Struggling with dore imports, MMTC Pamp banks on domestic gold scrap

Firm sets up 10 scrap collection centres, recovers 3 tonnes of gold from scrap jewellery in FY17

Facing much difficulty in import of dore, the term for unrefined gold, India's only refinery with LBMA (London Bullion Market Association) accreditation, MMTC Pamp, has diverted its focus on domestic jewellery scrap collection, to meet its raw material needs.
 
A joint venture between government-owned MMTC and Switzerland-based Pamp SA, the world’s leading bullion refiner, it has set up 10 scrap collection centres across major cities. These have testing machines and other equipment needed for checking purity of gold content in used jewellery. With these, it has recovered three tonnes of gold through scrap jewellery so far this financial year (ending March 31).

 
This contrasts markedly with the tepid response to the central government’s Gold Monetisation Scheme (GMS), which has collected 6.4 tonnes of gold since launch in November 2015. The government has pushed thousands of bank branches to make GMS a success but this is the result till date, with even this much of collection being largely from temples. GMS has been unable to draw individual consumers.
 

In contrast, employing only a few dozen at its 10 collection locations, MMTC Pamp has got three tonnes in a year.
 
India’s scrap gold market is estimated at 100 tonne a year if defined as gold jewellery sold for money and 300 tonnes otherwise. Of which, 200 tonnes is converted into new jewellery; otherwise, old jewellery is converted back into bars. With dore import falling, scrap gold refining is emerging as a good business.

 
“There is a shortage of dore across the world, as credible miners normally prefer to deal with good delivery refiners (gold produced by these refineries is considered ethical and responsibly sourced, their products are accepted worldwide). Miners across the world are willing to take exposure in India; yet, even miners we deal with sell only small percentage of their dore to India. So, we have started collecting jewellery scrap from domestic sources, which we plan to ramp-up in future,” said Rajesh Khosla, managing director, MMTC Pamp.
 
Their plan is to set up at least five new scrap collection centres every year, to reduce dependence on imported dore. “We have an estimated 25,000 tonnes of gold holding in Indian households. One per cent of that as scrap, which means 250 tonnes. Even if we target 10 per cent of this used jewellery as broken ornaments, we would be able to collect 25 tonnes a year. We are asking customers to give us broken ornaments of no use for them,” said Khosla.

 
MMTC Pamp is currently operating at half its installed capacity, given constraints in raw material supply.
 
Aiming to also recover gold from used jewellery, GMS has failed to enthuse consumers to sell precious ornaments for earning an annual interest of 2.75 per cent. “With your unused gold ornaments, you are earning interest and your asset remains safe. What better deal than this can you have? For making GMS successful, the government should ask banks to prioritise scrap collection for the sake of nation building and set a target for each bank,” said Khosla.