The head of the Perth Mint has acknowledged issues around gold it supplied to China were "damaging and unacceptable", as the state's opposition calls for a royal commission into the government-owned organisation.
An investigation by the ABC's Four Corners revealed the Mint had supplied gold to China between 2018 and 2021 that met broader industry purity standards, but in at least one instance, fell below Shanghai's stricter standards.
An internal investigation into the 'doping' program by the Mint estimated that up to 100 tonnes of sub-standard gold sold through Shanghai may have to be recalled and replaced — which at today's prices is worth $8.7 billion.
Internal reports allege the Mint then withheld evidence about the practice from its largest client, which an insider described as "a scandal of the highest level".
While the issue came to light because of concerns about a small number of bars, the report raised the possibility that more batches could have been affected.
Gold doping is a somewhat accepted practice in the industry and is not illegal, but is high risk for refiners, as it lowers the quality of bullion by adding impurities like silver or copper.
Jason Waters, who was appointed chief executive in April last year – after the doping program ended – said the issue "hurts" and was "bad for our reputation".
"I'm incredibly proud of this business and what it's achieved in its history and so yeah, I want to see that repaired and get us back to the reputation that we should have that we've held for so long," he said.
"So there's no doubt that these issues are damaging and unacceptable."
The Four Corners investigation found the Mint's doping program began to unravel in September 2021, when the Shanghai Gold Exchange alleged two bars contained too much silver and did not meet its specifications.
Mr Waters explained that during that period, gold produced by the Mint still met industry standards, which required the gold be 99.99 per cent pure – known as 'four-nines gold' – and that the value of the gold was unaffected.
He said the issues arose because the refining processes at the mint produced gold which was 99.996 per cent pure, despite customers only paying for the 99.99 per cent standard.
"The gold above that, in this case 0.006 per cent is known as giveaway, it's provided to the customer and it's not charged for," Mr Waters said.
Silver component 'a mistake'
"In this case, silver was added to bring that … [gold] component down from 99.996 per cent to 99.992 per cent … but the addition of the silver meant that the silver component of the non-gold component exceeded the upper limit [set by the Shanghai Gold Exchange]."
Mr Waters acknowledged that was "a mistake" which he became aware of shortly after taking the helm in 2022, and that he discussed it with Minister Bill Johnston not long after.
"In conversations I've had it was just, as it was for me, an awareness around the issue, the fact that the gold was always four-nines gold, as a minimum, the fact that it was the non-gold component that had been adjusted, the fact that the customer appeared to be taking no further action and that the processes had been amended to ensure it doesn't happen again," he told reporters this afternoon.
It is unclear when government became aware of the possibility that the Mint might have to buy back 100 tonnes of bullion – which at today's prices would cost $8.7 billion – transport it back to Perth and recast it.
The Four Corners investigation also highlighted concerns about the Mint's regulatory compliance defences after a notorious former bikie was only asked for his driver's licence when buying $27,000 worth of gold.
It is not suggested his money was sourced illegally, but the Mint did have a legal obligation to ask him where the money had come from.
'Need to improve our culture'
Mr Waters said for the last year he had been more focused on issues with anti-money laundering and counter terrorism funding obligations than gold quality issues.
"Since I've started … we're confronting a large number of historical matters that we appreciate are unacceptable, that are damaging to our reputation, and certainly very important to us that we get right for the future," he said.
"The ask, from me, is that we're given some space to continue to make some good ground on those and prove what we can do in terms of restoring the Mint's reputation and getting this business back to the level of operating quality that it should be.
He said anti-money laundering and counter terrorism was a "historical issue" but accepted the Mint needed to improves its processes, systems and culture in those areas.
'It's not good enough'
Earlier WA Opposition Leader Shane Love had called for a royal commission into the Mint, saying WA taxpayers had been "exposed to potentially billions of dollars of cost … during the period of time that the Premier was the responsible minister".
"It's not good enough for a government that claims to have a gold standard of transparency to have what's going on at [Perth Mint holding company] Gold Corp occurring," he said.
"There needs to be an open and transparent explanation as to what has happened.
"This is one of the biggest scandals that we've seen in terms of a breakdown of public governance, public trust, in the time that I can recall.
"This is a hugely important matter for the West Australian taxpayer, the West Australian community and it involves – at the heart of it – the Premier of the state."
Mr Love said the government had "lost credibility to look into themselves".
"There needs to be an independent inquiry, and the best way to have an independent inquiry is to have a royal commission," he told reporters.
The Nationals MP pointed to a recent royal commission into the state's only casino, and an inquiry into the City of Perth as two examples where "things of much less risk to the WA community" had been inquired into.
Mr Love said the commission should investigate the Mint's compliance with anti-money laundering and counter-terrorism financing legislation, which is the subject of an ongoing investigation by Australia's financial crimes authority.
He said it should also look at the "particular concern" around gold doping, which he said put the state's reputation at "immense risk".
The Mint recorded a $40 million profit last year, with $25.61 million in dividends and tax equivalents paid back to the state government.
Royal commission call dismissed
The only two government ministers to front media on Tuesday were Culture and Arts Minister David Templeman, and Transport Minister Rita Saffioti, to discuss plans for Ed Sheeran's Perth concert at the weekend.
Mines and Petroleum Minister Bill Johnston, who is currently responsible for the Mint, is on a two-week trade mission to promote WA's resources sector in Canada, the US, Japan and South Korea.
A spokesperson for Premier Mark McGowan said he expected Gold Corporation, the government-owned company that operates the mint, to uphold "compliance with the highest of standards".
"On being notified in September 2021 of concerns from a Shanghai Gold Exchange customer around silver levels in a small number of bars, Perth Mint took immediate action to review and improve its refining processes so the average gold bar contained approximately 99.996 per cent gold, compared to the industry average of approximately 99.992 per cent," the spokesperson said.
"Perth Mint has assured the state government that at all times customers received the gold purity they paid for.
"Ministerial responsibility for the Gold Corporation was transferred in March 2021, following swearing in of the new government, to the Mines and Petroleum Minister, given the obvious synergies between the entity and the resources sector.
"Following the overhaul of the old leadership, and under the lead of the new chief executive, Gold Corporation is constantly identifying areas of improvement including addressing historic practices into operational matters, which was voluntarily reported."
Mr McGowan was responsible for the Mint during his first term in government, but Ms Saffioti defended his decision not to front the press on Tuesday.
"The Premier does make himself available many, many days, he goes through many, many interviews," Ms Saffioti said.
"He's probably one of the most available Premiers I've ever seen in relation to answering questions on all issues."
She said the Premier would make himself available to media in coming days but was quick to dismiss the opposition's idea of a royal commission.
"I think they've asked for a royal commission every week they've been in opposition," she said.
"I don't think [those calls] are founded."
Ms Saffioti did not answer questions about how much the government knew of issues at the Perth Mint – particularly around the quality of gold exported to Shanghai – but insisted the government was taking the issue seriously.
She said concerns about compliance with anti-money laundering and counter-terrorism funding obligations were already being investigated by the AUSTRAC.
"That inquiry was started when the agency itself, the Perth Mint itself, self-reported some issues last year," she said.
"We're doing all we can to make sure that we protect the Perth Mint and make sure that the processes being undertaken by the Perth Mint are above question and that's why the work is ongoing now to make sure that we address all those issues that have been raised."
The Mint said its refining methods have been enhanced since late 2021, and was now committed to higher purity standards than the industry average.
