NMIMS Investocraft December 2011

Gold refineries currently are facing shortage of supply for many reasons like rising prices of gold, import duty structure and hallmarking of jewellery causing reduction in supply of reused gold. The domestic refineries operational capacity has declined to 20-25% on account of the non-availability of adequate used gold. As per the WGC, reused gold had declined from 25 tonnes in last quarter of 2010 to 10 tonnes in first quarter of 2011. In 2010, these refineries were operating at 35-40% of capacity. With gold prices rising globally, the amount of reused gold is reducing as people are keeping gold for investment. Total recycled gold supply plunged to 89 tonnes in 2010 as compared to 122 tonnes in 2009.

Rather than selling old ornament to jewelers in order to meet financial obligations, people are pledging them with non-banking financial institutions like Manappuram Finance and redeeming it later by paying back the dues.

Hutti Gold Mines Limited (HGML) HGML is the only producer of gold for India, apart from gold produced as a by-product by Hindalco from its copper mining sites. This state-owned company is the first member of India in the WGC and has two units in Karnataka, Hutti and Chitradurga. HGML has recently registered a phenomenal growth of around 45% in gold production by producing 689 kg of gold in first quarter of 2011 as compared to 474 kg produced in first quarter of 2010. This 18