Refined gold is subject to 10% import duty in India, as opposed to 8% on gold doré, and the refining costs just about $1-2
India has turned towards Latin America and Caribbean countries to bring in unrefined gold to meet its needs.
There has been an increase in buying doré bars from countries like Ecuador, Peru, Bolivia, Guyana, Colombia, Honduras and Nicaragua in the last two years as the gold importers are capitalising on the differential in import duties to bring the yellow metal into the country cheaply.
Confirming this trend in gold import, a senior MMTC official while explaining the process said, “Several refiners have been importing gold doré bar, and refining in India at new facilities dedicated to the refining of doré – a semi-pure alloy of gold and silver.”
“Refined gold is subject to 10% import duty in India as opposed to 8% on gold doré, and the refining just costs approximate $1-2. So, the gold importer is not only saving on import duty, by refining it here in India and reselling —they are fulfilling Prime minister Narendra Modi’s Make In India initiative.”
Refining doré bars is one means of keeping costs low, of maintaining production while scrap supplies are low and of building up stocks of refined metal to satisfy demand that has built up in the interim.
While Peru, world’s sixth top gold producer, is about to increase its shipments of the precious metal to India and is likely to exceed $270 million, other small countries in the LatAm region are excited with this new trend of export of doré bars to India.
Recommending reforms in the Indian mining laws, Amit Tripathi, principal consultant of US-based Geoexploration LLC, told FE, “countries like Guyana, Peru have tremendous opportunities for gold mining, with Colombia, Nicaragua, Mexico close behind. Ecuador, Nicaragua and Mexico are eons ahead in terms of attracting risk capital.”
However, “No Indian company is mining in Nicaragua although the country has great potential and highly underexplored. And Ecuador which is very rich in gold and copper has some really great opportunities and a lot of good quality geological data.”
Speaking to FE, ahead of the first meeting of Joint Economic and Trade Committee (JETCO), scheduled for next month in New Delhi, Mentor Villagomez, ambassador of Ecuador in India, said, “For the first time the Central Bank of Ecuador shows export of gold to India for 2015. As India is an interesting market for our exportable offer, there could be discussion about the dore bars next month. Also, we will talk about seeking Indian investors in the mining sector.”
Peru started exporting gold to India only in 2012, but the gold imports from that country, seem to have increased within short span of time. In fact, to meet the rising demand of gold in India, three Indian investors have decided to invest in gold mines in Peru.
Outgoing ambassador of Bolivia Jorge Cardenas Robles says, “In fact, in 2015 Bolivia exported dore bars to India for $ 157 million. Though the numbers may not seem big, this is something new that has started between the two countries and encouraged by this Indian delegation of gold miners is expected to visit Bolivia soon.”
India has refining capacity of an estimated 800 tonne per year. In May 2014, MMTC-PAMP became India’s first LBMA-accredited refiner, primarily refining gold-based doré. In its 2014 trends report, the World Gold Council claimed that India was the largest consumer of gold in the world at 842.7 tonne for the year.