Tag Archives: Swiss gold imports

Bank of England releases new data on its gold vault holdings

An article in February on BullionStar’s website titled “A Chink of Light into London’s Gold Vaults?” discussed an upcoming development in the London Gold Market, namely that both the Bank of England (BoE) and the commercial gold vault providers in London planned to begin publishing regular data on the quantity of physical gold actually stored in their gold vaults.

Critically, this physical gold stored at both the Bank of England vaults and the commercial London vaults underpins the gargantuan trading volumes of the London Gold Market and the same market’s ‘liquidity’. Therefore, a new vault holdings dataset would be a very useful reference point for relating to London’s ‘gold’ trading volumes as well as relating to data such as the level and direction of the gold price, the volume of gold held in gold-backed Exchange Traded Funds (ETFs), UK gold import and export statistics, and Swiss and Hong Kong gold imports and exports.

The impending publication of this new gold vault data was initially signalled by two sources. Firstly, in early February, the Financial Times (FT) wrote a story claiming that the London Bullion Market Association (LBMA) planned to begin publishing 3 month lagged physical gold storage data for the entire London gold vaulting network, that would, according to the FT:

“show gold bars held by the BoE, the gold clearing banks, and those [vaults] operated by the security companies such as Brink’s, which are also members of the LBMA.”

The “gold clearing banks” are the bullion bank members of London Precious Metals Clearing Limited (LPMCL), namely, HSBC, JP Morgan, ICBC Standard Bank, Bank of Nova Scotia – Scotia Mocatta, and UBS. HSBC and JP Morgan operate precious metals vaults in London. See profile of JP Morgan’s London vault and a discussion of the HSBC vault . ICBC Standard Bank also maintains a vault in London which is operated on its behalf by Brinks.

There are 4 security companies with their own vaults in London, namely, Malca Amit, Loomis, Brinks and G4S. Therefore, including the Bank of England, there are 8 custodians with gold vaults in London that comprise the LBMA gold vaulting network.

The second publication to address the new gold vault data was the World Gold Council. On 16 February, addressing just the Bank of England vaults, the World Gold Council wrote in its Gold Investor publication that:

“The Bank of England is, for the first time, publishing monthly data revealing the amount of gold it holds on behalf of other central banks.”

“The data reveals the total weight of gold held within the Bank of England’s vaults and includes five years of historical data.”

While I had been told by a media source that the London vault data would be released in the first quarter of 2017, at the time of writing, there is still no sign of any LBMA vault holdings data covering the commercial vault operators in London. However, the Bank of England has now gone ahead and independently released its own numbers covering gold held in the Bank of England gold vaults. These gold vaults, of which there are between 8 – 10 (the number fluctuates), are located on the 2 basement levels of the Bank of England headquarters in the City of London.

In an updated web page on the Bank of England’s website simply titled ‘Gold’, the Bank of England has now added a section titled ‘Bank of England Gold Holdings’ and has uploaded an Excel spreadsheet which contains end-of-month gold holdings data covering every month for a 6-year period up to the end of December 2016, i.e. every month from January 2011 to December 2016 i.e. 72 months.

BoE vault
Bank of England ‘show’ gold vault

According to the Bank of England, the data in the spreadsheet shows:

“the weight of gold held in custody on the last business day of each month. We publish the data with a minimum three-month lag.

Values are given in thousands of fine troy ounces. Fine troy ounces denote only the pure gold content of a bar.

We only accept bars which comply with London Bullion Market Association (LBMA) London Good Delivery (LGD) standards. LGD bars must meet a certain minimum fineness and weight. A typical gold bar weighs around 400 oz.

Historic data on our gold custody holdings can be found in our Annual Report.”

Prior to this spreadsheet becoming available, the Bank of England only ever divulged gold vault quantity data once a year within its Annual Report, for year-end reporting date end of February.

You will appreciate that the new spreadsheet, having data for every month of the year, and for 72 months of data retrospectively, conveys a lot more information than having just one snapshot number per year in an annual report. Therefore, the Bank of England has gone some way towards improving transparency in this area.

Before looking at the new data and what it reveals, it’s important to know what this data relates to. The Bank of England provides gold custody (storage) services to both central banks and a number of large commercial banks. Large commercial banks which trade gold are commonly known as bullion banks, and are mostly the high-profile and well-known investment banks.

On its gold web page, the Bank highlights this fact – that it provides gold custody service to both central banks and commercial banks:

“We provide safe custody for the United Kingdom’s gold reserves, and for other central banks. This supports financial stability by providing central banks with access to the liquidity of the London gold market.

We also provide gold accounts to certain commercial firms that facilitate access for central banks to the London gold market.”

In the London Gold Market, the word “liquidity” is a euphemism for gold loans, gold swaps, and gold trading including gold sales. This reference to central banks accessing the London Gold Market as being in some way supportive of ‘financial stability’ is also an eye-opener, since reading between the lines, the Bank of England is conceding that by accessing the London Gold Market’s “liquidity” via bullion banks, these central bank clients are either contributing to direct stabilisation of the gold price in some shape or form, or else are using their gold operations to raise foreign currencies for exchange rate intervention and/or system liquidity. But both routes are aiming at the same outcome. i.e. stability of the financial system.

At the end of the day, the gold price has always been a barometer that central banks strive to keep a lid on and which they aim to stabilise or smoothen the gyrations of, given that the alternative – a freely formed and unmanipulated gold price – would thwart their coordination of fiat currency exchange rates, interest rates and inflation targets.

Interestingly, in addition to the new spreadsheet of gold holdings data, the Bank of England gold web page now includes a link to a new 1 page ‘Gold Policy’ pdf document, which, looking at the pdf document’s properties, was only created on 30 January 2017. This document therefore also looks like it was written in conjunction with the new gold vault data rollout.

The notion of central banks accessing the liquidity of the London Gold Market via bullion banks is further developed in this Gold Policy document also. The document is quite short and merely states the following:


1. The Bank primarily offers gold accounts to central bank customers. This is to support financial stability by providing central banks with secure custody for their gold reserves and access to the liquidity of the London gold market (particularly given the Bank’s location).

2. To facilitate, either directly or indirectly, access for central banks to the liquidity of the London gold market, the Bank will also consider providing gold accounts to certain commercial firms. In deciding whether to provide an account, the Bank will be guided by the following criteria.

a. The firm’s day to day activities must support the liquidity of the London gold market.
b. Specifically, the Bank may have regard to a number of factors including but not limited to: evidence of active or prospective trading with a central bank customer; or whether the firm has committed to honour buy and sell prices.

3. Access to a gold account remains at the sole discretion of the Bank.

4. The Bank will review this policy periodically.”

The Vault Data

Nick Laird has now produced a series of impressive charts of this new Bank of England data on his website GoldChartsRUS. Plotting the series of 72 months of gold holdings data over January 2011 to December 2016 yields the below chart.

Bank of England custodial gold holdings: January 2011 – December 2016. Source www.GoldChartsRUS.com

On average, the Bank’s vaults held 5457 tonnes of gold over this 6 year period. The minimum amount of gold held was 4693 tonnes at the end of March 2016, while the maximum quantity of gold held was 6250 tonnes at the end of February 2013.

The overall trend in the chart is downward with a huge outflow of gold bars from the bank’s vaults from the end of February 2013 to the end of March 2016.

As of January 2011, the BoE held just over 5500 tonnes of gold bars in its vaults. Gold holdings rose until the end of August 2011 and peaked at nearly 5900 tonnes before falling to 5600 tonnes at year-end 2011. Overall in 2011, the holdings fluctuated in a 400 tonne range, trending up during the first 8 months, and down during the latter 4 months.

This downtrend only lasted until January 2012, at which point BoE gold holdings totalled about 5450 tonnes. For the remainder of 2012, BoE gold under custody rose sharply, reaching 6200 tonnes by the end of 2012, a level near the ultimate peak in this 6 year chart. The year 2012 was therefore a year of accumulation of gold bars at the Bank during which 750 tonnes were added.

The overall maximum peak was actually 6250 tonnes at the end of February 2013, after which a sustained downtrend evolved through the remainder of 2013. By December 2013, gold under custody at the Bank of England had fallen to 5670 tonnes, creating an overall outflow of 580 tonnes of gold bars during 2013.

The outflow of gold continued during 2014 with another 470 tonnes flowing out of the Bank, leading to end of year 2014 gold holdings of just 5200 tonnes. The outflow also continued all through 2015 with only 4780 tonnes of gold in custody at the end of December 2015. The Bank therefore lost another 440 tonnes  of gold bars in 2015.

Overall, that makes an outflow of 1490 tonnes of gold from the Bank’s vaults over the 3 years from 2013 to 2015 inclusive. This downtrend lingered for 3 more months, with another 80 tonnes lost, which brought the end of March 2016 and end of April 2016 figures to a level of about 4700 tonnes, which is the overall trough on the chart. It also means that there was a net outflow of 1570 tonnes of gold bars from the Bank’s vaults from the end of February 2013 to the end of March / April 2016.

A new uptrend / inflow trend began at the end of April 2016 and continued to the end of November 2016, where gold custody holdings peaked again at about 5123 tonnes before levelling off at the end of December 2016 at 5102 tonnes. Therefore, from the end of April 2016 to the end of December 2016, the Bank of England vaults added 400 tonnes of gold bars.

The gold holdings of the vast majority of central banks have remained stagnant over the 2011 – 2016 period, the exceptions being the central banks of China and Russia. But Russia buys domestically mined gold and stores it in vaults in Moscow and St Petersburg, so this would not affect gold holdings at the Bank of England. China’s central bank, the People’s Bank of China (PBoC), is known to buy its gold on the international market, including the London Gold Market. It then monetizes this gold (classifies it as monetary gold), and airlifts it back to China. But these Chinese purchases don’t show up in UK gold exports because monetary gold is exempt from trade statistics reporting. However, if China was surreptitiously buying gold from other central banks with gold accounts at the Bank of England or buying gold from bullion banks with gold accounts at the BoE, then some of the gold outflows from the BoE could be PBoC gold purchases. But without central bank specific data, its difficult to know.

But what is probably true is that the fluctuations in the quantity of gold stored in the Bank of England vaults are more do to with the gold holdings of bullion banks and less to do with the gold holdings of central banks, for the simple reason that central bank gold holdings are relatively static, or the least the central banks claim that their gold holdings are static. This does not take into account the gold lending market which the central banks and bullion banks go to great lengths to keep secret.

Bank of England custodial gold holdings and US Dollar Gold Price: January 2011 - December 2016. Source www.GoldChartsRUS.com
Bank of England custodial gold holdings and US Dollar Gold Price: January 2011 – December 2016. Source www.GoldChartsRUS.com

There is also a noticeable positive correlation between the movement of the US Dollar gold price and the inflows/outflows of gold to and from the Bank of England vaults, as the above chart demonstrates.

Bullion Bank gold accounts at the BoE

One basic piece of information that the Bank of England’s new vault storage data lacks is an indication of how many central banks and how many commercial banks are represented in the data.

In its first quarterly report from Q1 2014, the Bank of England states that 72 central banks operate gold accounts at the bank of England, a figure which includes a few official sector organisations such as the International Monetary Fund (IMF), European Central Bank (ECB), and Bank for International Settlements (BIS). This number would not have changed much in the meantime, so we can assume that the gold holdings of about 72 central banks are represented in the new data. But the number of commercial banks holding gold accounts at the Bank of England is less clear-cut.

The 5 gold clearing banks of the LPMCL all hold gold accounts at the Bank of England. Why? Because it says so on the LPMCL website:

“Each member of LPMCL has vaulting facilities under its control for the storage of gold and/or silver, plus in the case of gold bullion, account facilities at the Bank of England, which have contributed to the development of bullion clearing in London.”

The LPMCL also states that its clearing statistics include:

“Transfers over LPMCL Clearing Members’ accounts at the Bank of England.”

Additionally, the LPMCL website states that their

“clearing and vaulting services help facilitate physical precious metal movement logistics, location swaps, quality swaps and liquidity management.”

See BullionStar article “Spotlight on LPMCL: London Precious Metals Clearing Limited” for a full profile of LPMCL.

The Bank of England’s reference in its new ‘Gold Policy’ document to commercial banks needing to be “committed to honour buy and sell prices” is a reference to market makers and would cover all 13 LBMA market makers in gold, which are the 5 LPMCL members and also BNP Paribas, Citibank, Goldman Sachs, Merrill Lynch, Morgan Stanley, Société Générale, Standard Chartered Bank, Toronto-Dominion Bank. But there are also gold trading banks that make a market in gold which are not officially LBMA market makers, such as Commerzbank in Luxembourg which claims to be one of the biggest bullion banks in the world.

So I would say that lots of other bullion banks (of which there about 40 in total) have gold accounts at the Bank of England in addition to the 13 official LBMA market makers.

More fundamentally, any bullion bank that is engaged in gold lending with central banks (the central banks being the lenders and the bullion banks being the borrowers) would need a gold account at the Bank of England. I counted 28 bullion banks that have been involved with borrowing the gold of just one central bank, the central bank of Bolivia (Banco Central de Bolivia – BCB) between 1998 and 2016. Some of these banks have since merged or exited precious metals trading, but still, it gives an estimate of the number of bullion banks that have been involved in the gold lending market. The Banco Central de Bolivia’s gold lending activities will be covered in some forthcoming blog posts.

Bullion banks that are Authorised Participants (APs) for gold-backed ETFs such as the SPDR Gold Trust (GLD) or iShares Gold Trust (IAU) may also have gold accounts at the Bank of England. I say may have, because in practice the APs leave it up to the custodians such as HSBC and JP Morgan to allocate or deallocate the actual physical gold flowing in and out of the ETFs, but HSBC on occasion uses the Bank of England as a sub-custodian for GLD gold (see “SPDR Gold Trust gold bars at the Bank of England vaults” for details), so if some of the APs want to keep their own stash of allocated physical gold in relation to ETF trading, it would make sense for them to have a gold account at the Bank of England.

As to how much gold the GLD stores at the Bank of England and how regularly this occurs is still opaque because the SEC does not require the GLD filings to be very granular, however there is a very close correlation between inflows and outflows from GLD and the inflows and outflows from the Bank of England vaults, as the following chart clearly illustrates.

Gold held in the SPDR Gold Trust (GLD) and custody gold held at the Bank of England: January 2011 - December 2016. Source:www.GoldChartsRUS.com
Gold held in the SPDR Gold Trust (GLD) and custody gold held at the Bank of England: January 2011 – December 2016. Source:www.GoldChartsRUS.com

As gold was extracted from the GLD beginning in late 2012, a few months later the Bank of England gold holdings began to shrink also. This trend continues all the way through 2013, 2014 and 2015. Then as the amount of gold began to increase in the GLD at the end of 2015, the gold holdings at the Bank of England began to increase also. Could this be bullion banks extracting gold from the GLD, then holding this gold at the Bank of England and then subsequently exporting it out of the UK?

Some of it could, but UK gold net exports figures suggest that gold was withdrawn from both the Bank of England vaults and from the ETF gold stored at commercial gold vaults (run by HSBC and JP Morgan), after which it was exported.

Custody gold held at the Bank of England and UK gold imports and exports: January 2011 – December 2016. Source:www.GoldChartsRUS.com

Looking at the above chart which plots Bank of England gold holdings and UK gold imports and exports (and net exports) is revealing. As Nick Laird points out in this chart, over the 2013 to 2015 period during which the Bank of England gold holdings fell by 1500 tonnes, there were UK net gold export flows of 2500 tonnes, i.e. 2500 tonnes of gold flowed out of London gold vaults, so an additional 1000 tonnes had to come from somewhere apart from the Bank of England vaults.

Spot Checks

The new monthly vault holdings data from the Bank of England can now also be compared to the amount of gold reported by the Bank of England in its annual reports. The figures the Bank reports in the annual report are as of the end of February. These figures are only reported in Pounds Sterling, not quantities, so they need to be either converted to USD and divided by the USD LBMA Gold Price on the last day of February, or else just divided by the GBP LBMA Gold Price on that day.

In September 2015, I wrote the article “How many Good Delivery gold bars are in all the London Vaults?….including the Bank of England vaults”. This was followed by an October 2016 update titled “Tracking the gold held in London: An update on ETF and BoE holdings”. Both of these articles aimed to calculate how much gold was actually stored in the entire London gold vaulting network by looking at how much gold was held in custody in the Bank of England vaults and how much gold was held by ETFs in London.

For end of February 2015, the calculated total for gold held at the Bank of England (based on the annual report) came out at 5,134 tonnes. Now the Bank of England data says 5126 tonnes which is very close to the calculation.  For February 2016, the calculation came out at 4725 tonnes.  The new Bank of England data now says  4730 tonnes, so that’s pretty close also.


This new Bank of England data is welcome and the Bank of England has taken a step towards greater transparency. However, it would be more useful if the Bank published a breakdown of how much of this gold is held by central banks and how much is held by bullion banks, along with the number of central banks and number of bullion banks that the data represents. Two distinct sets of data would be ideal, one for central bank custody holdings and the other for bullion bank custody holdings. The Bank most likely would never publish two sets of data as it would show bullion bank gold storage activity for the whole world to see.

While the Bank of England has now followed through with its promise to publish its gold vault holdings, the LBMA has still not published gold vault data for the commercial gold vault providers, i.e. its members HSBC, JP Morgan, ICBC Standard Bank, Brinks, Malca Amit, Loomis and G4S. Where is this data, why is there a delay, and why has it not yet been published?

As a reminder, the Financial Times article in early February said that the LBMA would publish gold vault holdings data that would:

“show gold bars held by the BoE, the gold clearing banks, and those [vaults] operated by the security companies such as Brink’s”

The Financial Times article also said that:

HSBC and JPMorgan, London’s biggest bullion banks, are backing the initiatives by the LBMA to improve transparency.”

With the gold holdings data on the other London vaults still not published, it begs the question, has there been a change of mind by HSBC and JP Morgan, two of the LBMA’s largest and most powerful members?

The vaulting page of the LBMA’s website could also do with an update since currently it erroneously says:

“Reputedly [the Bank of England vaults are] the second largest vault in the world with approximately 500,000 gold bars held in safe custody on behalf of its customers, including LBMA members, central banks, international financial institutions and Her Majesty’s Treasury.”

A holding of 500,000 Good Delivery gold bars is equal to 6250 tonnes. However, according to the Bank of England’s own figure for month end December 2016, the Bank of England only holds 5100 tonnes of gold in custody (408,000 Good delivery gold bars). Therefore, the LBMA is overstating the Bank of England’s holdings by 1150 tonnes, unless, and it’s unlikely, that the BoE vaults have seen huge gold bar inflows in the last 4 months.

Swiss gold refinery Argor-Heraeus to be acquired by Private Equity investors

News has just emerged in the gold market that the giant Swiss precious metals refiner, Argor-Heraeus, has held discussions to be acquired, and that the likely outcome is an acquisition by a private equity group. This private equity group is believed to be London-based WRM CapInvest, part of Zurich headquartered WRM Capital. Other interested buyers are also believed to have examined a bid for Argor-Heraeus, including Japanese refining group Asahi and Swiss refining group MKS-PAMP, however, neither of these are thought to be in the running at this stage. Since this news is developing, details of the discussions and potential acquisition are still thin on the ground.

If Argor-Heraeus is acquired, it will mean that 3 of the 4 giant Swiss gold refineries will have been taken over within less than a year and a half of each other.

In July 2015, Indian headquartered Rajesh Exports, the world’s largest gold jewellery fabricator, announced the agreed acquisition of the giant Swiss gold refinery Valcambi. See BullionStar article “Swiss Gold Refineries and the sale of Valcambi” for full details. In July 2016, Japanese precious metals refiner Tanaka Kikinzoku Kogyo K.K , part of the Tanaka Precious Metals group, announced the agreed acquisition of Metalor Technologies, another of the large Swiss gold refineries. Retrospectively, the acquisition of Valcambi by Rajesh Exports now looks to have initiated a flurry of take-over activity in the normally low-key Swiss precious metals refining world.

While Metalor is based in Marin-Epagnier in the Canton of Neuchâtel in northwest Switzerland, the other 3 giant Swiss gold refineries, Argor-Heraeus, Valcambi and MKS-owned PAMP are all located literally within a few kilometres of each other in the Italian speaking Canton of Ticino, in southern Switzerland, near the Swiss-Italian border. Argor-Heraeus is in Mendrisio, Valcambi is in Balerna, and PAMP is in Castel San Pietro. Mendrisio is 4 kms from Balerna and 2kms from Castel San Pietro.


The Golden Triangle of Swiss gold refineries, Canton of Ticino

Argor-Heraeus is currently jointly-owned by German bank Commerzbank, German industrial and refining group Heraeus, the Austrian Mint, and Argor-Heraeus management. See BullionStar Gold University for a full profile of Argor-Heraeus.

Commerzbank owns 32.7% of Argor-Heraeus’ share capital. The Austrian Mint holds another 30% of Argor-Heraeus shares. In its annual report, Heraeus doesn’t reveal its holding in Argor-Heraeus, but with the Austrian Mint and Commerzbank owning a combined 62.7%, this means 40.2% of the shares are held by Heraeus and Argor-Heraeus management. On the Argor-Heraeus website, Heraeus is listed first on the shareholder list, which could signify that it’s the largest shareholder. This would put Heraeus’ shareholding above Commerzbank’s 32.7% stake, and mean that Argor-Heraeus management probably hold a shareholding somewhere below 7%.

A Precedent for Private Equity Ownership

Interestingly, there is a precedent of private equity ownership in the Swiss precious metals refining sector. Until Tanaka’s take-over of Metalor technologies last July, Metalor was majority owned by French private equity company Astorg Partners and Belgian private equity company Sofina, which between them held approximately 60% of Metalor’s shares. The remainer of Metalor’s shares were held by Metalor management, as well as by Martin Bisang and Daniel Schlatter. Bisang and Schlatter are connected with Swiss boutique investment bank Bellevue Group, which has in the past also acted as a strategic adviser to Metalor. Bisang had bought into Metalor in 1998 along with Swiss executives Ernst Thomke, Rolf Soiron and Giorgio Behr, and an additional group of Swiss executives bought into Metalor in 2004. These additional buyers were a secretive bunch, only known as the ‘Partners Only’, a group which was said by Swiss media at the time to have been connected to the Swiss Roche group.

Likewise, when Valcambi was sold to Rajesh Exports in July 2015, the then owners of Valcambi were a combination of US gold mining company Newmont (with an approximate 60% shareholding) and a group of shy Swiss private investors (who held the remaining shares) the largest of which were Emilio Camponovo and the Camponovo family. Technically, you could call these Swiss private investors direct private equity investors, or equivalent.

Even the PAMP refinery, which is owned by the Geneva based MKS-PAMP group, could be described as private equity, or at least concentrated privately-owned equity, since the group is controlled by the founding Shakarchi family. Note that MKS-PAMP has a parent company MKS PAMP Group BV based in Amsterdam, but this appears to be purely for corporate structure reasons.


The Sellers – Heraeus, Commerzbank and Austrian Mint

Since Argor-Heraeus has multiple owners, any sale would in theory be more complex than if the refinery only had a single owner. Looking quickly at the current owners, Commerzbank in its bullion banking marketing literature usually draws attention to the fact that its partial owner of a gold refinery, and uses this as a selling point by trumpeting the fact that it has direct connections to the physical gold world. Selling Argor would probably be a negative for Commerzbank, however, it may need the cash given that german banking is in a crisis at the moment. The Austrian Mint is owned by the Austrian central bank (OeNB), which in turn is owned by the Austrian State. Any sale of the Austrian Mint’s shares in Argor would be a one-off profit boost to the OeNB. In 2015, the Austrian Mint sold a stake it held in Casinos Austria (yes, a casino company), so maybe the Mint has a new-found strategy to jettison its non-core investments. Although presumably the Mint gets preferential precious metal supply from Argor, or one would think that it does.

Heraeus also has close relationships with Argor-Heraeus, for example, in the production of various precious metals products, so a sale by Heraeus of its stake in Argor could in theory affect these synergistic relationships. All of these shareholders also receive a substantial annual cash dividend from Argor-Heraeus which is a nice to have to say the least. Selling their stakes would obviously be a loss of their cash dividends. I personally was surprised that Argor-Heraeus would be up for sale, since it definitely has what looks like a very stable, secure and content set of shareholders. As per BullionDesk coverage of this potential deal, Commerzbank and Heraeus have yet to respond or comment on the potential sale of Argor-Heraeus.

Interested Parties in an Argor Bid

Presuming that the private equity company WRM CapInvest, as well as Asahi Refining, and MKS-PAMP all looked at potentially acquiring Argor-Heraeus (and that’s the word in the gold market right now), let’s have a quick look at these players.

The current Asahi Refining group, headed by Asahi Holdings, owns precious metals refinery operations in 5 locations worldwide, namely Tokyo, Salt lake City, Utah (US), Brampton, Ontario (Canada), Mexico City, and Santiago (Chile). Some readers will be familiar with Asahi’s takeover of the US and Canadian gold and silver refining operations of Johnson Matthey, which was completed in March 2015.  If Asahi had emerged as the favourite suitor to acquire Argor-Heraeus, it would mean that 2 Japanese headquartered precious metals refiners, Tanaka and Asahi, would both own a Swiss precious metals refinery, namely Metalor and Argor-Heraeus. Market sources indicate that Asahi’s bid value for Argor-Heraeus wasn’t as high as the bid tabled by the favoured private equity group bidder. Argor-Heraeus also operates a precious metals processing plant in Santiago in Chile, which could feasibly provide synergies to Asahi, since Asahi runs a refining operation in Santiago.

Its interesting that MKS-PAMP has been mentioned as a possible acquirer of Argor-Heraeus. As mentioned, the PAMP precious metals refinery is literally ‘down the road’ from the Argor-Heraeus refinery, i.e. 2 kms down the road. PAMP is a prestigious global brand in precious metals refining and bar production, and so is Argor-Heraeus. But would the resulting consolidation in the Swiss precious metals refining industry make sense, and how would this affect the PAMP and Argor-Heraeus brands. That’s a difficult question to answer, and only PAMP could accurately answer that at this time. Market sources say that MKS PAMP was shy in revealing its full financials, data that would presumably be necessary if it put in a bid for Argor-Heraeus.

Argor-Heraeus opened a new refining headquarters in Mendrisio in 2013 which doubled its former refining capacity. According to its 2014 corporate responsibility report, the new Argor-Heraeus refinery has an annual refining capacity for gold of between 350 and 400 tonnes. The PAMP refinery has an annual refining capacity of 450 tonnes of gold, and an annual silver refining capacity of over 600 tonnes.  A merged PAMP and Argor-Heraeus would have an annual refining capacity for gold of about 900 tonnes. Their neighbour Valcambi has an annual refining capacity for gold of 1600 tonnes. A combined PAMP and Argor-Heraeus would therefore start to approach the production capacity of Valcambi. Each of Valcambi and a combined PAMP ~ Argor would also have a refining presence in India also, since PAMP has an Indian refining joint-venture with MMTC, and Valcambi, owned by Rajesh Exports, has refining operations in India. Argor-Heraeus is also one of only five refinery members of the London Bullion Market Associations (LBMA) good delivery referee panel. PAMP is also on this panel, as is Metalor and Tanaka. This panel assists the LBMA is maintaining quality standards of refinery members worldwide. Argor-Heraeus is also a full member of the LBMA, one of the few refineries to be a full LBMA member.

Finally, turning to the private equity company WRM CapInvest, which is said by sources in the gold market to be the preferred bidder for Argor-Heraeus, what is known about this company? According to its website,  WRM CapInvest is a division of the WRM Capital group of companies. The WRM Group was founded by Raffaele Mincione, who is Italian, but who resides in Switzerland. WRM Group seems to have started as a private wealth management / family office type company but has expanded into private equity.

WRM CapInvest is based in Berkeley Square in Mayfair in London, Mayfair being a very popular location for hedge funds and private equity funds to locate in. WRM CapInvest was incorporated in the UK in March 2012 as Capital Investment Advisors Ltd, but changed name to WRM CapInvest on 11 May 2016. The original single director of WRM CapInvest was Massimo Cattizone, also an Italian. Massimo Cattizone and Raffaele Minicone were listed as shareholders, with Minicone holdings 80% of the WRM CapInvest shares and Cattizone holding 20% of the shares. In July 2013, Leonidas Klemos (Italian), and Michele Cerqua (Italian) were appointed as directors of WRM CapInvest, and Massimo Cattizone ceased to be a director. Between May 2014 and March 2015, Roberto Agostini (Italian) was also a director. In July 2015, Raffaele Minicone was appointed as a director. In February 2016, Leonidas Klemos ceased to be a director. By April 2016, Raffaele Minicone was listed as owning the entire share capital of WRM CapInvest. The current directors are therefore Raffaele Minicone and Michele Cerqua. The reason for listing the above is to highlight that all the directors of WRM CapInvest since it was incorporated have been Italian, and there is a Swiss connection since Raffaele Minicone is based in Switzerland, and the WRM Group is headquartered in Zurich, Switzerland.

Therefore, the fact that Argor-Heraeus is based in the Italian speaking Swiss Canton of Ticino, right beside the Italian border, and that CapInvest is operated by an Italian team, owned by an Italian, and part of a Swiss based group is probably of relevance to a potential acquisition of Argor by CapInvest. Additionally, Knight Frank, a large commercial real estate agent, mentioned on its website in a 2013 article that “CapInvest, which is also backed by private Italian investors, purchased 60 Sloane Avenue for US$206m.”

So the question is, assuming CapInvest acquires Argor-Heraeus, is it acquiring the company on behalf of CapInvest, or on behalf of some other Italian or Swiss investors, or Italian Swiss, or Swiss Italians? And if an acquisition is on behalf of other investors, who are these investors? Could the private investors who were involved in Metalor (such as Martin Bisang and his circle of business acquaintances), or the private investors that were involved in Valcambi (such as Emilio Camponovo and friends) be re-entering the Swiss refining industry with an acquisition of Argor-Heraeus. They would definitely be some of the best placed people around that understand how the precious metals refining industry works, given their experience. Or possibly the Argor-Heraeus management and other local business people in Ticino are moving to take ownership of Argor through a private equity route?

Another potential connection is UBS. Swiss investment bank UBS previously owned the Argor-Heraeus refinery, and only exited its shareholding in 1999, so it’s also possible that a UBS connection could pop up in a Argor-Heraeus acquisition deal. This has a precedent since when Valcambi was acquired by Rajesh Exports in 2015, Credit Suisse, which itself used to own Valcambi (and which Valcambi executives had close ties to), provided strategic corporate finance advice on the Valcambi acquisition and also actually partially funded the Rajesh acquisition.

Whatever the outcome of these developments with Argor-Heraeus, further details should emerge sooner rather than later. So, as they say, watch this space.