Issue 101
Rand Refinery: 100 Years of Reshaping Value
It was in 1920 that Rand Refinery was officially registered (refining operations only commenced late in 1921) with start-up capital of £50,000 and shares split between the gold-mining companies that were members of the Chamber of Mines (now the Minerals Council of South Africa). Like the present times, it was a tumultuous historical period – people were still piecing together their lives following the devastation left behind by the Spanish flu, World War I had just ended and a recession was on the horizon.
The economy then had no choice but to look to the future with optimism.
The discordant notes at the turn of the decade were soon replaced by the Roaring Twenties, which saw rapid industrial and economic growth, accelerated consumer demand, and the introduction of significant new trends in fashion, lifestyle and culture.
London
The relatively free market conditions of the 1920s gave support to South African gold producers, which finally began exercising their influence. One of their biggest grievances was that they were not getting the best price or the lowest handling charges for gold produced on the Witwatersrand. Gold producers on the southern-most tip of the continent incurred significant refining charges as a result of the entire South African gold output having to be transported and processed in London.
In the decade before Rand Refinery was actually conceptualised, South African mines spent some £500,000 (the equivalent of more than £51 million today) to ship gold to London. These exorbitant costs gave voice to calls for the establishment of a gold refinery in South Africa. As expected, the fear of losing its place as the principal market for global supply of gold forced the Bank of England to table many options, such as building a new refinery in London to refine all South African gold for free.
Unbeknown to all, Rand Refinery became one of the early proponents of disruption. The persistence of the Chamber of Mines paid rich dividends when Rand Refinery rose up from the ground 16 months after construction started on 20 August. Built on a stand in Elandsfontein (later Germiston) Junction, South Africa’s largest railroad junction, it linked the refinery not only with the mines – including, later, gold from mines in the then-British colonies of Rhodesia (Zimbabwe) and Tanganyika (Tanzania) – but also with the large ports in Durban and Cape Town.
SOUTH AFRICAN MINES SPENT SOME £500,000 (the equivalent of more than £51 million today) TO SHIP GOLD TO LONDON
The act of unseating London as the hub for refining South African gold and setting up a local refinery was in equal measure both bold and progressive.
On completion, the refinery had a capacity of 12 million troy ounces or 373 tonnes. Over the next decade, this capacity fell short as the gold rush continued unabated.
The fortunes of the refinery grew with the growing volumes of gold discovered in the country’s gold belts stretching from Johannesburg to the Free State. South Africa’s gold production peaked in 1971, reaching nearly 1,000 tonnes of gold in a single year, equal to nearly 80% of world gold production.
Dwindling Gold Reserves
In the ensuing years, even as South Africa’s gold volumes thinned and new finds became scarce, Rand Refinery’s growth trajectory continued northwards. Today, it continues operation as an integrated, single-site precious metals smelting and refining complex. Rand Refinery is one of five LBMA accredited referees in the world.
Much of consequence happened during the late 1980s when the country’s gold volumes dropped to some 30% of the global output. The decline in South African gold production meant a decline in business for Rand Refinery. This change of setting however did not dent its zeal for value creation.
At the same time as South African gold output was declining, gold production across the rest of Africa began to increase. In response, Rand Refinery changed its business model from being a Southern African gold refinery to reflect its international ambitions. In addition to almost all of South Africa’s gold, gold for the refinery is now sourced from all parts of the continent and America.
THE REFINERY HAD A CAPACITY OF 12 MILLION TROY OUNCES OR 373 TONNES
Building for the Future
Since 1920, Rand Refinery’s technological pioneering spirit has enabled it to transform into a global presence with a wide range of products and services. In the decades that followed, it consistently and continuously expanded its product portfolio and technical know-how.
Our history and experience in dealing with complex and different types of mine doré deposits is critical in the sampling and assaying processes, as precise content reflection for the depositing customer is of paramount importance.
The refinery’s products include Good Delivery bars, kilobars, minted bars, coin blanks and value-added products, which are part of its signature offerings, as well as the world’s most widely held and actively traded gold bullion coin, the Krugerrand (with Prestige Bullion).
At the beginning of the last decade, Rand Refinery embarked on an extensive modernisation programme aimed at enhancing the company’s technologies, processes and equipment.
An amount of R1 billion was earmarked to automate and simplify the refinery complex’s processes and introduce new technologies.
The refinery has the capability to refine and provide the necessary assurance for refinery deposits from 25% Au and upwards.
Our smelter operations deal with complex low-grade materials ranging from 300g/t Au.
We provide a one-stop service offering to our shareholder mines so that they can optimise the value returned for both mine doré as well as low-grade mine waste products containing Au.
With value-added products from Rand Refinery used globally in jewellery fabrication and industrial applications, the consumers of these products are ensured that this gold is responsibly sourced – in some instances, provenance data is supplied to select customers.
Today, Rand Refinery is much more than what its history suggests. It is ideally positioned to not only extract value from the resources but also play an active role in shaping sustainable and responsible mining conversations of the future.
RESPONSIBLE SOURCING IS GAINING TRACTION AND INCREASINGLY CONSUMERS ARE ASKING THE DIFFICULT QUESTIONS ABOUT ORIGIN AND IMPACT
Responsible Sourcing
Throughout our history, we have contributed to the development of responsible gold supply chains on the continent with the aim of being a strong partner to our customers and ensuring countries derive the direct benefits of their resources. However, the role of LBMA accredited refineries is truly underappreciated in this regard.
The metal that is one of the biggest foreign currency earners for most major economies on the continent is also one of the ugliest market forces in the world. Conflict gold has become a byword for human rights violation, child labour, slavery and poor practices that often lead to environmental degradation.
Responsible sourcing is gaining traction and, increasingly, consumers are asking the difficult questions about origin and impact.Our sourcing processes are a key strategic differentiator as we deal with credible mines, uphold our legacy of dealing with only shareholder mines and provide value in best-in-class out-turn (from doré received to settled payments).
We have a detailed understanding of the mines that make up most of our supply. Most of the local mines are visited on a frequent basis by sourcing specialists, whilst mines in Africa are directly visited by Rand Refinery or by approved outsourced partners.
Our certified gold and silver chain-of-custody is independently audited to meet the requirements set by relevant industry bodies. All companies that deal with Rand Refinery need to go through strict vetting processes known as KYC (Know Your Customer) and KYP (Know Your Product). This ensures that everyone adheres to the responsible gold guidance principles that Rand Refinery subscribes to and maintains.
As an LBMA Good Delivery List refiner, we only accept gold that meets LBMA’s Responsible Sourcing standards at multiple levels and within our own stringent requirements. The Good Delivery Lists contain refineries whose gold and silver bars meet the required standard for acceptability in the London bullion market. No other refinery in Africa is registered to produce LBMA Good Delivery products.
Moreover, our sourcing from shareholder mines and non-shareholder mines is aligned to the OECD Due Diligence Guidance for Responsible Sourcing and to LBMA’s Responsible Gold Guidance for Good Delivery refiners. We also publicly identify our sources, and every depositor, whether a shareholder or not, has to pass a rigorous onboarding process and due diligence, which includes a physical visit to the mine to confirm production and practices.
In 2017, Rand Refinery became a signatory to the Global Precious Metals Code, which sets out the standards and best practices expected from market participants in the global over-the-counter (OTC) wholesale precious metals market. Rand Refinery produces products that are tradeable on the OTC market.
Conclusion
The centenary is a remarkable milestone for Rand Refinery. Our survival through World War II, the Great Depression and the many financial downturns that fortuitously followed speaks of our resilience, our commitment to doing business with integrity and our customer centricity.
We seem to have come a full circle, sandwiched between two global pandemics. Covid-19 has turned the clock back, disrupting every sense of normalcy, but our experience is strengthening our fight and, with people on our side, we will emerge stronger.
If our success during our first century was led by the gold rush, our second century is being well led by our focus on people, partners and the planet.
Praveen Baijnath is a Chemical Engineer with more than 30 years’ experience in minerals beneficiation, smelting and refining, and the chemical process industry. He attended University of Cape Town’s Graduate School of Business Program (PMD) in 1995 and in 2000 attained an MBA with distinction from the University of Wales.
He was appointed as Chief Executive of Rand Refinery on 1 June 2015. He is also an Executive Director on the Rand Refinery Board. His other board directorships include Prestige Bullion and the Ekurhuleni Jewellery Project.
He was previously (2009-2015) Group CEO of JSE listed Delta EMD and remains on the Board of Delta EMD Limited as independent, non-executive director. He also served as CEO of Gold Reef Speciality Chemicals. His previous roles spanning a period of 20 years was with Huntsman Corporation in process and chemical engineering, plant management and executive management roles in Operations, EHS, Technical and Strategic Development.
He is a member of the South African Institute of Directors, South African Institute of Chemical Engineers and an Associate of The Institution of Chemical Engineer (IChemE).