Private Saudi Al Othaim Jewellery Factory Group said on Monday it has bought 36 tonnes of raw gold from an African central bank for 1.8 billion riyals ($480 million).
"The price should include 20 percent margin for the sharp fluctuations in gold prices in international markets," Suleiman al-Othaim, board chairman of the Riyadh-based firm, told Reuters.
Delivery of the gold would start in the fourth quarter of this year, he said.
"We concluded the deal directly with the African central bank. The trade has its secrets, I can't tell you of which country it (the bank) is," al-Othaim said.
"The Saudi Arabian Monetary Agency (Saudi central bank) approved the transaction," he added.
The purchase represents 18 months of feed for the firm's 24-tonne refinery, located in Riyadh. Saudi Arabia's gold imports stood at an estimated 150 tonnes in 2005 with another 180 tonnes imported for refined use, he said.
A Dubai-based industry source questioned whether the firm had directly purchased the gold from a central bank. "For a central bank to sell that much amount of gold without a proper public announcement, it's just strange," the source said.
A London-based analyst said: "There are not many African central banks with enough gold to sell in this quantity."
The company is among the five largest gold jewellery firms in the kingdom which, with estimated annual sales of 400 tonnes, accounts for 70 percent of gold and jewellery sales in the Gulf region.
The firm produces the equivalent of 12 tonnes of finished gold products. It has 25 branches and gem and jewellery factories in the kingdom and in Dubai.
The spike in gold prices in international markets and the crash that has hit the Saudi bourse this year had not had an impact on the company's sales, the CEO said.
"The gold market is prospering. The economic boom in Saudi Arabia and the Gulf region is boosting consumption," he added. Suleiman al-Othaim is the brother of Abdulaziz al-Othaim, founder and owner of Saudi leading jewellery maker L'Azurde, among the world's five largest jewellery manufacturers.
L'Azurde plans to list on the Saudi bourse this year to finance a new plant and al-Othaim said his firm also planned to float a stake. "We plan to go public in 2010," Suleiman al-Othaim said.
L'Azurde, which sells through 3,000 retailers in 35 countries throughout the Mideast Gulf region and Asia, already has four plants in Saudi Arabia, Egypt and India mining holding company Maaden said it would provide L'Azurde with its gold. Maaden this week awarded L'Azurde, winner of an international tender, a three-year contract to process gold ore extracted locally. Maaden plans to raise its annual output by 25 percent to 300,000 ounces from the beginning of 2007.