Royal Canadian Mint explains how it lost gold

By Ian Macleod
Ottawa Citizen
Monday, December 21, 2009

http://www.ottawacitizen.com/business/Royal+Canadian+Mint+reveals+lost+t...

More than $3 million in government gold was unwittingly sold off at a fraction of its value as refinery slag, while $8 million more was miscounted and never left the Royal Canadian Mint, the Crown corporation revealed today in a full accounting of how it lost track of a fortune in gold for a year.

A series of miscalculations and blunders in its gold refinery dating back to 2005 were responsible for 17,500 troy ounces of gold going missing from the mint's Sussex Drive inventory count last October, the mint announced in a 12-page report. That's the equivalent of almost 44 400-ounce bars and worth more than $20 million in today's prices.

The mint said a 14-month hunt to find out what happened to the precious metal now "fully accounts" for the missing gold, though it admits almost 3,500 ounces unwittingly sold off in slag to U.S. re-refiners will never be recovered.

The mint blames the situation on an explosion in the demand for gold in 2008, which pushed sales up by 250 per cent and placed a huge strain on it’s gold refinery, one of the largest in the world.

"At the end of the day, we've learned a lot of lessons," said Christine Aquino, mint spokeswoman. "These reviews have bolstered our reputation by strengthening the mint's accounting practices, vindicating our security systems, and confirming that our technical procedures and expertise in other areas are superior to industry standards."

The government was quick to respond.

"Despite the explanations I am disappointed that errors have occurred," Minister of State (transport) Rob Merrifield said in a press release.

"As a result of these findings, executives will not receive any discretionary bonuses for 2008. In addition, I will continue to require the Mint to report quarterly on inventory status as well as update me on how they are implementing the processing, accounting and security recommendations put forward by the reviews. I will continue to hold the Mint accountable."

A new Deloitte audit of mint operations from 2005 through 2007 has resulted in the mint lowering its reported 2007 corporate profit by about $7 million to $23.8 million, meaning hundreds of employees will have to pay back a portion of their 2007 performance bonuses.

About 90 employees who have since left the mint will have their portions paid by mint CEO Ian E. Bennett and four vice-presidents. The total amount hasn't be disclosed but is "significant," said Aquino.

A separate security audit found the mint has good protection, echoing the findings of a recent RCMP inquiry that rule out theft of the missing gold.

The mint also reported a record corporate profit for 2008 of $55.3 million, a 133-per-cent hike over 2007.

Until this year, the mint reconciled its rolling precious metals inventory every April and October in a complex and time-consuming process. It now counts its stock of precious metals every quarter. Some of the gold belongs to the mint, while some belongs to customers who store it at the mint.

Account records are checked against physical stock. The October 2008 count could not reconcile tabulations of the mint's own gold with the physical stockpile. The difference represented about 0.32 per cent of the total gold throughput for 2008. Customers' gold and other precious metals were not affected.

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