the lbma good delivery list a · pdf filethe lbma good delivery list a primer ... in the...

The LBMA Assaying & Refining Seminar7-8 March 2011 1

The LBMA Good Delivery List A Primer

Stewart MurrayChief ExecutiveThe London Bullion Market Association

LBMA Assaying and Refining Seminar 7th March, 2011

What London provides for Precious Metal Investment

• Allocated and Unallocated Accounts• A Benchmark Mechanism – the fixings• Competitive 24-hour trading• Liquidity providers (market makers)

• Good delivery system• Vaulting • Clearing system


Metal Accounts and Precious Metals Investment

• Unallocated Accounts

• Equivalent to a current account at a bank.Account maintenance fees are charged.

• Institutional Investors and Hedge Funds

• Allocated Accounts

• Segregated bars are held in the name of individual depositors.Storage fees are charged.

• Central Bank gold at Bank of England• Central Bank gold at Bank of England

• Exchange Traded Funds (ETFs)

London Vaulting

• Nine recognised Custodians(6 clearers, shippers & BoE)(6 clearers, shippers & BoE)

• Five vaults (JPM, HSBC, Brinks, Viamat, BoE) + JM in Royston (silver)

• Security• Experience (weighing,

inspection, storing, packing, shipping)shipping)

• Quality monitoring –Gatekeeper role


Bank of England

G ld k t l• Gold market role• Relationship to other central banks• Relationship to LBMA Members

What is the Good Delivery List?

• Gold and Silver (the LPPM has a similar system for Pt and Pd)• Large Bars: approximately 400 tr oz (gold) and 1,000 tr oz (silver)• Published by the LBMA since 1987 but origins go back to the ~1750• Originally what was acceptable to the Bank of England

later an arrangement between members of the London Gold and Silver Markets listing refiners whose bars were acceptable as GD (i.e. LGD)

• The List is now maintained by the LBMA using objective criteria for admission and continued listing

• It is used by many markets for defining deliverable brands• It is used by many markets for defining deliverable brands• To be acceptable as LGD, all bars delivered to London vaults must also

meet the LBMA’s technical specifications


The History of the London Good Delivery Gold List 1750-2010

Gold Good Delivery Refiners


Silver Good Delivery Refiners

Location of the refiners – then and now

• Steady move eastwards• From early 1980s Japan was• From early 1980s, Japan was

No. 1 in terms of numbers


Location of the refiners – then and now

• Steady move eastwards• From early 1980s Japan was 40

Gold Good Delivery Refiners By Region

• From early 1980s, Japan was always No. 1 in terms of numbers

• Decline in Europe, Australia & the Americas

• New Russian refiners post Soviet Union (1999-)

• Rapid growth in China since10

15

20

25

30

35

GDL Refiners

Africa

Americas

Asia

Europe

Oceania

• Rapid growth in China since 2000 0

5

1994 2000 2009

Recent Additions – 2010

• Heraeus Ltd Hong Kong (silver) 15-Sep-2010• Kazakhmys PLC – Balkhash, Kazakhstan (silver) 21-Jul-2010• Yunnan Chihong Zinc & Germanium Co, China (silver) 28-Jun-2010Yunnan Chihong Zinc & Germanium Co, China (silver) 28 Jun 2010• L'azurde Company For Jewelry, Saudi Arabia (gold) 1-Jun-2010• Atasay Kuyumculuk, Turkey (gold) 7-May-2010• Shandong Gold Mining Co., China (gold and silver) 14-Jan-2010


The “doc” Versions of the ListActive and Former Lists

Active List and Former List

• Active List means:

• Refinery is operating and is accredited

• Bars described are in current production

• Each refiner can have only one bar on the Active List

• Former List means that

• The bars and refiners listed are still acceptable (if produced before the date of transfer to the Former List), but

• The refinery may no longer be operatingy y g p g

• The refinery may no longer be accredited

• The bars listed may have been replaced by new ones, with different dimensions or marks, on the active list


The Electronic Version of the List

Used by London Vaults to look up bar dimensions and illustrations and information on refiners

Purpose of the Good Delivery List

• Settlement of a loco London contract is a Good Delivery Bar (the brand being at seller’s option)

• To provide fungibility for the loco London contract (in other words all bars are regarded as being equivalent)

• Level Playing Field(for refiners, fabricators and investors)

• Increasingly seen as the only globally accepted accreditation by exchanges and ETFsexchanges and ETFs


What are the features of a Good Delivery Bar?

• Cast in open mouldsp

• Dimensions

• Marks

• Good Physical Appearance

Good Delivery Bar Specifications

• Assay• 995-999.9 (gold)995 999.9 (gold)

999-999.9 (silver)

• Size: • ~400 ± troy oz (gold)

~1,000 troy oz (silver)• Range of LxWxH & undercut

• Marks (as per drawing)• Logo, number, year, assayg , , y , y• Clear and durable

• Physical Appearance• Flat surfaces, no holes or

cracks


Changes in the GD Rules

• January 2008 Edition (announced in July, 2007)• Recommendation that if possible silver bars should weigh between 950 and

1050 tr oz• Ban on closed mould casting• Recommended undercuts introduced: 7-15% on length and 15-30% on width• Pneumatic punching of marks allowed• Bottom stamping disallowed• Bar Numbers to have a maximum of10 digits• July 2009 Version• NGD bars to be marked as such• May 2009 Version• Changed bars must comply with recommendations on size and weight• Eventual phasing out of pre-2008 bars with weights below 750 and above

1,100 troy ounces

Good Delivery Accreditation

• Non-technical criteria must be satisfied before accepting an application for assessment

D il f O d Di• Details of Owners and Directors

• In business for 5 years

• Operating History – 3 years

• tangible net worth - £10 m (currently under review)

• Refined production level – 10 tonnes pa for gold (30 tpa for silver)

• Technical Assessment – two parts:

• Assaying test – 24 gold reference samples (10 for silver)

• Bar test - 11 bars inspected in London; 5 bars tested by two referees


Technical Assessment

• LBMA reference samples

• produced to LBMA specifications by 5 referees

• Controlled by the LBMA Executive

• May be provided to bona fide applicants for self testing

• Testing of samples and bars by Referees

• Double blind basis (the Referee is ignorant of the identity of the refiner and vice versa)

Appointment of the International Referees Panel

• Until 2003 only two referees (JM & Engelhard-CLAL) - both UK

• 2001-2003: Applications for expanded referees panel were evaluated

• Each applicant had to manufacture homogeneous reference samples (16x100 10g gold samples and 10x30 30g silver samples) and demonstrate accuracy and precision in assaying

• New panel appointed in December 2003:

• Japan Tanaka

• South Africa Rand Refinery

• Switzerland Argor HeraeusMetalorPAMP


Role of the Referees

• Manufacture of reference samples

• Testing of sample bars provided by GD applicants

• Assaying of dip samples provided during Proactive Monitoring

• Provision of advice to LBMA Executive on technical matters

• Acting as Advisory Committee for Assaying and Refining Seminar

Physical Defects

• Button-like defects• Cracks and fissures• Exuding voidsExuding voids • Flaky edges• Flattened nodules and ridges• Former marks • Surface pits or holes • Layering• Sharp ledges • Poor marks • Missing marks • Mould Marks• Nodules and Ridges• Rough Surfaces• Rough Surfaces • Sharp edges• Excessive Shrinkage • Shrinkage Cavity• Stacking problems• Voids• Wedge shape


Defects (fortunately not typical!)

Detecting Internal Defects using Ultrasound

• High frequency sound waves reflect off internal voids and foreign bodies

• Used for investigating suspect bars, eg with button-like defects


Proactive Monitoring

• Introduced in 2004

• Rolling three-year retesting of all refiners on the List

• Focus on refining and assaying ability

• Now a great success –adds credibility to the LBMA and the listed refiners

• No other institution does this (base or precious)

Good Delivery Usersthe International Dimension - Exchanges

The LBMA List is used in various ways by a number of exchanges to define their locally accepted brands including:

• Tocom

• Istanbul Gold Exchange

• Dubai Gold and Commodities Exchange

• Shanghai Futures Exchange

define their locally accepted brands, including:

• Indian Commodity Exchange Ltd.

• Multi Commodity Exchange of India Ltd.

• National Commodity & Derivatives Exchange Ltd, India

• National Spot Exchange, India• NYSE-Liffe

p g ,

• Singapore Mercantile Exchange


Good Delivery Accreditationthe International Dimension - Investment

Many investors have unallocated gold and silver accounts with London banks This metal is overwhelmingly held by the banks in the form of GDbanks. This metal is overwhelmingly held by the banks in the form of GD bars.

Many Exchange Traded Funds hold gold and silver as allocated metal in the London vaults or elsewhere. The great majority specify that their holdings are exclusively GD bars. The major ones include:

Gold Bullion SecuritiesSPDR Gold SharesiShares COMEX Gold Trust

Sprott Physical Gold TrustETFS Physical Swiss Gold SharesETFS Physical Silver SharesiShares COMEX Gold Trust

Julius Baer Physical Gold FundETFS Physical Silver SharesiShares Silver Trust

Good Delivery Usersthe International Dimension – the Official Sector

The Bank of England acts as gold custodian for about 100 customers, including central banks and international financial institutions, LBMA members and the UK government.


Good Delivery Usersthe International Dimension - Investment

• Many investors have unallocated gold and silver accounts with London banks. This metal is overwhelmingly held by the banks in the form of GD bars.

• Many Exchange Traded Funds hold gold and silver as allocated metal in the London vaults or elsewhere. The great majority specify that their holdings are exclusively GD bars. These include:

Supporting the GD List

• Maintenance of the list is the LBMA’s single largest expense• The LBMA is asking exchanges and funds which use the List to support

the work financially• The LBMA will provide enhanced information about the List to the

Exchanges and funds which refer to it


Reference Materials

• Programme initiated following discussion at the 2007 Assaying and Refining Seminar

• Gold and Silver: used for validating calibration of instruments

• 1 set consists of two materials with differing levels of ~ 20 trace elements

• Manufactured by Tanaka (gold) and Krastsvetmet (silver)

• Collaborative analysis involving 10 GD laboratories to determine f lreference values

• Project completed in 2009/2010

Proficiency Testing for Fire Assaying of Gold

• Based on assay testing of a 2.5 g sample in the fineness range 995-996 or possibly wider

• Open only to GDL refiners, but not obligatoryp y g y• Minimum participation will be required• Anonymity guaranteed but participants will be listed in an appendix• Once a year• Estimated cost £125 per year (not including the cost of the metal)

the lbma good delivery list a · pdf filethe lbma good delivery list a primer ... in the...

Documents