AUSTIN — There’s gold in them thar hills, or, at least, there will be.
On Wednesday, Texas Comptroller Glenn Hegar announced Texas-based Lone Star Tangible Assets Management will partner with the state to open the long-awaited Texas Bullion Depository — the Lone Star State’s version of Fort Knox.
The depository will initially be located in a temporary facility owned by Lone Star in North Austin, and is expected to begin receiving gold as early as January 2018, officials said.
“We chose them because we believe they are the right combination of experience, financial stability and infrastructure,” Hegar said during a news conference announcing the initial details of the project.
Lone Star has an opening contract with the state for five years with two, one-year extension options, Hegar said.
The company will be tasked with building and operating the high-security site that was first planned after a bill was passed two years ago directing the comptroller’s office to create the depository.
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Progress had been slow since the bill was signed, but Wednesday marks the second public announcement in three days about the depository. The first was the naming of Tom Smelker as the depository administrator.
Smelker currently heads treasury operations for the comptroller and will remain in that role while overseeing the depository.
“It has been a more complex project than we expected,” Smelker told the Houston Chronicle. “Because of the visibility, we wanted to make sure we had every ‘t’ crossed and every ‘i’ dotted. If their life savings are going to be brought to us, people have to trust it’s going to be handled correctly.”
The depository was first envisioned as a new home for millions of dollars’ worth of gold bullion owned by the University of Texas Investment Management Company that manages investments for the UT and Texas A&M systems. It also was seen as a place for gold owners to keep their private bullion.
UTIMCO currently stores its gold in New York, and the non-profit pays $605,000 annually in storage fees. In 2015, upon signing the bill tasking the comptroller’s office with the creation of the depository, Gov. Greg Abbott declared Texas would “repatriate” the gold.
UTIMCO is currently the only Texas entity that owns a significant amount of gold, but convincing the corporation to move its gold may not be easy. Previously, the UT System officials had stated the gold would only be moved to Texas if the state-run depository is a full member of the Chicago Mercantile Exchange’s COMEX platform, where gold contracts are exchanged. Also, the fees to store the gold must be equal to or less than the cost to store in New York.
Lone Star Tangible Assets Management chairman Matt Ferris said the depository would be unable to join COMEX due to a geographical restriction that requires all members to be within 150 miles of New York state.
UT System Spokesperson Jenny LaCoste-Caputo said that for the gold to be moved to Texas, the same conditions still apply.
To work around the lack of a COMEX membership, Ferris said Lone Star intends to run the depository under the same guidelines of a COMEX member facility.
“We will have access to COMEX level liquidity, but we are also endeavoring on a journey here to create something that hasn’t been done, and our goal is to eventually create liquidity of COMEX levels in the state of Texas for those large institutions over time,” Ferris said.
Despite the uncertainty surrounding UTIMCO’s gold, Smelker said he has received “hundreds” of calls and emails from people and companies interested in storing their bullion in a Texas depository.
“To some folks’ surprise we’ve seen a lot of people calling and asking when they can bring their gold in,” Smelker said. “We’ve received a pretty steady stream of interest in the progress of this.”