Royal Mint contracts with Indian firm to strike sovereigns

Demand for gold in India drives outsourcing of British gold coins
Published : 02/28/13
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To reach India’s gold market, the Royal Mint is now producing coins in India.

You might call it outsourcing.

Britain’s Royal Mint announced Feb. 18 that it is partnering with Delhi-based MMTC-PAMP India Pvt. Ltd. to strike and sell British gold sovereigns in India. The Delhi company is a joint venture between PAMP India, the subsidiary of Swiss-based private minter PAMP SA, and MMTC Limited, an Indian national government owned enterprise that, among other things, distributes precious metals. An I Mint mark identifies the coins as a product of presses in India.

Sovereigns have not been struck under license in this way before, but they have been struck in India before, nearly a century ago, when the Royal Mint operated a branch mint in India.

The sovereigns will be struck to the same specifications as the historic sovereign, which weighs 7.98 grams and measures 22.05 millimeters in diameter. Composed of .9167 fine gold, the coin contains 0.2354 ounce of pure gold.

Though the sovereign’s intrinsic value is based on the metal content, the coin has a face value of £1.

The obverse of the Indian-struck sovereign carries the Ian Rank-Broadley effigy of Queen Elizabeth II, and the reverse shows Benedetto Pistrucci’s St. George and the Dragon design from the original 1918 sovereign struck at the Bombay Mint.

Royal Mint officials said the partnership was necessary not only for the Royal Mint to gain a foothold in the Indian gold market (the world’s largest), but also to combat the counterfeits they say proliferate and hurt the Royal Mint brand.

In addition, striking gold sovereigns in India will make the coins more attractive as potential purchases for traditional gifts at weddings, festivals and holidays.

British Prime Minister David Cameron said, in a statement: “It is great to see gold sovereign coins being introduced back into India for the first time in almost 100 years. This will no doubt be a boost for The Royal Mint as they re-enter the largest gold market in the world.”

Producing local coins

Royal Mint officials anticipate the new relationship lasting far longer than their last effort in India.

A branch mint in Bombay struck 1.3 million sovereigns in 1918 before being shuttered in early 1919 after striking a small amount of Indian coinage. Though of short duration, the output of gold sovereigns in that one year in India totaled more than the Ottawa Mint in Canada struck in 20 years, according to Graham Dyer in Royal Sovereign 1489 – 1989.

The Royal Mint has a three-year agreement for MMTC-PAMP to strike bullion sovereigns (with no plans for the fractional sizes to be struck in India) at a facility near Delhi. The first production run is 50,000 pieces, according to the Royal Mint, but no mintage limits will be imposed. Future volumes will be determined by the success of this trial.

The Royal Mint will receive a license payment for every sovereign struck in India, with the target for the third year of sales at £125 million. Until the establishment of this partnership the Royal Mint had no current direct trade relationship with the Indian market.

According to Shane Bissett, the Royal Mint’s director of Commemorative Coin and Bullion, the sovereigns struck in India will go through the same quality process as all United Kingdom coins, including the annual Trial of the Pyx, which Bissett noted was, at over 750 years old, “the oldest quality control process still being used today.”

The move has no negative effect on jobs at the Royal Mint, according to officials.

All sovereigns struck in India will be struck using dies and tools made by the Royal Mint team in south Wales, and workers in the MMTC-PAMP plant have all received training from Royal Mint staff, according to the Royal Mint.

These tools will either be returned to the Royal Mint when worn out and unfit for further production, or be defaced in India by Royal Mint technical personnel, with documented evidence of the defacing, ensuring that they cannot be reused.

All other UK coins, including sovereigns, made for distribution or sale in any other international or domestic market will continue to be produced at the Royal Mint in Llantrisant, Wales.

Selling in India

MMTC-PAMP is responsible for the marketing and distribution of the India-made gold sovereigns, and will use the network it has already established, including jewelers and banks.

In 2002 PAMP began selling gold bars, rounds and wafers in .9999 fine purity, and now sells its bullion products to 24 banks, who retail through more than 5,000 branches across India.

Distinct, individually serially numbered packaging, with the Royal Mint certification of content and purity, has been created for the new, Indian-struck sovereigns.

The coins’ pricing will include an undisclosed markup to cover production and distribution costs and the pieces will be available exclusively in India.

The Royal Mint will keep one of the coins for its museum, but otherwise the coins will not be directly sold outside of India.

Collectors around the world who want the special version with the I Mint mark “will have to book themselves a holiday in India!” quipped Jenny Manders, a Royal Mint spokesperson.

Several factors spurred the Royal Mint toward the joint venture to strike gold sovereigns in India, including import restrictions and widespread counterfeiting. According to the Royal Mint, India’s laws restricted the import of gold until 1998, when a loosening of the laws paved the way for, since 2002, the import of .9999 fine gold. Customs duties for gold of any fineness are determined by the gross weight, not net gold content, so the lower fineness gold sovereigns, which are heavier than equivalents struck with a higher fineness, cost more to import.

However, the demand for the historic .9167 fineness introduced with the 1918 sovereigns remains. To meet that demand, many locally made sovereign imposters have proliferated, according to Royal Mint officials.

Combating counterfeits

The Royal Mint cites the global Thompson Reuters GFMS survey, which estimates the numbers of gold sovereign-equivalent bullion items sold in India last year to be about 10 million pieces.

These “gold sovereign-equivalent bullion items” are pieces that purport to be sovereigns (but clearly are not) and trade freely on the Indian market, where they are accepted by buyers and sellers who know the pieces are not genuine, according to the Royal Mint.

Driving the market for gold are gift-giving for engagements, weddings, birthdays and religious events, the latter including the festivals of Akshay Tritiya in April and Diwali in October.

The emphasis on gold as an investment has also driven demand higher.

The Royal Mint wants to claim a larger percentage of this market, while allowing the Indian market access to authentic sovereigns.

“This should have long term benefit to the Indian public and to the integrity of the Royal Mint brand and the sovereign itself,” according to a statement from the Royal Mint.

While the sovereign is protected by U.K. copyright laws, and the Royal Mint cooperates with U.K.-based agencies to thwart counterfeiting, it has “no such role in international territories, including India. ... The best way to tackle an illegal activity is to provide customers with a validated genuine product,” according to the Royal Mint. ■

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