Precious Metal Executives Meet

Precious Metal Executives Meet

Highlighting the agenda of IPMI’s recent conference and exhibition were discussions of the impact of environmental regulations and laws and talks about precious metal investment markets.

John C. Bullock, of Handy & Harman, Waterbury, Connecticut, moderated the conference's environmental session, which was attended by a large, lively group. Bullock, who is also chairman of IPMI's environmental and regulatory affairs committee, called for industry involvement during the environmental decision-making process, rather than reaction to decisions already made. Two opportunities for such involvement are now available with the unpending reauthorization of the Resource Conservation and Recovery Act (RCRA) and proposed legislation that could negatively affect exports of precious metal-containing material, he pointed out.

Bullock's presentation, entitled “Environmental Decision-Making: Closing the Plant Door,” reviewed the events that led to the 1989 closing of Handy & Harman's secondary precious metal refinery, located in a predominantly residential section of El Monte, California. Built in 1059, the facility was designed to process a wide variety of precious metal-bearing materials including photographic scrap, cyanide solutions and sludges, and buffing and grading materials, as well as electronic materials such as printed circuit boards. The plant did not fully recover precious metals but, like other intermediate precious metal refineries, it conducted pyrometallurgical and mechanical processing steps, allowing it to ship homogeneous products to smelters for further refining. As Bullock emphasized, the California plant was in complete compliance with applicable regulations and employed state-of-the-art air pollution controls. Furthermore, according to Bullock, the facility was not obsolete, had no labor problems, did not lack business, and was profitable to boot.

However, as Bullock explained, the company decided to close the refinery because of "a clearly perceived trend of increasingly stringent environmental policies and regulations." The rapid evolution of environmental laws--especially those that focused on air quality--made the El Monte facility a likely target for future litigation, he said. With the passage of the state's "Proposition 65," The Safe Drinking Water and Toxic Enforcement Act of 1986, company officials believed that the facility might not be capable of complete compliance in either the letter or spirit of the new regulations, and thus decided to shut down the plant. It was the perception of future trends, Bullock observed, that initiated the move; Proposition 65 was only the catalyst.

“The consequence of not making a decision was too great,” he concluded.

Proposition 65: Industry Overreacting?

Peter A. Baldridge, of California's Health and Welfare Agency, presented a closer look at Proposition 65. Although this legislation has received enormous national attention, noted Baldridge ("It's part of the California mystique"), there have been only a few enforcement actions since its passage in November 1986. He firmly believes that industry has "overreacted" to the law's two key provisions, which focus on chemical discharges and warning requirements. In fact, according to Baldridge, had Handy & Harman provided a public warning that the El Monte facility emitted chemicals known to cause cancer or reproductive toxicity, there would have been "no liability under Proposition 65." Nevertheless, he speculated, while proposition 65 was not reason enough to close the facility, given its residential location, the plant was already a "target."

Are more laws similar to Proposition 65 to be expected? Both Baldridge and another speaker, Anil K. Mehta, of PPG Industries Inc., Santa Fe Springs, California, noted that the trend likely is toward more stringent regulations, with states such as California pulling others in their wake.

Accepting Environmental Risks

While California's environmental laws are more restrictive dm those found elsewhere, according to Mehta, it is possible to survive in such a regulatory climate. " PPG Industries, he said, chose to remain in California by addressing, head on, environmental compliance issues. The key to survival, he explained, may be found by first acknowledging the fact that environmental issues are part of doing business, adding that "self discipline" must be developed in conjunction with advanced leadership that embraces

an understanding of the environmental climate,

recognition that "compliance" is not a single program,

early involvement in pending legislation and regulations, and

business plans that call for strategic analysis and forecasting.

Mehta further explained that companies can successfully remain in business, despite onerous environmental regulations, by adhering to basic compliance-related programs that included aggressive waste minimization, liability reduction programs, increased plant and worker safety programs, effective communications, and information sharing.

Other presenters of environmental and legislative topics included H.C. Goodrich, of Pilko & Associates, Inc., Woodland Hills, California, who focused on the benefits and use of an independent environmental consultant; Stephen T. Holzer, of Parker, Milliken, Clark, O'Hara & Samuelian, Los Angeles, who reviewed what he called "the increasing tendency to criminalize perceived environmental transgressions"; and Walter D. Ramsay, a consultant from Arlington, Virginia, who guided listeners through the convoluted legislative process--from the time bills are introduced to the steps involved before final passage and ultimate enforcement. Ramsay noted that because of the time and effort directed toward this year's passage of the Clean Air Act, RCRA would not be an issue until Congress convenes in January 1991. He also did not expect any action to be taken on the Basel Convention on the Transboundary Shipment of Hazardous Waste.

Precious Metal Investment Opportunities

Precious metals as investment vehicles also received much attention at the IPMI conference. Carl P. Denney Jr., U.S. marketing manager for Johnson Matthey North America, discussed platinum demand in the context of what he termed "the four pillars: autocatalyst, industrial usage, jewelry, and investment demand." Following a review of market trends over the past eight years, Denney cited several factors that have caused investors to shy away from precious metals through most of last year and this year. These include, he said, strong equity markets, relatively low inflation, general absence of major global unrest, and, as a result of the above, relatively stable prices and therefore, dull, unexciting conditions m the marketplace.

Nevertheless, Denney believes, platinum investment is a well-established market segment, is cyclical in nature, and is not unlike other investment vehicles.

Denney concluded his presentation by predicting an additional 1 million ounces of potential platinum demand in 1995. However, he warned, growth in demand "does not come easily, and there is no free lunch." Substantial future growth, he said, will have to come from the jewelry and investment sectors, adding that "everyone concerned with these sectors must take action now to ensure a continued healthy picture in five years."

Perspective on Investment Markets

Richard Lawson, of the Rhode Island Hospital Trust, Providence, Rhode Island, traced the development of precious metal investment markets from the mid-1970s to the present. In 1975, he recounted, when it finally became legal for individuals to own gold in forms other than in rate coins, there were limited products available to investors-other than small bars. There were no legal tender gold coins until the introduction of the South African Krugerrand in 1978 Oater banned in 1985), which, according to Lawson, changed investor attitude and shifted demand away from bullion bars. Today, he said, although there are too many investment vehicles to choose from, legal tender coins dominate the marketplace.

During a question-and-answer period, Lawson stated that gold coins can usually be purchased at a 4- to 5-percent premium over published gold prices; silver at $1.50 per ounce over the silver price; and platinum coins at around 5 to 6 percent more than published platinum quotations.

Another investment vehicle, gold stocks (shares of gold mining companies), were examined by Paul Sarnoff, of Metals Consultancy, Baldwin, New York. Sarnoff observed that gold stocks have been better investments than bullion, with gold share values increasing as gold increased, but not dropping as much as bullion prices in falling markets. Sarnoff examined the criteria for gold stock selection and offered pointers-including specific research services-of what, to look for before taking market risks. South African gold stocks pay the best dividends, he believes. • 

Note: Copies of the proceedings of IPMI’s 14th conference and exhibition are available by contacting IPMI, 4905 Tilghman St., Suite 160, Allentown, PA 18104. The cost is $45 plus $4 postage and handling for single copies to nonmembers.

Precious Metal Executives Meet

Highlighting the agenda of IPMI’s recent conference and exhibition were discussions of the impact of environmental regulations and laws and talks about precious metal investment markets.

John C. Bullock, of Handy & Harman, Waterbury, Connecticut, moderated the conference's environmental session, which was attended by a large, lively group. Bullock, who is also chairman of IPMI's environmental and regulatory affairs committee, called for industry involvement during the environmental decision-making process, rather than reaction to decisions already made. Two opportunities for such involvement are now available with the unpending reauthorization of the Resource Conservation and Recovery Act (RCRA) and proposed legislation that could negatively affect exports of precious metal-containing material, he pointed out.

Bullock's presentation, entitled “Environmental Decision-Making: Closing the Plant Door,” reviewed the events that led to the 1989 closing of Handy & Harman's secondary precious metal refinery, located in a predominantly residential section of El Monte, California. Built in 1059, the facility was designed to process a wide variety of precious metal-bearing materials including photographic scrap, cyanide solutions and sludges, and buffing and grading materials, as well as electronic materials such as printed circuit boards. The plant did not fully recover precious metals but, like other intermediate precious metal refineries, it conducted pyrometallurgical and mechanical processing steps, allowing it to ship homogeneous products to smelters for further refining. As Bullock emphasized, the California plant was in complete compliance with applicable regulations and employed state-of-the-art air pollution controls. Furthermore, according to Bullock, the facility was not obsolete, had no labor problems, did not lack business, and was profitable to boot.

However, as Bullock explained, the company decided to close the refinery because of "a clearly perceived trend of increasingly stringent environmental policies and regulations." The rapid evolution of environmental laws--especially those that focused on air quality--made the El Monte facility a likely target for future litigation, he said. With the passage of the state's "Proposition 65," The Safe Drinking Water and Toxic Enforcement Act of 1986, company officials believed that the facility might not be capable of complete compliance in either the letter or spirit of the new regulations, and thus decided to shut down the plant. It was the perception of future trends, Bullock observed, that initiated the move; Proposition 65 was only the catalyst.

“The consequence of not making a decision was too great,” he concluded.

Proposition 65: Industry Overreacting?

Peter A. Baldridge, of California's Health and Welfare Agency, presented a closer look at Proposition 65. Although this legislation has received enormous national attention, noted Baldridge ("It's part of the California mystique"), there have been only a few enforcement actions since its passage in November 1986. He firmly believes that industry has "overreacted" to the law's two key provisions, which focus on chemical discharges and warning requirements. In fact, according to Baldridge, had Handy & Harman provided a public warning that the El Monte facility emitted chemicals known to cause cancer or reproductive toxicity, there would have been "no liability under Proposition 65." Nevertheless, he speculated, while proposition 65 was not reason enough to close the facility, given its residential location, the plant was already a "target."

Are more laws similar to Proposition 65 to be expected? Both Baldridge and another speaker, Anil K. Mehta, of PPG Industries Inc., Santa Fe Springs, California, noted that the trend likely is toward more stringent regulations, with states such as California pulling others in their wake.

Accepting Environmental Risks

While California's environmental laws are more restrictive dm those found elsewhere, according to Mehta, it is possible to survive in such a regulatory climate. " PPG Industries, he said, chose to remain in California by addressing, head on, environmental compliance issues. The key to survival, he explained, may be found by first acknowledging the fact that environmental issues are part of doing business, adding that "self discipline" must be developed in conjunction with advanced leadership that embraces

an understanding of the environmental climate,

recognition that "compliance" is not a single program,

early involvement in pending legislation and regulations, and

business plans that call for strategic analysis and forecasting.

Mehta further explained that companies can successfully remain in business, despite onerous environmental regulations, by adhering to basic compliance-related programs that included aggressive waste minimization, liability reduction programs, increased plant and worker safety programs, effective communications, and information sharing.

Other presenters of environmental and legislative topics included H.C. Goodrich, of Pilko & Associates, Inc., Woodland Hills, California, who focused on the benefits and use of an independent environmental consultant; Stephen T. Holzer, of Parker, Milliken, Clark, O'Hara & Samuelian, Los Angeles, who reviewed what he called "the increasing tendency to criminalize perceived environmental transgressions"; and Walter D. Ramsay, a consultant from Arlington, Virginia, who guided listeners through the convoluted legislative process--from the time bills are introduced to the steps involved before final passage and ultimate enforcement. Ramsay noted that because of the time and effort directed toward this year's passage of the Clean Air Act, RCRA would not be an issue until Congress convenes in January 1991. He also did not expect any action to be taken on the Basel Convention on the Transboundary Shipment of Hazardous Waste.

Precious Metal Investment Opportunities

Precious metals as investment vehicles also received much attention at the IPMI conference. Carl P. Denney Jr., U.S. marketing manager for Johnson Matthey North America, discussed platinum demand in the context of what he termed "the four pillars: autocatalyst, industrial usage, jewelry, and investment demand." Following a review of market trends over the past eight years, Denney cited several factors that have caused investors to shy away from precious metals through most of last year and this year. These include, he said, strong equity markets, relatively low inflation, general absence of major global unrest, and, as a result of the above, relatively stable prices and therefore, dull, unexciting conditions m the marketplace.

Nevertheless, Denney believes, platinum investment is a well-established market segment, is cyclical in nature, and is not unlike other investment vehicles.

Denney concluded his presentation by predicting an additional 1 million ounces of potential platinum demand in 1995. However, he warned, growth in demand "does not come easily, and there is no free lunch." Substantial future growth, he said, will have to come from the jewelry and investment sectors, adding that "everyone concerned with these sectors must take action now to ensure a continued healthy picture in five years."

Perspective on Investment Markets

Richard Lawson, of the Rhode Island Hospital Trust, Providence, Rhode Island, traced the development of precious metal investment markets from the mid-1970s to the present. In 1975, he recounted, when it finally became legal for individuals to own gold in forms other than in rate coins, there were limited products available to investors-other than small bars. There were no legal tender gold coins until the introduction of the South African Krugerrand in 1978 Oater banned in 1985), which, according to Lawson, changed investor attitude and shifted demand away from bullion bars. Today, he said, although there are too many investment vehicles to choose from, legal tender coins dominate the marketplace.

During a question-and-answer period, Lawson stated that gold coins can usually be purchased at a 4- to 5-percent premium over published gold prices; silver at $1.50 per ounce over the silver price; and platinum coins at around 5 to 6 percent more than published platinum quotations.

Another investment vehicle, gold stocks (shares of gold mining companies), were examined by Paul Sarnoff, of Metals Consultancy, Baldwin, New York. Sarnoff observed that gold stocks have been better investments than bullion, with gold share values increasing as gold increased, but not dropping as much as bullion prices in falling markets. Sarnoff examined the criteria for gold stock selection and offered pointers-including specific research services-of what, to look for before taking market risks. South African gold stocks pay the best dividends, he believes. • 

Note: Copies of the proceedings of IPMI’s 14th conference and exhibition are available by contacting IPMI, 4905 Tilghman St., Suite 160, Allentown, PA 18104. The cost is $45 plus $4 postage and handling for single copies to nonmembers.