Questions about our government guarantee
- What is the government guarantee?
- Who is Gold Corporation and what is its relationship to The Perth Mint?
- The government guarantee only mentions gold; does that mean my silver and platinum deposits are not covered?
- Does the phrase "cash equivalent" mean that I am not guaranteed to receive physical metal?
- How strong are the finances of The Perth Mint?
- How strong is the Government, and its guarantee?
- What sort of liability does the Depository represent to the Government?
- Even if the Government's finances are strong, isn't the Guarantee worthless if the Mint cannot obtain the gold?
- How does the Government keep control of The Perth Mint?
What is the government guarantee?
We are wholly owned by the Government of Western Australia, and operate under an explicit government guarantee that covers the obligations of The Perth Mint Depository. Western Australia is one of Australia’s wealthiest states, with an abundance of natural resources, and holds the highest possible short term Standard and Poor’s credit rating of A1+.
We provide multiple storage options to more than 30,000 clients worldwide looking for exposure to precious metals without the need to take physical delivery. Presently we have more than AUD 3billion of gold and silver in our care, secured in a network of state-of-the-art vaults and every ounce of metal is 100% backed.
What is the Gold Corporation Act 1987?
We operate under a government guarantee, which is enshrined in Section 22 of the Gold Corporation Act 1987. Clause 22(1) of the Act explicitly states that "The payment of the cash equivalent of gold due, payable and deliverable by Gold Corporation, the Mint or GoldCorp under this Act and all moneys due and payable by Gold Corporation ... is guaranteed by the Treasurer, in the name and on behalf of the Crown in right of the State."
Who is Gold Corporation and what is its relationship to The Perth Mint?
In 1988 the Government of Western Australia decided to place the Western Australian Mint (the refiner and minter, successor to the Perth Branch of the Royal Mint) and GoldCorp Australia (its bullion marketing organisation) under a new entity called Gold Corporation to form Australia's leading precious metals refining, minting and value-adding group. Gold Corporation was formally created by the Gold Corporation Act 1987 on 30 June 1988 and it and all of its subsidiaries are wholly-owned by the Government of Western Australia.
Gold Corporation trades under the name "The Perth Mint" and to reassure those dealing with the Mint, especially those with precious metal or money on deposit with the Mint, a government guarantee was included in the Gold Corporation Act 1987.
The government guarantee only mentions gold; does that mean my silver and platinum deposits are not covered?
No. Under Clause 3(2) of the Act it states that a "reference in this Act to gold shall be construed as including a reference to silver, other precious metals, precious stones and other minerals", so you can be reassured that the government guarantee covers all of your precious metal holdings in The Perth Mint's Depository facility.
Does the phrase "cash equivalent" mean that I am not guaranteed to receive physical metal?
No. A government's power to tax can only be in terms of money, therefore its obligations have to be expressed in monetary terms. Should the government guarantee need to be activated, we will immediately purchase on the open market the required amount of precious metal needed to meet our obligations and then request funds from the Government to pay for the purchase (in other word, request the "cash equivalent" of the precious metal due). In this way cash is converted into physical metal so that we can meet our legal delivery obligations.
It is important to note that we buy precious metal when you buy from us and sell when you sell to us on a 1:1 basis - all holdings, whether they be allocated or unallocated, are therefore 100% backed. This issue is discussed in further detail in the Storage Options FAQ page.
Note also that Clause 22(2) does not restrict the Guarantee, nor does it exclude repayment in gold. This clause refers to a gold coin-backed security that was under consideration when the Act was drafted in 1987. However, no such security was issued by us. It does not apply to the Perth Mint Depository facility, which was developed later during the 1990s.
How strong are the finances of The Perth Mint?
Whilst wholly-owned by the Government of Western Australia, The Perth Mint is a commercially focused business that is entirely self funded while still paying the Government the equivalent corporate income tax plus 75% of its after tax profits as a dividend. The key financial figures from the last six years in the table below demonstrate our finanical strength (all figures AUD millions).
|Year Ending 30 June||Profit Before Tax||Net Assets||Value of Depository Metal|
For further information see our Annual Reports page.
How strong is the Government, and its guarantee?
Western Australia is one of Australia's wealthiest states, with an abundance of natural resources, and economically it is a net exporter. Economic summaries and financial statements for Western Australia can be obtained from the Treasury Department of Western Australia.
Standard and Poor's currently rates Western Australia as AA+. Moody's Investor Services currently rates the State's domestic currency as Aa2, with a stable outlook.
In addition, like any prudent individual, we insure our physical metals at our cost to minimise the risk to the government.
What sort of liability does the Depository represent to the Government?
At the 30th of June 2014, the Perth Mint Depository held just under AUD $2.7 billion worth of precious metals on behalf of investors. By comparison, the total public sector of Western Australia for 2013-2014 reported:
- Revenue of $42.6 billion
- Assets of $180.8 billion
- Net Assets of $116.8 billion
The latest financial statements for Western Australia are available on the State Finances page of the Treasury Department of Western Australia.
Even if the Government's finances are strong, isn't the Guarantee worthless if the Mint cannot obtain the gold?
We do not have any problems obtaining physical gold, or other precious metals. Australia has been one of the world's top three gold producing countries for some time and we refine and acquire around 400 tonnes of physical gold each year.
How does the Government keep control of The Perth Mint?
While we are a commercial enterprise tasked with generating a sufficient return for the taxpayers of Western Australia, the Government imposes strict guidelines on our management with a focus on prudent risk management. We are monitored by:
- appointing leading gold industry executives and other professionals to the Board of Directors of Gold Corporation;
- the Under Treasurer of the State of Western Australia has a permanent position on the Board of Directors;
- annual audits by the State Auditor General to ensure compliance with the Financial Management Act 2006 and the Gold Corporation Act 1987.
See our About Perth Mint FAQ page for more details on our corporate governance and policies.