South African Reserve Bank Announces that Some 2011 Proof Gold Krugerrands Were Underweight

by Louis Golino for CoinWeek

On Tuesday, April 24 a spokesman for the South African Reserve Bank, Hlengani Mathebula, e-mailed a statement to the Associated Press about a controversy regarding gold Krugerrand coins that first came to light last week.

Mathebula stated that an internal investigation of proof Krugerrands produced last April and May had determined that some coins were found to be underweight.

2011 proof krugerrands South African Reserve Bank Announces that Some 2011 Proof Gold Krugerrands Were Underweight1,539 proof coins were minted in various sizes for collectors, but it was not revealed precisely how many were found to be underweight.  Of the coins produced, only 548 were actually sold.

Initial news reports in the British press and elsewhere suggested the coins weighed less than they were supposed to, i.e., an ounce or less for smaller-sized coins.  But it was subsequently determined that although the coins themselves weighed the correct amount, they contained less than the amount of gold they were supposed to have.

It is believed that something went wrong during the production process that changed the gold content that went into the coins.

Coin dealers in South Africa and in other countries were contacted by the Mint and given the opportunity to return the coins.  They reportedly returned 90 coins.  Of those 90 coins, Mathebula stated that just 6 coins were found to have up to 5 percent less gold than required by specifications.

The South African Reserve Bank oversees the South African Mint.

The bank has indicated that last year it suspended the mint’s managing director and general director for numismatic coins as a result of what it referred to as “technical problems” in their management of the mint, though it is unclear whether those problems specifically include the gold Krugerrands that were found to be under-specification. According to South African news accounts, the coins were first discovered by a South African collector who noticed his coins were tarnishing and then had the gold
content of his coins checked.

“We are confident that the deficiencies have been addressed and appropriate steps taken to avoid a recurrence,”Mathebula added.

The South African Mint has described the Krugerrand as the most popular gold coin in the world.  The coins have been minted since 1967, and by 1980 they accounted for 90% of the world’s gold coin market, according to Wikipedia (www.wikipedia.com).

Because they were initially made to be circulating gold coins, Krugerrands are made from a copper-gold alloy that makes them more durable than a pure gold coin, similar to American gold eagles (which were never made for circulation, but which were in many respects the American response to the Krugerrand.)

Until restrictions were removed on the purchase of them by U.S. citizens, Americans were not allowed to buy Krugerrands during the 1970’s and 1980’s.  That is because until 1994 South Africa was ruled by a white regime of Dutch descent known as Afrikaners who instituted a system of racial segregation known as apartheid to repress and control the black African majority.  As a result economic sanctions were instituted in opposition to apartheid, and those sanctions included prohibitions in a number of Western countries against buying Krugerrands.

Most mints around the world would probably not even have made public what turned out to be a relatively minor development, according to numismatic experts.

Coin collectors have speculated that if such coins ever make it into their hands they would be desirable collector items, similar to error coins.

The American Precious Metals Exchange (www.apmex.com) was contacted for comment on this story since its current inventory includes proof gold Krugerrands, but through a spokesperson the company declined to provide any statement.

golino portrait thumb South African Reserve Bank Announces that Some 2011 Proof Gold Krugerrands Were UnderweightLouis Golino is a coin collector and numismatic writer, whose articles on coins have appeared in Coin World, Numismatic News, and a number of different coin web sites. His column for CoinWeek, “The Coin Analyst,” covers U.S. and world coins and precious metals. He collects U.S. and European coins and is a member of the ANA, PCGS, NGC, and CAC. He has also worked for the U.S. Library of Congress and has been a syndicated columnist and news analyst on international affairs for a wide variety of newspapers and web sites.

About the Author:

Louis Golino is a numismatic journalist and writer specializing in modern coin issues. He has been writing a weekly column for Coin Week since May 2011 called "The Coin Analyst," which focuses primarily on modern U.S. and world coins and developments at major world mints, and is also a contributor to two magazines, American Hard Assets and the Numismatist, the American Numismatic Association's monthly publication. His work has also appeared in Coin World, Numismatic News, and various coin web sites. He collects classic and modern U.S. coins and modern world coins from a number of different countries. He first joined the ANA in the 1970's. He has also worked for the Congressional Research Service of the Library of Congress and has been a syndicated columnist and news analyst on international affairs for a wide variety of publications. He has been writing professionally since the early 1980's.

11 Comments on "South African Reserve Bank Announces that Some 2011 Proof Gold Krugerrands Were Underweight"

Trackback | Comments RSS Feed

  1. It was good of the South African Mint to do damage control and alert customers to the problems with the 2011 release.

    Though in all honesty, the most surprising thing I found in this article was that the South African mint only sold 548 proof Krugerrands. Given that the Krugerrand is arguably the most venerable bullion coin in the world, I would have expected the proof variety to be a very popular product.

  2. Louis Golino says:

    Good point, CO. I checked and found that a lot of the proof one ounce coins have low mintages, around 5K each, and sell for a relatively modest premium of a couple hundred each over spot. But the 2011 coin, if you can find one, has a lower mintage than earlier issues, though I am not certain if it is the lowest.

    Wikipedia notes that that one way to distinguish the proofs is they have 220 serrations on their rims compared to 160 for the BU’s. Seems like it would be easier to check the finish than count up the serrations!

  3. Mamba says:

    What is the exact metric mass specifications of a 1oz Krugerrand? From the Rand Refinery brochure the coin mass (weight)is 33.93g with a carat content of 11/122 Au and 1/12 Cu. Which equals 31.1025g Au nett content and 2.8275g Cu content. What is the upper limit mass and what is the lower limit mass on the total mass (weight) and what is the upper limit mass and lower limit mass of Au (Gold) in the 1oz Krugerrand?

    • Louis Golino says:

      Mamba,
      I would try the SA Mint site or try contacting the mint if it is not there. My understanding is that collectors who have concerns are taking their coins to gold or coin shops which have machines that can determine if the gold content is right.

  4. Rene says:

    The coins referred to are proof coins and not bullion coins. Only 6 of the total mintage were underweight, according to the press release from the SA Mint, and these were minted in April/May of 2011. The proof coins are produced by the SA Mint, while bullion Krugerrands are minted by the Rand Refinery. Hundreds, if not thousands of bullion coins are sold every day, while limited quantities of proofs are sold because proofs are sold at a premium (around R3000 more than the bullion coins.) Bullion coins actually have 180 serrations vs proofs with 220. Each coin dealer will have a Fisch scale that weighs and measures the coin to see that it is authentic. The SA Mint will exchange coins that are found underweight. However, I think this is a storm in a teacup since only 6 coins were affected. Thank you for reporting the facts, please keep on informing coin collectors!

  5. Mark Rogers says:

    There does seem to be a problem with the numbers involved. The Mint admits to 6 dud proofs, while the South African collector who alerted the Mint has 6 duds in his possession. Nothing in the SA Mint media Statement indicates whether these are the same 6. On the PMbug forum, the SA collector has posted a CNBC clip which also shows a dealer in Johannesberg weighing krugerrands, at least two of which come up under spec. Which 6 do they belong to, or are they another two? I.e. on these numbers do we have 6, 8, 12 or 14 duds? There is also a coin that contains 94% silver – where does that fit in? Is it possible that these are dud forgeries? Ie. rather than a glitch or skimming operation conducted at (or even by?) the Mint, are the result of stamps having been stolen (remember the Mint’s Media Statement confessed to a criminal gang operating at the Mint which was stealing R5 coins): these stamps would then have been used to try to pass off forged coins which means they would not have been intended to be underspec, so the glitch’s are the forgers’ glitches? The question arises because most mints would not bother to make public problems in the production process, and there has been an ongoing investigation by CNBC and Forbes. This may yet be a big story!

    • Louis Golino says:

      Thanks very much for your comments and questions, Mark. It will be interesting to see what additional information comes to light as a result of those investigations and perhaps additional details from the mint.

  6. Reinhard says:

    Hello, I am a coin collector for 30 years and I have never had any problems with the normal Krugerrand (the bullion issue). But with colletor coins like the proof Krugerrand and commemorative gold coins the South African Mint has some severe problems. Some of them are not well centered struck and have a bulge at the edge. My 2008 proof Krugerrand from the Oom Paul minting press has a deep scratch on Mr. Kruger`s likeness. If you pay a premium for a collector´s issue with only 350 pieces issued and it is damaged with a deep scratch it is worth only bullion. Today I opened my 2011 proof Krugerrand which was still in the original plastic bag from the mint (never opened before). When I opened the box I had a big laugh: The Kruggerrand was chocked in an opened plastic capsule!! I was not able to close the plastic capsule completely nor open it completely. It looked like that this Krugerrand was too big for the capsule!! Yes that it´s! And if I would sell this coin probably no one would believe me that this is a genuine coin from the mint… Certificate number is between 100 and 150. Just for reference.

    • Mark Rogers says:

      Does your reference to the Oom Paul minting press mean that the SA mint contracts this work out? The damage you refer to and the problem with the size of the coin, or the capsule, suggest a hogh degree of carelessnes? Have their been investigations before, or is it well-known that the SA mint has these problems, and if that is the case, what is the importance of the 2011 story that this article refers to?

  7. Reinhard says:

    Hello Mark, I have taken the 2008 Oom Paul Krugerrand for reference because I want to say that quality problems have been at the SA Mint for years. This is nothing new. If it doesn´t work well within the mint itself (Oom Paul minting press) they can not blame someone else e.g. a contractor. Like people always tend to do…
    Regarding my 2011 proof Krugerrand: The capsule is fitting close in the box. So it seems to me that the capsule is at the minimum normal seize, but the coin does not fit in the capsule. It looks like that the coin has not the correct size.
    I am located in Germany and do not know what they are doing within the mint. But I know for sure that there is a great demand for physical gold worldwide nowadays. In the 70s the Krugerrand had a market share of 80 percent of the world bullion market. Today there are so many nations offering gold coins, there is great competition. If the SA Munt disgruntles some key international dealers and collectors these may buy and resell other world gold coins. This is the story. It is not that there are probably 10 coins under specification. If you can not resell a mint-sealed SA coin which comes directly from the mint without opening the box and control it, you have a problem. That´s my point of view.

Post a Comment

LinkedIn
 
LLC. Copyright © 2014 All rights reserved. No portion of this site may be reproduced or copied without Written Permission
PO Box 916909 Longwood, Florida 32791-6909 | Office Hrs M-S 7:00AM-7:00PM | Toll Free: 800-579-5228 | Email:news@coinweek.com

ABOUT COINWEEK | ADVERTISING | WEEKLY COIN GIVEAWAY | SHOW SCHEDULE | CONTRIBUTE ARTICLES | NEWSLETTER | TERMS OF USE