Several gold bullion processors cease production

December 01, 2011 | 08:57
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Even though the government’s new decree on the management of gold trading has yet to take effect, some gold bullion producers have temporarily halted their processing work.

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>> State Bank makes bold gold move

The CEO of a major gold trader in Ho Chi Minh City told VnExpress that the State Bank of Vietnam used to allocate quotas for businesses to import gold material for processing bullion.

“But over the last few months only the Saigon Jewelry Co was allocated quotas,” she was quoted by the newswire as saying.

She added that the company had received documents from the central bank ordering it to stop producing gold bullion and await new regulations.

“We have put a halt to all gold bullion processing.”

A representative of Sacombank-SBJ said the company received a similar directive to cease production from the central bank.

He said Sacombank-SBJ has in fact been unable to produce gold bars under its brand name all year, since it was not allocated a quota on gold imports.

“We only acted as an outsourcing gold bullion processor for other banks,” he said.

Nguyen Thanh Truc, CEO of Agribank Jewelry Co, said his unit has also stopped making gold bullion and is waiting for new quota figures from the central bank.

According to a draft decree issued by the State Bank of Vietnam last month, only businesses with a minimum registered capital of VND500 billion ($24.3 million) and holding at least 25 per cent of the gold bullion producing market share in the last three years are licensed to produce gold bullion.

With such high requirements in place, Saigon Jewelry Co, the country’s largest gold trader, will be the only business eligible for processing gold bullion.

Last week, the central bank also announced that SJC gold will become a national asset and the company will come under direct management of the central bank.

Consequently, gold bullion of other brand names will still be eligible for circulation, but the processors have to stop making new bars.

Cao Thi Ngoc Dung, CEO of Phu Nhuan Jewelry Co (PNJ), said the suspended processing would not heavily damage her company.

Dung said that since PNJ’s machinery and equipment for processing gold bullion have been operating for a long time, they have nearly reached the complete depreciation.

“Moreover, the machinery is used not only to make gold bullion but also to process gold jewelries,” she said.

“So even when we are no longer allowed to produce gold bullion, financial damage will be minimal.”

However, the damage can be quite heavy for businesses that are relatively new to the gold bullion production sector, such as SBJ and ACB.

An executive of Sacombank-SBJ said the company has invested around VND30 billion on establishing gold bullion processing facilities.

“This investment will severely damage us financially if we have to stop making gold bars,” he said.

In an attempt to avoid similar damage, many gold bullion processors have called on the central bank to allow them to make use of their machinery to outsource gold bullion for SJC.

The CEOs of PNJ and SBJ, however, expressed their concerns that such proposal was not feasible, since it would be difficult for the central bank to closely monitor the SJC gold bullion outsourcing.

For example, the central bank may find it hard to verify whether the outsourcing companies will produce more bullion to sell in the black market, they said.

Thus, SBJ’s CEO suggested that the central bank buy the processors’ machinery to make gold bullion bars on its own.

“This will facilitate the central bank’s management on the quality and quantity of gold bullion while helping businesses reduce their damages,” he concluded.

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