All That Glitters May Not Be Gold

Published 12 years ago
All That Glitters  May Not Be Gold

The South African Reserve Bank (SARB) has admitted that not all required quality criteria were met in the production of krugerrands by the South African Mint—which is wholly owned by SARB.

Tests on certified krugerrands have been carried out in the presence of FORBES AFRICA journalists. The results show that some contain less than the required amount of gold. The highly-valued collector’s items make up an industry worth billions of dollars. Depending on the gold price a one ounce, proof krugerrand is worth around $2,000.

Patrick Willis


Patrick Willis, a South African gold investor of 12 years, is behind the claim. He noticed that a number of his krugerrands were losing their lustre—often a sign of too much copper and zinc. These are base metals used to strengthen the gold and decrease wear and tear.

“The issue is that they are under spec. I made the discovery about the colour. It has not happened anywhere in the world, where a national mint produced coins for sale that are under spec,” said Willis.

Tests on several krugerrands found that some were “under specification”—as they say in the trade. By law each krugerrand has to contain at least 91.7% gold. This measure is so important that international gold mints often include a small amount of ‘extra’ gold to ensure they reach the stipulated requirement. A gold assay test proved that one of the coins in question had merely 87% gold. That is nearly 5% less than it should be.

“If I see such a result, I will panic. I’m not pointing any fingers. This is quite anomalous [referring to the 87% result]. I’ve never seen something like that on a coin before. It cannot be explained by sample prep [the margin is too large]. That is a big red flag right there,” says Jaco le Roux.


He is an employee of Spectromed—a company which sells and conducts tests using Niton XRF analyzer guns—who tested multiple krugerrands using the Niton analyzer in front of FORBES AFRICA journalists to verify the results.

The disgruntled krugerrand owner took up the issue with SARB. Natanya van Niekerk, acting head of numismatic coins, at the SA Mint replied:

“As the krugerrand is the flagship of the South African gold industry and has reputational value to South Africa, we will leave no stone unturned to rectify the situation. I am of the opinion that the coins in question are now strictly speaking illegal and that the Reserve Bank has the right to demand all the coins to be returned.”

Hlengani Mathebula, head of group strategy and communications at SARB released an updated media statement on April 13, claiming: “…investigations into the matter have revealed that some of the proof krugerrand coins casted between April 2011 and May 2011 may not meet all the required quality specifications.” Early investigations show that of the 1,500 krugerrands minted in this time only six have, so far, have been found to be under spec.


The SA Mint called a meeting with a number of local and international dealers. They explained that the April and May 2011 batches were under spec. In his most-recent statement Mathebula continued, “…should any of the dealers have reasonable concerns that some proof krugerrand coins may not comply with all required quality criteria, they could return such coins to the SA Mint.”

At stake is the reputation of the gilt-edged SA Mint which created an optimum way in which to market South Africa’s gold. Kruggerrands are one of the safest and most effective ways to secure assets against uncertain markets. They are called ‘liquid gold’ since there’s never a shortage of buyers who can easily turn them into cash.

Willis risked devaluing his investments by performing Niton XRF tests and destructive fire assays on proof krugerrands. The SARB is threatening FORBES AFRICA’s anonymous source with legal action for “destroying legal tender” in order to conduct the fire assays. During a fire assay test, the metal object is smelted to determine its composition. However the concentration of gold would not be accurately proven, without such procedures. This is because the Niton analyzer is not a certifiable method of testing gold quantity. It is not as accurate as a fire assay. However results can be proved against known certified materials.

“The Niton analyzer gives a chemical analysis within a couple of seconds. It quantifies content and concentration in metallic objects. The results are shown onscreen. Its limiting factor is that it depends on the sample prep. If the sample is not clean, or flat or contains impurities on the surface, the results may be misleading,” says le Roux.


The same sample underwent a fire assay at two independent refineries. The results from First Refinery showed it was 87.40% gold while the results from Rand Refineries showed 87.46% of gold concentration. These results prove that the Niton analyzer was fairly accurate in comparison to the fire assay. When the SA Mint was alerted to the results on October 25, it collected the samples and test results to conduct their own investigation.

“Our assay indicated that this batch was in spec when we casted this. If we are at fault, we will make it good to the customer as we followed our procedures and something could have happened. We want to know what happened to ensure it is not repeated in the future,” wrote Tom Davel—while he was still in office—in correspondence with our source.

There is no proof that this is linked to the suspension of both the managing director, Andile Mvinjelwa, and the general manager of Numismatic Coins, Tom Davel on December 8. Their press release stated: “The board has become aware of certain technical issues within the operations of the South African Mint Company. Investigations into the matter have been instituted and are ongoing.” No results from the pending investigation have been produced.

In the statement related to the two suspensions at the SA Mint last year, Mathebula said, “The Mint is a high-security area for SA and I cannot reveal any details of the operations. There are no irregularities. Technical operational issues are being investigated.” He maintained that the suspensions could “never be related to fraud.”


A disappointed Willis said, “Surely, that kind of company would want to be transparent with everybody, seeing as it is a touchy subject and a worldwide distributed product from South Africa. If I were a dealer in South Africa or any other country, and I had coins which were part of the batch that is said to be under spec, I would certainly want to return them to the SA Mint and say ‘give me back my dough.’”