Rand Refinery


An act of alchemy
Even with a commodity as rock solid as gold, change has to be managed, as Alan Swaby learns.
One of the modules to be found in business courses covers the topic of marketing myopiaÔÇöor how businesses take their eye off the ball and allow a once thriving concern to wither away. The case often quoted is the demise of the rail transport industry in the second half of the 20th century.

Imagine having been the undisputed market leader for three quarters of a century, accounting for 30 per cent of the total output of your industry worldwide but now finding your output slashed.
These are the conditions facing the new managing director of Rand Refinery. Howard Craig has been hired to make sure that the thriving business will adapt itself to vastly changed circumstances and continue to be a market leader into the future.
ÔÇ£Rand Refinery,ÔÇØ he explains, ÔÇ£is inextricably linked to the South African gold mining industry, which is today producing much less than in the past. Nor does it make logistical sense for other countries outside of Africa to send their gold here for refining. The major gold producers such as China and Australia have their own refining facilities. My task is to create a sustainable strategic future for the business, to compensate for the continuing reduction in South African gold output.ÔÇØ
Rand Refinery was established in 1920 in Germiston, a city not far west of Johannesburg. Its shareholders were and still are the major gold mining companies and its remit is still to operate as refinery and disposal agent for AfricaÔÇÖs gold. In the process, over the intervening years, Rand Refinery has handled some 40,000 tons of gold, or around 30 per cent of all gold ever mined.
Today, though, against an historic production high of 1,000 tons per annum, Rand Refinery is processing 400 tons. While revenues are steady, under the new strategic direction it is hoped that these will start to climb.
Rand Refinery has a number of strategic advantages. ItÔÇÖs the largest single integrated refinery and smelter site anywhere in the world; and one of only five centres accredited as a London Bullion Market Association referee, which means that it can assess other refineriesÔÇÖ ability to assay gold.
But it is a plant whose technology is attached to the past, at least when considering dor├® gold. This is the form in which gold is received from the mines, which is around 70 per cent gold mixed with other metals and impurities. To take this up to the 99.95 or 99.99 per cent pure level which Rand RefineryÔÇÖs customers want, a technique known as the Miller Chlorination Process is used, which involves blowing chlorine gas through molten gold.
However, there is a cleaner alternative refining techniqueÔÇöelectrowinningÔÇöwhich works on similar principles to a battery and deposits pure gold on cathode plates. High on CraigÔÇÖs agenda is the development of an electrowinning process that can be used as effectively with dor├®.
Once gold is received at the refinery, the objective is to manage risk as effectively as possible. The price of gold is fixed twice a day by a conglomerate of bullion banks based in London. Rand Refinery works on an agency model, receiving gold in the morning and selling it on to bullion banks in back-to-back trading at either the afternoon fixing or at some other spot price as best determined by Rand RefineryÔÇÖs treasury department.
In the process, dor├® from the mines needs to be assayed, which will determine the value they receive, and the bullion bank needs to specify the form in which it wants to receive the goldÔÇöbars, Krugerrands, coin blanks etc.
Gold is one of the few materials that never loses its value. Even when used as part of some other productÔÇöelectronic equipment, for exampleÔÇöit can still be reclaimed and will become indistinguishable from virgin gold. As such, it has long been an attractive alternative to paper money, even at government level. Last month, for example, India bought 200 tons of gold for $6.7 billion. At the same time, millions of private individuals are adopting their own currency protection strategy, buying gold bars, jewellery or coins.
Historically, Rand Refinery has made gold bullion; however, these days the emphasis is on adding value by processing the gold to the next stage. Alongside Krugerrands, other small bars or coins and coin blanks, there is a range of semi-finished products for jewellery manufacture. In fact, part of the work done by Rand RefineryÔÇÖs treasury and sales department is to encourage buyers to take more of the value added range.
ÔÇ£As part of the review IÔÇÖm doing,ÔÇØ says Craig, ÔÇ£we are investigating the feasibility of making jewellery itself. WeÔÇÖre thinking of the mass market where we could manufacture chains or earrings on automated machinery.ÔÇØ
But the value added approach with the greatest current appeal is to increase the throughput of its smelting operation. Gold can be recovered from many not easily-accessible formsÔÇöelectronic components or even suspension in the sludge by-product of some other manufacturing process. Either way, an assessment of the gold content needs to be made and then the gold recovered. There are very few such smelters around the world and even fewer with a refinery attached. Rand RefineryÔÇÖs smelter uses the latest technology, making it both efficient and environmentally sound.┬á
ÔÇ£We are also considering having assay facilities in target countries,ÔÇØ Craig says, ÔÇ£which will enable us to determine more efficiently, and quickly, whether the source material is worth the effort.ÔÇØ
Some years ago, Rand Refinery moved from its former ÔÇÿbreak-evenÔÇÖ business model to a profitable, self-sustaining business; in the process, it created a cash-rich war chest for Craig to work with. With a clear eye to the future, itÔÇÖs unlikely Rand Refinery will be going the way of the steam trains any time soon.