| National Affairs Correspondent | The Australian Financial Review
SYDNEY - The lockdown has been good to gold. Since early February it has rallied more than 10% as investors predictably sought shelter in the precious metal during these uncertain economic times.
But some of that sheen has come off this rally in recent days after The Australian Financial Review revealed industry standards around ethical sourcing, or ‘conflict gold’, were hollow at best.
Now there are two inquiries under way at either ends of the world.
The Perth Mint, which has been exposed buying gold from a convicted killer whose company has openly threatened violence against its competitors, announced a review on Friday evening.
Chief executive Richard Hayes pledged to have an "independent third party review its audit processes". "We remain confident that we comply fully with all regulatory requirements," Hayes said.
He is probably right. The Mint has after all only promised to review its ‘audit process’, which is like getting one box ticker to see if another box ticker has ticked all the boxes correctly.
If you are not asking the right questions in the first place then any "review" is pointless.
The real issue for the Mint is whether buying gold from a company that sources its metal from small-scale miners in Papua New Guinea, which use child labour and toxic mercury, meets with its ethical standards.
The answer should of course be no, but reviewing the ‘audit process’ will not even ask this most basic of questions or what could be done to elevate the work practices of these small miners.
The Mint's auditor, Stephen Rogers, has already told the Financial Review he's not required to do any independent evaluation of its supply chain or make his own investigations into those it is buying from.
"I just look at the process," he said last week. "That's all that's required."
So the Mint, owned by the West Australian government, is likely to be fully compliant with the process – it's just a pathetically weak process.
Then comes the issue of that convicted killer, Justin Parker, and his company, Golden Valley.
The auditor said he was not aware of Parker or his conviction. Let me help out here.
PNG's national circuit court found that Parker killed his helicopter mechanic on 6 June 2015, after an evening out.
The court heard Parker dragged the deceased from his bed at around 4am and punched him three to four times in the face, before throwing his head against a wall.
He died in hospital two days later from a "subdural haemorrhage as a consequence of blunt force to the head", according to the court.
In May 2017, Parker was found guilty of manslaughter and sentenced to 13 years' jail. He was released on parole last year and remains active in the management of Golden Valley, according to its general manager, Luke van Boehm.
Once again the Mint's audit of its processes is unlikely to ask if Parker is the type of person it should be doing business with.
And speaking of process, why is the chief executive ordering a review into his own internal processes. Where is the Mint's chairman, Sam Walsh?
The former boss of Rio Tinto has been silent, despite it being the chairman's role to determine if management is doing its job correctly.
Not at the Mint where Hayes looks to have set the terms of reference for a review into his own handling of a highly sensitive issue.
The problem for Walsh is that Hayes and the Mint have boasted of being at the "forefront of setting the highest possible ethical standards".
That looks to be a stretch, which begs the question if Hayes can survive even if his own ‘review’ clears him.
The concurrent investigation announced on Friday by the London Bullion Market Association, the world's biggest gold exchange, is unlikely to be as narrow.
"We take very seriously the recent allegations relating to the Perth Mint and its sourcing from Papua New Guinea," the LBMA said.
Its 11-step incident review process has been invoked and should answer the only question which matters – can the Mint claim to be at the "forefront" of ethically sourced gold if it is buying from Parker and Golden Valley?