September/October 1989
The recent conference of the International Precious Metals Institute was filled with information on precious metals--including the state of the markets.
By Robert J. Garino
Robert J. Garino is director of commodities for the Institute of Scrap Recycling Industries, Washington, D.C.
New technologies used by today's precious metal refiners for recovery, sampling, production, and refining, as well as current and projected markets for gold and platinum, were covered by top industry speakers representing North America, Europe, Australia, and Asia at this year's International Precious Metals Institute (IPMI) Conference. More than 450 attended the June event in Montreal, Quebec. Despite sagging precious metals values quoted in both London and New York through most of 1988, the mood among the delegates was upbeat.
Although most speakers focused on the technical aspects of precious metal refining and recovery, other special interest sessions were offered. For example, along with talks highlighting the commercial and financial side of gold, silver, and the platinum group, several presentations zeroed in on the scrap industry. In addition, IPMI's Environmental and Regulatory Affairs Committee reviewed the Environmental Protection Agency's position in classifying secondary precious metal refining as a type of waste management.
Gold's Financial Potential
The session on commerce and finance was opened by David A. Gulley, World Gold Council, London, who spoke on gold's potential as a financial product in the current investment climate. Gulley said total world gold offtake has been generally stable over recent years with the exception of 1986, which he attributed to the "unusual demand" caused by the Hirohito commemorative coin. Gulley believes that, overall, a favorable climate is building in the U.S. for gold as a growing investment medium. However, Gulley listed several negative factors at work against gold at present, including a low level of inflation expectations, high interest rates, a strong U.S. dollar, and (recent events in China notwithstanding) a "high level of geopolitical optimism."
On the plus side for gold, Gulley believes that the high volumes of Personal savings accumulating in the U.S., coupled with a worsening domestic debt situation--as well as debt problems in less developed countries--may stimulate higher demand for gold holdings by individuals. Gulley reviewed the investment climate for gold in Europe in light of changes that will be occurring between now and 1992. He cited both the United Kingdom and West Germany as countries where the potential for higher investment offtake is greatest.
Platinum Demand Outpacing Supply
World platinum supply/demand fundamentals were highlighted by Neil Carson, Johnson Matthey, Valley Forge, Pennsylvania. To emphasize platinum's relative "smallness," Carson observed that the gold industry added some 1,500 metric tons (mt) of new supply last year, of which 200 mt were directed to coinage. In comparison, 100 mt of new platinum supply came into the market in 1988, according to Carson--making the platinum market 1/15 the size of the gold market.
Carson reviewed the world platinum market in 1988-a year that set "all-time supply/demand records," he noted. He also viewed the near-term outlook for platinum very favorably, with demand' expected to exceed the 3.66 million troy ounces (mto) consumed last year. In fact, according to Carson, demand has outpaced supply for four consecutive years-the largest deficit being last year (Carson projected the 1988 supply shortfall at 0.47 mto). He believes new supply will continue to fall short of projected demand, thus ensuring a platinum supply deficit "for years to come." Platinum prices should not fall much below $500 per troy ounce, he believes, but will probably continue to be "fairly volatile," he concluded.
Gold Bullion Financing
Following a presentation by Peter Payne, Bank of Nova Scotia, Toronto, Ontario, on the practice of lending gold bullion to industrial users of gold, Jeffrey Christian, CPM Group, New York City, focused on lending bullion to finance future mine production. Several in attendance took sharp exception to Christian's premise that this form of mine financing does not ultimately put pressure on forward gold prices as the loans mature and become due. Christian countered by expanding on what he termed a misconception that gold loans were a "bearish now, bullish later" proposition. He also believes that the reason gold is weak currently is because the investment community in America, Europe, and Asia does not favor gold as an investment medium. As for the future effects of gold loans, Christian stated that such financing schemes may only narrow the contango. At the same time, he believes these loans do not attract uncommitted, so-called sterile gold holdings into the marketplace.
IPMI Position on Waste Management
IPMI's Environmental and Regulatory Affairs Committee discussed EPA's classification of precious metals refining as a type of waste management. IPMI's basic position is that precious-metal-bearing intermediate products, such as ingots and sweeps, are the intended products of the secondary precious metal refining industry, so they fall outside the waste jurisdiction of EPA--and outside the scope of its waste management regulations. The committee believes all secondary material containing economically significant amounts of precious metals is not waste when it is sent to a precious-metal refiner for reclamation, as opposed to being discarded.
On Scrap
Interest in scrap and refining precious-metal-bearing materials was apparent judging by the number of topics that examined scrap and secondary refining. Included among these were managing waste water for profit, palladium recovery from scrapped automotive catalysts, sampling and sample preparations of precious metal scrap, and precious metals recovery from secondary sources.
Complimenting the commerce-, finance-, and scrap-related sessions were numerous technical presentations ranging from precious metals recovery from refractory ores and by-products to examinations of new or unique extraction processes. More than 45 presentations were delivered. •
The recent conference of the International Precious Metals Institute was filled with information on precious metals--including the state of the markets.