JOHANNESBURG (miningweekly.com) - Safe-custody custodianship of exchange-traded fund (ETF) gold bullion had been declared noncore and had ceased to be a business pursuit, Rand Refinery MD Geoff Millet said on Wednesday.

The Rand Refinery is the world's largest single-site refining and smelting complex for a variety of precious metal products.

Millet told Mining Weekly Online that the Rand Refinery had given Absa Capital notice of its intention to cease performing the ETF custodianship role, which it had been doing since the inception of Absa's high-flying NewGold ETF.

Absa Capital, which is South Africa's biggest ETF performer, with a market share of more than 50% and R8,7-billion worth of product under management, said it had already moved the gold off the Rand Refinery site to London.

Absa Capital ETF head Vladimir Nedeljkovic said that the popularity of the ETF had soared and that the bank had found it appropriate to appoint Brink's Limited of the UK as the safe-custody custodian of NewGold's fast-growing gold bullion holdings.

Although the ETF volumes had grown substantially to 28 t of gold, Millet said that storage capacity was not an issue as there was ample space, but that Rand Refinery had decided to "walk away" from the ETF business because of the decision of the refinery shareholders that "the storing excessive quantities of gold" was not a core business pursuit.

"Our insurers are quite disappointed, but we have enough risk in our business as it is," Millet added.

Nedeljkovic puts the reason for the popularity of the NewGold ETF down to gold performing significantly better than gold equities.

The ETFs market was relatively quiet until 1999, when it grew in prominence globally. Currently, ETFs worth $700-billion are listed worldwide. Some researchers have estimated that the ETFs market could reach the $1-trillion mark by the end of 2009 and $2-trillion by the end of 2011.

In South Africa, there are 17 ETFs worth R15-billion, with many more awaiting listing.

The world's largest gold-backed ETF, the SPDR Gold Trust, on Tuesday set a new record of 1 008,80 t, when Reuters reported that investors were pouring money into securities that are backed by gold bullion in the wake of world economic uncertainty.

Bullion, Reuters added, had rallied more than 40% since falling to a 13-month low of $680,80/oz in October.

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