Budget 2014: Edelweiss to foray into gold scrap refining; hopes cut in import …

July 5, 2014 Posted by admin

Edelweiss Commodities -a wholly-owned subsidiary of the listed financial services company -is setting up the refinery at Naroda, close to Ahmedabad, at an investment of around Rs 60 crore. The refinery will have an annual processing capacity of 60 tonnes of scrap, or around 7% of the average annual 880 tonnes of gold imported over the past three years.

Though margins for processing scrap or old jewellery at around 0.2% are low, the Edelweiss Group, with a turnover of Rs 2,500 crore in FY14, believes that its high-quality processing of the large volume of net scrap generated -average 100 tonnes of jewellery is swapped for cash each year -will enable the valued added business to gener ate decent returns.

Also, the company could rope in an international partner, on lines of the MMTC Pamp refinery, which would enable it to source dore, or raw gold, at a discount from overseas miners and help increase margins. Margins for refining dore gold are as much as 1.5-2% if an impor much as 1.5-2% if an importer has good relations with its overseas supplier, said Ketan Shroff, MD of Royal Refinery.

An Edelweiss spokesperson confirmed the development. “Our decision to get into this activity was hastened by the rupee devaluation a year ago… this offers added competitive advantage of manufacturing back home, where lower labour and process costs make refining here at three-fifths the cost of that abroad.”

The official added that the refinery would be used for melting gold and silver scrap, or old ornaments, and converting them into bars of higher purity to be sold locally to jewellers or bullion dealers. The country on an average generates net scrap gold -ornaments swapped for cash -of around 100 tonnes. This is processed by refineries across the country, said James Jose, founder-secretary of Association of Gold Refineries Mints, which comprises 15 refineries, including the largest -MMTC-Pamp, a joint venture of Pamp Switzerland and state-run MMTC, with installed capacity of 100 tonnes a year.

Gold consumption is expected to increase with the start of the festive season next month and on hopes that the government could cut import duty, currently 10%, during the Budget presentation on July 10. However, a few analysts said on condition of anonymity that they expect only a slight cut in duty, given that premium on gold had drastically fallen from a high of $190 an ounce last December to around $7-15 post May 21 when the government eased supply restrictions. The government then renewed licences of 19 premier trading houses to import gold following an improvement in the current account deficit.

Article source: http://economictimes.indiatimes.com/industry/banking/finance/edelweiss-to-foray-into-lucrative-gold-and-silver-scrap-refining/articleshow/37693612.cms

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