Hi All, first post & very new to stacking & I must say what a wealth of information this site is. I'm so glad I stumbled across it!! About a month ago I was in Perth for work & decided to start my stack at the same time. While I was getting my order processed I overheard a lady asking for a 100oz bar of silver. Couldn't quite hear the reply she got but I THINK it was that they didn't make them any more?? It was either that or they didn't have any in stock. Either way she wasn't able to buy a 100oz bar there & then. 10oz & 1kg no worries, but no 100oz... Taz
The PM is now not selling any silver bars, with the 100oz also being made unavailable (as of Monday morning 17 Oct). Are we to assume that all of the 100oz bars are now being re-cast, not leaving any available for sale? It's no wonder that conspiracy theories get started, when the only other alternative is a completely inadequate product forecasting capability within the Perth Mint. Not only that, but their production capacity is exhausted within 3 or 4 months of a major upgrade? As an engineer myself, I find that to be astonishingly incompetant. Major capital upgrades should cater for anticipated demand at least 3 to 5 years in the future. The PM looks bad either way. People will believe them to be incompetant or untruthful (or both).
Also Peth Mint has monopoly in Bullion coin production. Monopoly status has also obligation, and I do not really care how much a coin press cost. They waist so much money on everything else and this is only the very few business producing real economic income under their control and they messing it up.
Last week Bullion bourse were out of stock. 10X10oz PM bars. Today you can purchase them with about a 2 week delay. Seems to me they will be back available at the mint soon
Lots of comments, easiest way I think is to group them by topic. FORECASTING hotel 46: well they dont run a very good show. they are behind the 8 ball with a lot including foresight. their production has been way behind for at least the last year with shortages. this last bar fiasco has made it into the mainstream. however with hindsight i think they have to get their foresight up to speed. alexisio: Point is they knew this demand would be coming HeavyMetal: It's no wonder that conspiracy theories get started, when the only other alternative is a completely inadequate product forecasting capability within the Perth Mint. Not only that, but their production capacity is exhausted within 3 or 4 months of a major upgrade? As an engineer myself, I find that to be astonishingly incompetant. Major capital upgrades should cater for anticipated demand at least 3 to 5 years in the future. The PM looks bad either way. People will believe them to be incompetant or untruthful (or both). Renovator: I thought your new bars line was meant to increase output & keep up with the demand? There was all the hype about the new setup would meet demand blah blah. It all sounds like white noise to me. Sales of PMs are usually related to the metal price. The normal relationship is if the price is up, demand is up because people are optimistic and think prices will continue to rise. However, this recent increase in demand coincided with a fall in the silver price. Point is, forecasting is not easy because it requires forecasting metal prices, and I don't see any guru who gets that right all the time. The key problem we have is estimating how long will this PM bull market continue? If it is 2 years vs 10 years then that makes a huge difference to how much money you spend on equipment. Keep in mind also that for a number of years after the tail end of the peak Mints can expect almost zero demand as sales back from sellers will exceed demand - dealers will buy little from us as they just resell what they buyback. If forecasting is so easy then please provide and estimate of the number of ounces of silver the US Mint will sell over Oct/Nov/Dec this year just one quarter's sales. Historical figures are here: http://www.usmint.gov/mint_programs/american_eagles/index.cfm?flash=yes&action=sales. Alternatively, please provide annual silver ounce sales estimates for 2012 through to 2016. I think a +/-10% margin of error is reasonable. Or even easier, just tell me when the bull market will peak, that is not too hard is it? Of course the above is a bit silly because none of you are spending millions of dollars based on those forecasts so have nothing to lose. We do, and if we get it wrong it is the WA taxpayer that loses. As Ponzi says: "what I am doubting is their managements conviction in the sustained increase in demand for physical bars over the next 5 years. I think it's a reasonable position to take." DOING SOMETHING Renovator: It wont solve the problem but it will alleviate some of the backlog.. It seems they are doing nothing. Doing something is better than nothing. Ponzi: "Their perspective of the market must not warrant expansion IMO. This is reflected by the fact they are not ramping up production to the tune of huge outlays in hardware and personnel." We have been doing something. I won't go into a laundry list of improvements and expansions but just draw your attention to page 24 from our 2011 Annual Report and the category "Plant and Equipment, Additions". This is what we have spent on new equipment. The figures for the past five years are: 2011: $7.038 million 2010: $14.34 million 2009: $3.783 million 2008: $2.938 million 2007: $2.41 million Total over five years $30.509 million, compared to total plant and equipment at the end of 2006 of $7.477 million. So we've spent four times what we had on the books in 2006. All of that has to be paid for out of profits (after paying dividends to the WA Government equivalent to normal corporate tax rates). Projack asked the question "government run mints capacity is kept on a certain limited level?" The answer is there is no restriction, however we operate under our own restriction that we will not increase the net borrowing of the Government (as this can affect their credit rating). As our CEO says in our Annual Report, capital expenditure is "fully funded from internal cash resources, without resorting to increased borrowings". We do not want to be a drain on the Government. PRODUCTION Renovator: Lol yeah its complicated ...melt ....pour ....stamp ....stack. its medieval technology that the 21st century cant manage hahaha hilarious Projack: What is so complicated to melting down silver to make smaller 10 oz, 100 oz, 1 kilo pieces? geewiz: I'm guessing that it doesn't take too long to pour some liquid into a mold. Renovator: Hey boss i dont think it has anything to do with the refinery brons earlier post said they had plenty of 1000 oz bars so its just the pouring of them thats the problem It isn't as easy as you think. Firstly, if you gave it a bit of thought, you'd realise you can't pour exact weight bars. Get 10 containers with no markings on the inside and a litre of water and try and pour exactly 100ml ten times. Then imagine your water as molten silver and you have to do that for 8 hours. The actual process involves melting the 1000oz bars, granulating them, sorting the granules into sizes (I think it is three groups), loading into a automatic weighing machine, the machine weighs out exact amount of granules into cups, those cups are poured into moulds, the moulds go through a pizza oven style furnace, then cool them down, do another weight check and finally stamp them. All of that is done in at the Refinery site, not the Mint. We are working on automating as much of that as possible, but either way it isn't medieval technology and the equipment doesn't come cheap. STAFFING Renovator: I dont think theyve heard of overtime or putting on another shift to meet demand employing more australians win win situation. geewiz: If the PM had people working 24/7 pouring bars they'd easily be able to supply all of their Australian customers 100% of the time. Plus it would be profitable for them and create some new night shift jobs for people. geewiz: Yeah, employ them and tell them what the circumstances are. {in response to spannermonkey: And than what do you do with the new staff as demand drops of slowly Give them to boot & back on the dole for the new staff} I think you guys are forgetting that over here in WA we have a mining boom on the go. We lose staff to the big paying mining companies all the time. It is hard to attract workers for night shifts, let alone normal shifts, especially when you add on police checks (nothing allowed, that cuts a fair number out straight away) and the fact they need frisk searches every time they leave the factory. There is a whole lot of OHS stuff and training since we are dealing with molten metal, so some cost involved in new employees. There is no way with hugely better paying jobs someone is going to work for us when we might just have to cut them later. We do use labour hire firms for temporary workers, but often when we want them back, they have gone on to other work, so we have to retrain a new batch. COMPETITION Projack: Monopoly status has also obligation, and I do not really care how much a coin press cost. They waist so much money on everything else and this is only the very few business producing real economic income under their control and they messing it up. VRS: Bron - I don't believe for a minute that PM does not have alternative contingency for rebarring. VRS: Yes, that's why they bought Matthey out (or AGR back to be precise) - do you not remember? At the time the deal was (so PM say) intended to prevent exactly this situation - that's extra capacity of anything up to 400 tones per year mi'laddo... Are they telling us that this year's output is 400 tonnes up on last year's? I doubt it - but whatever the case this kind of cock-up is (or should be I hope) bloody embarrassing to PM... Anyhow Newmont used to get all their refining done thru the Matthey facility as was - Because this is a national interest situation why on earth can't PM sub-out to Melbourne on silver or gold? There is no monopoly in bar production. If there is so much money in bar premiums and it is so obvious there is huge demand coming ahead in the future then where are all the entrepreneurs setting up bar production facilities? There are plenty of small foundries and a few boutique refiners in Australia, why aren't they getting into this market gap? Why aren't coin dealers importing silver bars from overseas from the more foresighted commercial operators? I'd suggest that you are overestimating the profit from this business and underestimating the risks involved if demand doesn't hold up for long enough to recoup your costs. You may not care how much a coin press (or bar equipment) costs projack, but the WA taxpayer does, because ultimately they are paying for it. The 400t capacity was in reference to gold, not silver, which has always been a by-product of gold refining. The Melbourne facility is not a refiner, it was all consolidated to Perth to achieve economies of scale. There are no significant refiners/melters in Australia we could subcontract out to. STOCKING UP Grinners: How about storing silver in 10 oz and 1kg bars from now on, instead of having "1,000oz bars coming out the ears" as they have stated before... Don't worry about demand being 40 fold in a day because you have been pouring bars for the past 10 years, and storing the metal in convenient form which can be sold if extra demand comes! Even if we could get ahead of the current demand (and we were starting to stock up a bit before silver's drop), we don't have some unlimited pile of silver that we can just hold. We can stock up a bit, but there is only so much space and insurance cover. We run pretty much like any business on a throughput basis. We are not a central bank who just has tonnes and tonnes of metal lying around. Just to clarify, if demand exceeds what silver we get from refining, then we ship in 1000oz bars to rebar. We don't make and stockpile 1000oz bars. My comment was that we have no problem sourcing raw silver, the problem is getting that into smaller forms. PRICE EXPOSURE BBQ: Perth Mint must have made fortunes when the price rose back in April/May. As must have most mints. Price drops like crazy and they are still in the profit. Makes you wonder about the true production costs. Either way they must be doing fine, profit-wise. This is without going into numismatics. We don't make fortunes or lose fortunes on price changes we do not own the metal we use, it is owned by our Depository clients. Prices can drop 50% and it won't make a difference to our profit, except if that results in a drop in demand.
Cheers for the monumental missive Bron - although I didn't expect a question to be answered with another question Thanks for this, VRS x
Ok then....Bron : We do not want to be a drain on the government... wow you must be the only one that doesnt. Production...Melting & pouring metals is medieval technology.. You might be automating it but it is. Doing something...Staffing you use labour hire firms but obviously not enough or often enough . Competition... Projack specifically mentioned the coin press but you go on to talk about bars ..You know yourself you have the monopoly on coins so why start talking about if theres so much money in bar production wheres the entrepeneurs ? Competition you say its 400t of gold & silver is a by product of gold so theres at least a % of silver that comes with it. but dont mention it just tell us about the gold. . Stocking up ...Yuo say theres only so much space & insurance cover 1000oz bars are minute why would you mention theres only enough space i understand the insurance side of it but no space? lol .Im sure you could up your cover & the sales would more than cover the premiums. Price exposure... We dont own the metal ? Why dont you buy some? Prices can drop 50% & it wont make a difference to our profit so invest some money in some then.You can obviously sell it even if its in numismatic coins. This is just my opinion but you said SFA to really address any of the problems just made excuses & threw a few big figures at us to make it look like they are spending a lot .The big question is are they spending it wisely ? Its not showing on your production capabilities or your computer systems after the dragon saga that unfolded the other week .
Not really closely related, but, but our Federal Government has waisted $2.5 million on lawyers defending the Malaysian solution on the high court. The whole procedure cost $5 million, when it was so clear the case can not be constitutional, but nobody really cared if the tax payer could buy a new coin press on that waisted money. Legal tender coin minting is a monopoly. Even Australia Post uses helicopters to deliver 60 cents mails to 5 addresses in some region and electricity is connected to houses 10s of kilometres from the main line. This is what I meant as an obligation to a monopoly. Sometimes it would be easier to stop city bus services when only one passenger siting on it to save the taxpayers money, but Australia not a third world country and should be able to buy a coin press serving the world with coins everyone want to buy. How can you aim for a larger share on the world bullion coin market if you can not supply what they want when they want it? You can not sell tomorrow what you did not sell today, because your customers will buy maples, eagles, philharmonics instead. If you do not need the coin press you do not use it, that simple, but you have it and can be used as needed even if the other is on maintenance or broken down. The only way a business can grow if they have positive view on the future, and this is what I do not see from the Perth Mint. If the margin is small you need quantity. Just imagine McDonald not buying the million dollar equipment they need because a cheeseburger is only $.1.30. Sorry, but I do not see trying to justify not to make more coins is a way to progress in the future, specially if not only simple delays we have this time, but a complete stop on taking orders on the most popular coins and all bars.
Obviously the WA government did not invest in gold and silver because they were told by their expert it is not the WA taxpayers' interest. Now the same expert still in charge and even the management of the Perth Mint thinks investing in more money in the Perth Mint is a bad idea.
Bron, what a fantastic write-up. I'm a little surprised about the price exposure bit. Are you guys buying silver daily with fluctuating prices like your customers are?
Hey! Bron!! Nice to see a man with a double-barrelled shotgun who knows how to use it!! Thanks for the comphrensive reply - lots of info and must have taken a lot of your time. I must admit, I'm getting pretty jacked off with all the anti-Perth Mint vitriol thrown around (mind you, I'm a bit peeved today too - couldn't buy any gold or silver; sizes I wanted were unavailable! But then what can you do if every man and his dog and his grandmother is knocking on your door wanting to buy PM? Thats right - sell it to them. I believe that's called "free market activity"). I don't see any of this type of stuff sprayed around about the other PM providers in the Australian marketplace. Maybe because, deep down, those who carry on the most, love the Perth Mint product and sulk when they can't get it?
Well, from what I heard in the past, the USA gets some silver blanks from the Perth Mint to make its Silver Eagles. How much, and whether they use any other suppliers, I'm unsure of.
Unfortunately Canada and the Europe don't have yet the technology to make milk spot free coins, and they did not trust the Chinese on fake blanks.
Double barrelled shotgun ? it looked more like a water pistol to me. At no stage did he mention when & if they would be available & in what quantities What the output of the new line is ..How far behind they are Any changes to the online system thats failed miserably .If they intended to employ more staff to cope with demand just told us the problems with using labour hire not that they were training people now to keep up with demand or how many they had on now trying to keep up . Werent they the questions people were asking or did you get all impressed with the length of brons post & lose sight of the original questions ?........ Man some people are easily calmed by diplomatiic rhetoric.That totally avoided the actual questions .im out its a waste of time trying to get straight answers .Wheres Ron currie he was supposed to adress these things but hes conveniently MIA . As far as sulking because i cant get it Im not even buying anymore ive reached my goal so there goes your arguement. Have you ever thought that things could be improved on anything? well the first step is to identify the problem & thats what most here are doing making fair comments about specific problems they have not whinging for the sake of whinging..
I have a feeling that Ron Currie was probably the gentleman who was recommended to join SS forum and then promptly outed and I can't say I blame him ! ......... NO offense intended to you GP .
I appreciate Bron's response, but I stand by my criticism of PM management. I agree that product forecasting and inventory management is not an exact science. It is subject to continuously varying economic sentiment, or "animal spirits", but this is not an issue restricted to the precious metals industry alone. It is an issue for almost every business sector, outside of those with high levels of government regulation and interference. And yes, over forecasting can bring just as much criticism as under forecasting, although usually from a different set of stakeholders. So it's not easy. Never said it was. But that's why Managing Directors and CEOs get the big bucks. They are supposed to be good at their jobs within their area of expertise. They also have access to more industry information and analysis than outsiders. If anybody can do their jobs just as well, why are they paid so much more than the rest of us lessor mortals? Nobody can be expected to get it right all of the time, but industry experts should get it right more often than not. In particular, they should be able to build in some contingency into their infrastructure capacity upgrades, so that capacity is not exhausted within a few months after commissioning. I was also surprised by the comment "The normal relationship is if the price is up, demand is up because people are optimistic and think prices will continue to rise. However, this recent increase in demand coincided with a fall in the silver price." It seems fairly obvious, to me at least, that demand that increases dramatically with price is an early warning sign of an unsustainable bubble, whereas increased demand in response to a falling price is indicative of a healthly and ongoing bull market. The former situation indicates that future demand is being brought forward to the present, which means that the current levels of demand are not likely to be sustained in the medium or longer term, and conservative forecasts and infrastructure investments are justified. The latter situation indicates the opposite. It's not rocket science. Demand increased on falling prices in 2008, and back in April, and again now. We are still in a healthy bull market that has years left to run. One day a bubble will form, and then demand wil be destroyed when it pops, but that is not even on the horizon yet. Maybe the PM is another contrary indicator, and we should all sell when they finally invest in sufficient capacity to meet market demand.
