Theft possible in mystery of Mint's missing gold
Peter Koven, Financial Post
Published: Monday, June 29, 2009
At the Royal Canadian Mint, the big question remains unanswered: What the heck happened to our gold? After a thorough independent investigation, it still has no concrete answers and says a theft is possible.
For the past few months, the Mint has tried to get to the bottom of an unprecedented scandal in which some gold it was supposed to have in its inventory for the 2008 fiscal year has seemingly disappeared. Monday, it revealed that $15.3-million of precious metals is unaccounted for at its Ottawa facility.
Christine Aquino, director of communications for the Mint, said it is looking into "all" possibilities at this time, including the chance that someone pulled off an Ocean's 11-esque heist from a facility that ranks as one of the most secure in the country. It has even asked the Royal Canadian Mounted Police to do its own investigation.
"We're not going to discount anything," she said.
The one thing the Mint is confident of is that the problem is not accounting. Monday, it released a 54-page independent report by Deloitte & Touche LLP that determined there were no counting mistakes that could explain the $15.3-million discrepancy in inventory. Deloitte went to great lengths to make sure no accounting errors were made *- it even checked out the precious metals content in the Mint's chlorination slag (a byproduct of the refining process).
Deloitte said that 17,500 troy ounces of gold, or 0.32% of the Mint's stock, is unaccounted for. At today's spot gold price of US$940.70 an ounce, that is worth nearly $16.5-million (the Mint's $15.3-million figure reflects prices at the end of last year).
While an outright theft of the Mint is not out of the question, experts said Monday that it is unlikely.
"Clearly the least likely scenario is that some guy in a trenchcoat walks out with a 400-ounce, 12.5-kilo bar and goes undetected day after day," said Jon Nadler, senior analyst with Montreal-based bullion dealer Kitco, which stores some gold at the Mint.
"That's the Italian Job scenario. I don't see that. We've been there [to the Mint], we've seen how fortress-like the place is."
The Mint has told its clients that all their gold is safe, and Mr. Nadler said he is not losing sleep over the facility's security procedures.
To figure out where the gold went, Deloitte suggested that the Mint undergo technical reviews, security reviews and prior-period accounting studies. The Mint plans to follow those recommendations.
But getting to the bottom of what happened may not be an easy task. Ms. Aquino said that reviewing the Mint's accounting from prior years is very difficult because of staff turnover, changes in technology and a lack of supporting documents. She also said that its security standards are top-notch and there are no known issues with it.
The Mint has suggested that the problem may have come about as a result of a red-hot gold market.
Last year, spot gold prices rose above US$1,000 an ounce for the first time ever as the global financial system unraveled and gold reclaimed its traditional role as a safe haven in times of turmoil. That led to an unprecedented demand for gold coins and bars, and many dealers reported shortages as they tried to meet demand.
That also affected the Mint, which was processing far more gold than it was used to.
"The amount of precious metal coming in and out of this facility put a lot of stress on our reporting systems and how we do business here," Ms. Aquino said.
"We're looking at that as one of the possible reasons for this occurrence."