity with the balance consisting of silver and other base metals.
There are no fixed standards for Doré Bars with regards to weight and size and could vary from 500gram to 25 kilogram bars in all shapes or forms.
Exporting gold in this format is the most acceptable. Cognisance should be taken in that Doré Bars could be “spiked” with a range of foreign metals to increase the visual size and the weight.
GEA Verification of a consignment typically includes the confirmation of the source or origin, the legitimacy and ownership.
The Assay and sample selection devised are done comprising of the following criteria:
- The sample selection methodologies we formulated produce a sample with a predictive mathematical probability of 99.975% and being representative of the consignment. This method of statistical sampling table derived from the application of the MILITARY STANDARD 105E (ANSI/ASQC Z1.4, ISO 2859) to establish the random sampling plan for a particular survey Lot of a Tranche which results in an Accepted Quality Level (AQL) of 0.025% (99.975% probability of detecting any anomalies).
- To obtain a very high degree of accuracy with regards to the purity level of samples, the assaying techniques of the selected samples include, but not limited to, XRF (X Ray Spectrometry), Sonic and Thermal technologies, Fire Assay as well as Specific gravity methods. Depending on source format, the Dancor Process™ could also be utilized. Combinations of assay techniques could also be used.
The countries in Africa we operate in are:
West Africa: Ghana, Burkina Faso, Mali, Nigeria, Cameroon, Benin, Ivory Coast, Liberia, Guinea, Sierra Leone, Gambia, Senegal and Togo.
East Africa: Kenya, Uganda, South Sudan, Tanzania, DRC.
Southern Africa: Zambia, Angola, Namibia, Botswana, Zimbabwe, South Africa and Mozambique.