The Road to the Perth Mint!
The Perth Mint has responded to my allegations that the unallocated pooled metal program may not be able to deliver the metal in times of distress. Here is the back and forth. First my article:
SILVER: What Happens When...
So the response came from:
MANAGER, ANALYSIS AND STRATEGY
THE PERTH MINT
Bron was good enough to email me when he posted this reply on the Perth Mint Blog. Here's his email:
From: Bron Suchecki email@example.com
Dear Mr Weir,
I have left a response to your article above, specifically the comments regarding the Perth Mint:
Please feel free to email me if you want to clarify any facts or have any questions about our operations for future articles.
Manager, Analysis and Strategy
And here is the entry:
Road To Roota Wrong On Perth Mint Unallocated
January 13 2011
Topics [ depository services certificates bullion ]
Posted By Bron Suchecki
Bix Weir's recent article SILVER: What Happens When… gets it wrong when he says that The Perth Mint's Depository "customers cannot convert" to physical and "cash settlement may be the only option".
Bix's misunderstanding stems from taking the comments of the Mint's Treasurer out of context and assuming that the statement "cannot meet all the enquiries" was about all enquiries across the diverse business units of the Mint. I can confirm that the Treasurer's comments were only in respect of the wholesale market and not in reference to retail or Depository demand.
Usually the context or target of these sorts of newswire articles is the wholesale market. This is alluded to in the quote "the biggest demand is coming from banks and traders looking for kilo bars" but to be fair to Bix this is probably not clear, especially after journalists edit a full interview down into catchy quotes.
In actuality, the fact that the Mint cannot meet all wholesale enquiries is proof that Depository clients are protected and safe, contrary to Bix's conclusion. The Perth Mint understands its obligations to its Depository clients and its policy is to prioritise unallocated conversions to allocated or delivery. It is only after fulfilling Depository conversion/delivery requests from its stockpiles and approximately 300 tonnes per year of new mine production that the Mint's Treasurer will offer what is left to the wholesale market (that is, the bullion banks).
If you think about it, prioritising Depository and retail bullion sales demand is not some ethical decision but perfect commercial sense -- why supply to wholesalers at lower fabrication premiums when your retail premiums are higher?
The Treasurer's statement that "demand for our coins and medallions is strong" is alluding to our Depository and retail bullion trading demand. Since this is strong, supplies to the wholesale market are restricted and hence we are unable to "meet all the enquiries" of the bullion banks.
There are also a few other incorrect statements in the article that need clarifying.
BIX: "runs quite a large paper gold and silver operation with their unallocated pooled accounts and metal leasing operations"
Bix's reference to "metal leasing operations" is totally without basis. If he had read a few more paragraphs down from his own quote from our website he would have found the following:
"The Perth Mint is not a bullion bank and does not provide project financing or bullion lending/derivative services to mining companies or other entities. It does not lend client's unallocated metal to support short selling transactions or other derivative activities. The unallocated metal is utilised solely to fund the Mint's operations."
Can't get any clearer than that. Furthermore, if he looked at our latest annual report, we disclose ZERO outward precious metal leases (loans).
BIX: "The business model is massively flawed because the offering entity doesn't even charge enough to cover obvious expenses like insuring metal, storing physical metal, tracking, collecting, administration"
I'm assuming Bix is referring to Unallocated here, because Allocated storage has a 1.5% pa charge that I think anyone would be hard pressed to claim is too low. However, Bix says "charge enough", which is a little confusing because we don't charge ANYTHING for Unallocated storage. This is not a massively flawed business model as he claims. In fact if we did charge a fee on Unallocated for insurance and storage it would be double dipping!
This is because the costs Bix refers to are costs associated with production of our coins and bars and as a result are covered by our fabrication premiums. Before the Depository business existed we incurred these costs and customers buying our coins and bars "paid" for these costs via our fabrication premiums. Nothing has changed just because our physical operational metal is now owned by our Depository clients rather than bullion banks as it was in the past. To then claim that we need to charge Unallocated clients a fee because we have storage and insurance costs, when those costs have always been and still are covered by fabrication premiums could possibly be considered deceptive.
Of course I could just let this one pass by with out a quick response to "clarify any facts or have any questions about operations for future articles"!
Thanks for the email and your remarks. I do have a few questions as our viewpoints don't exactly match.
Contrary to what you wrote, the Perth Mint DOES provide metal leasing
as well as other paper metal services through your Treasury
Department. Here's the link to your own website:
"Our services include:"
* Sales and Purchases of Precious Metals
* Location Swaps
* Leasing, Consignment Stock and Funding Facilities
* Price Hedging
It can't be much clearer than that.
In the 2008 Gold Corp Annual Report your metal leasing programs were clearly represented. They seemed to have disappeared from your reporting in the 2009 Report. If you have terminated these programs please explain how it was done and why.
As for other related issues there have been many, many problems with delivery of Perth Mint metal in the past so you don't exactly have a very trustworthy track record. A few years back Jason Hommel documented some of these:
As for your ability to deliver in time of distress...I guess it depends on "how distressful" things get. Gold and Silver are the ultimate forms of money. IF the global derivative bubble pops I can practically guarantee you that all those pieces of paper metal will go up in smoke with the trillions of other promises.
I' m sure you'll agree that...THERE IS NO SUBSTITUTE FOR PHYSICAL GOLD AND SILVER IN YOUR OWN HANDS IN TIMES OF REAL TROUBLE.
I usually don't get into battles of words with those who try to discredit my offerings because I deal mostly on the conspiratorial side but I hope you can see where I would make the connections I'd appreciate some sort of explanation if I am as far off base as you say.
All the best and thanks for your time.
The Road to Roota Letters
PS - I have posted my response in you Perth Mint forum....I understand
if you do not wish to post it or do not wish to reply.
Just in case they delete that section of their website here's a little screen saver for ya...
Bron has just posted his return email in which he comes to the defense of the Perth Mint and tries to justify or disclaim certain issues...all of which I've heard before out of the Perth Mint.
More power to him as I'm sure he believes EVERYTHING he is saying...I just happen to think there is more to their historical gold and silver leasing programs...A LOT MORE but I doubt this was done in the open at the mint but rather in the shadows where most of the manipulation happens. So be it.
The big question I had floating around in my head after reading his response was "Is the Perth Mint on the 'Up-and-Up' these days given his claims that the Mint is "one of the good guys" and they care mostly about the people of their great land?
Well, I thought I might just put it to the test so I sent Bron this email with a request...
Thanks for all this Bron.
It might be worth both our while to clarify further as we BOTH want to advocate for silver and gold investments. Also, I agree with you that gold and silver are of vital importance to your economy and the people of Australia. The on going price suppression is severely hampering the potential of your country. With your vast natural resources YOU should be one of the wealthiest nations in the world along with South Africa.
One thing I want to ask you though. Our decades long battle against the manipulation of gold and silver is in desperate need of an endorsement from a mainstream player. Most of our attempts at gaining official support from a large miner have hit a wall. Not that they don't support our cause but rather it is too hot a topic for them to discuss as they deal directly with the bullion banks in financing their operations.
As you seem to be in support of ending the manipulations would the Perth Mint be willing to issue any kind of statement supporting the work of GATA and Ted Butler? If these are too hot how about a statement denouncing metal market manipulation?
Also, to shed a better light on your unallocated account offering would you be willing to publish monthly the total amount of unallocated accounts in each metal with the corresponding value of the inventory you are processing? This would go a long way in establishing clarity in this program instead of just a "trust me" that we can cover.
I would also urge you to submit a comment to the CFTC regarding position limits as this is where the gold and silver manipulation takes place.
What do you think?
Thanks again for the clarification.
I have yet to hear back from our good friend Bron over at the Perth Mint but if he follows through with my requests you can be assured that I WOULD BE THE PERTH MINT'S BIGGEST FAN AND ADVOCATE!