ABSA NewGold and 40 tons of phantom bling

So, while looking into all this Rand Refineries (RR) kak, I learned that ABSA at one time used to store the gold which it uses to back up its NewGold ETF with RR in Germiston. Then, in 2009 or thereabouts, the gold was moved to Brinks’ vault in London. RR said that they had “decided to walk away”, and ABSA said one thing and RR said another – but both parties made big noise to the effect that this had nothing whatsoever to do with safety or any suspicions about whether the gold was at risk in Germiston.

At that point, the big question in my mind was: “So does that mean that any South African investor who decides to cash in his ETF’s for physical gold has gold flown to him from London?”. But, of course, ABSA could claim that no one was redeeming their chips, or that if they were, they were asking to be paid in cash instead of bullion.

Then I looked into Brinks’ history. Check this shit out and tell me if you, as ABSA bank, would store gold with these people:

http://en.wikipedia.org/wiki/Brink%27s

Not a chance, right? But then you and I aren’t earning what Maria Ramos is, and so our brains must function differently, and we must be some kind of genetic throwback that just doesn’t understand this new species and what it does and why.

So that’s all kind of fishy to begin with.

Now I learn that the Brinks vault is practically empty, and is haemorrhaging shiny stuff. To whit:

“Brinks is now being depleted.   They have gone from 447,199 on July 3rd to 134,525 on July 9th which is a drop of 312,674 oz.”

 So I put four and seven together and checked out what ABSA NewGold claims to hold: 1,364,150 oz. as of June 30. 

Now, hang on a minute here, because NewGold also stores gold at Barclays. So maybe the extra 1,2 million ounces is at the Barclays vault, right? In this respect, Ernst and Young’s “Annual Financial Statement” prepared for NewGold could prove instructive: ABSA NewGold spent R1,8m in 2012 and R2m in 2013 in custodian fees at Brinks. At Barclays? R1,743 in 2012 and R0.00 in 2013. So either Barclays (a bank which is one of four who are apparently on the verge of collapse when business closes every single nightdoesn’t charge ABSA for storing about 40 tons of bling, or the deal is off the books. VERY off the books.

 Here’s an alternative hypothesis: all of that gold (presumably covering mostly South African investors) just ain’t there.

I’m sure homo sapiens pecuniensis, with its greater understanding of these things, has a way of explaining all this to stupid okes like me. Because, when NewGold claims that your investment “…is fully covered by holdings of gold bullion with the NewGold Custodian, Brinks Limited,” in light of the above, I find this very hard to believe.

Update:

Further perusal of the Terms and Conditions of the ABSA NewGold ETF shows how well the ETF has covered its rear:

ABSA NewGold shall “ensure that no more than two London Good Delivery bars are at any time… deposited with the Custodian.” So it’s all above board, then. Unless “Quantity of Gold Held” doesn’t actually mean “Quantity of Gold Held”. Good delivery gold bars contain between 350 and 430 ounces. Street value for two 430 ounce bars is about R1m. Anyone who is paying R2m to store something worth R1m is a tool. In 2010, NewGold claimed that Brinks was charging it 0,1% on amounts above 800,000 oz. That would put their current tab at roughly R1,2m. As opposed to R2m. Also, any redemption of bullion is done “voetstoots” (sic). So FU if your AU ain’t A-OK.

Erratum/facepalm:

This is what happens when you rush: it turns out that NewGold is only claiming to hold no more than two bars in an UNALLOCATED account. The rest of the gold which isn’t there is supposedly in an allocated account.

Advertisements

Lewer kommentaar

Verskaf jou besonderhede hieronder of klik op 'n logo om in te teken:

WordPress.com Logo

Jy lewer kommentaar met jou rekening by WordPress.com. Log Out / Verander )

Twitter picture

Jy lewer kommentaar met jou rekening by Twitter. Log Out / Verander )

Facebook photo

Jy lewer kommentaar met jou rekening by Facebook. Log Out / Verander )

Google+ photo

Jy lewer kommentaar met jou rekening by Google+. Log Out / Verander )

Connecting to %s