at this point which will give the precise amount of gold. We sell the gold immediately and set the price both for the sale and purchase according to the London fix that day. Trading that way means that every trade is effectively hedged so we are not currently taking a position on the market movement of gold. TW: Given what you say, is it not going to suffer if gold prices fall? After a good run for gold don’t you see that as likely? RP: Gold prices will fluctuate for sure but we are still seeing a major accumulation of physical gold by China and Russia. Readers of my Black Swan Newsletters know that I am firmly of the view that China is steadily taking over the world economy with new financial institutions and massive investment. This will inevitably mean a new role for the Yuan in world trade and a diminution of the role of the US$. I think the accumulation of gold by China means that they see a role for gold as part of this economic shift. Accordingly I think there is a strong possibility of a rise in physical gold prices but this might also lead to a commensurate collapse in paper gold prices. Last Thursday week we saw a default by Deutsche Bank on delivery of physical gold to a shareholder in the XETA Gold ETF. The bank stated that “delivery was no longer possible for reasons of business policy”. I believe that means they simply do not have the gold as it has been sold or pledged. A few more defaults like that and I think the price of physical gold could rise substantially. TW: Why base yourself in Dubai? Is that both a bit out of the way and also politically risky? RP: We are based in Dubai for a number of reasons. Firstly, it is a very good market for physical gold. Around 40% of the physical gold traded in the world moves though Dubai. Secondly, it is an excellent logistics centre with direct flights to many of the countries we deal with and a new trade-only airport opening next year which will improve logistics even further. Lastly, tax: there is no tax on gold trading, no corporation tax and no personal tax. Given that Wishbone is in Gibraltar that should increase returns to shareholders. As regards political risk I think Dubai and the UAE are the most secure countries in the region. There is political risk in the region certainly but that is chiefly the risk of
America doing something stupid again. TW: You have indicated that you will be at breakeven at 25kg a week or is it 45kg? And how close is that to being reached? RP: What I actually said was that currently breakeven is around 25kg per week but that if we hit our target of 100kg per week by the end of the year then next year our breakeven would rise to around 45kg per week because we would need to add staff and infrastructure in Dubai to handle the volumes. TW: Will you need to issue more shares to raise cash to last until then? RP: If we do raise more equity it will be for investment but the trading itself is funded by the debt facility we put in place in June. Of course if the volumes go above our budgets we may need more of both but I think that would be good news. TW: You have asserted that you will be at 100 kg a week by Christmas. How can you be so sure of that? RP: The answer is that we are on track to hit that because we have supply contracts in place which commit to that amount. The uncertainty which remains is bringing those suppliers on stream. TW: I reckon that 100 kg a week you’d be making a profit of c£2.75 million a year ( at current exchange rates and gold prices). Is that too optimistic? RP: Tom, you know I cannot make a profit forecast! TW: If my maths is even half correct will we be getting dividends in 2017? RP: I think dividends in 2017 is unlikely because continuing the expansion and possibly some reverse integration would be a better use of funds. Personally though, as the largest shareholder, dividends sound pretty attractive TW: Thank you. RP: Tom, thank you very much.
UK Investor Magazine — 13 — September 2016