New refinery sees gold rush from S-E Asia

SINGAPORE - More gold will flow into Singapore next year following the establishment of a new gold refinery here.

Gold scrap that had been shipped from South-east Asia to other countries with refining capabilities will now instead come to Singapore, Metalor Technologies' country head Robert Gilles told The Business Times.

Last month, the Swiss precious metals refiner announced that it was investing US$15 million to build a gold refinery and bullion product manufacturing plant here. This will see a doubling of its headcount of 25 at Metalor Singapore which currently focuses on sales and technical support in precious metal plating.

The new Singapore plant, which is expected to be completed by the second half of next year, will use mostly secondary scrap, or recycled gold, as input material for a start, before eventually balancing it with input from junior mines in South-east Asia, Mr Gilles said.

The secondary scrap will come from collectors in South-east Asia, who are now selling to refineries in Hong Kong, Australia and Switzerland.

"What is happening now is you have the scrap going out of the region and coming back in the form of good-delivery bars. Because it's expensive to transport high value materials, it makes sense to have a refinery taking up the scrap, creating fine gold and then transforming this fine gold into bars," said Mr Gilles.

The Singapore plant will produce investment-grade bars in various sizes, with a capacity of 150 tonnes of gold each year. Metalor currently has four refineries in Hong Kong, Switzerland, the United States and China, with a combined capacity of 1,000 tonnes a year.

Total gold demand - coming mainly from jewellery, investment and industrial needs - reached 4,600 tonnes last year, according to the World Gold Council. Of this, 37 per cent went towards investment products. Demand for gold investment products has been steadily increasing in the past few years, though jewellery remains the most popular use for the precious metal.

Metalor's plans come on the back of Singapore's ambitions to become Asia's gold trading hub.

Trade promotion agency International Enterprise Singapore has said it hopes to expand the country's share of the global gold trading market from the current 2 per cent to 10-15 per cent in the next five to 10 years.

This follows a government exemption of the 7 per cent Goods and Services Tax (GST) for investment-grade precious metals starting from October this year.

The GST exemption was critical for Metalor's decision, Mr Gilles said.

"Without GST exemption it would have been a no-go," he said. "High-grade refining is actually very cheap compared to the price of the gold. It's a fraction of a per cent of the value of gold. If you have to put up 7 per cent of this value, the financial load it puts on your profit and loss is such that there's no point in importing gold scrap."

Singapore is not alone in eyeing the golden pie. India and Indonesia are also aiming to boost refining capability by offering a discount on ore imports and imposing regulations and taxes on ore exports respectively.

Nonetheless, Metalor decided to set up its greenfield refinery here because of the stability that Singapore offers, as well as its customer base.

"Singapore is really the reference in this part of the world, in terms of stability and reputation," Mr Gilles. "Also, all the banks with ambitions in commodities trading are established here. It makes sense to be close to your customers in this market segment."

The large demand from its customers means that there is no time to lose - hence Metalor's eagerness to complete the plant next year even though the final location is yet to be fixed.

"This is a rushed project, because we have a lot of demand already," Mr Gilles said. "Our customers are waiting, so it's good, but we have to deliver."