Perth Mint to close unallocated silver

Discussion in 'Silver' started by bron suchecki, Mar 29, 2011.

  1. bron suchecki

    bron suchecki Active Member Silver Stacker

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    FYI, this letter has just been sent to all Depository clients. I'll be writing a blog on it shortly, let me know if you have any questions or stuff to clarify and I'll address it in the blog annoucement.

    Peter Schiff has apparently sent a letter to his clients, if you want to read it, it is on goldismoney2.com forum. Not surprisingly some of the first knee jerk reactions are negative, eg "This is an obvious and transparent attempt to drum up demand for yet more worthless unbacked silver paper, and to take pressure off of the physical market". Hmm, but we are CLOSING it, if we wanted to take pressure off they physical market wouldn't we be continuing to sell it?!? :/

    Dear Depositor,

    Since the inception of The Perth Mint's Depository and Certificate Programs, clients have had the option of holding their metal in Allocated or Unallocated form at the Perth Mint. Allocated metal is stored in specific coin or bar form on a client's behalf whereas Unallocated metal can be in the many different forms of gold and silver used to support our refining and manufacturing businesses. In recent years the amount of Unallocated silver we hold on behalf of clients has exceeded that which we need to support our business activities, and the rising insurance and other costs associated with maintaining these balances have impacted on our profitability.

    For this reason, The Perth Mint will be withdrawing the Unallocated silver option as of 1 May 2011 and replacing it with a new product called Pool Allocated silver.

    At this stage Unallocated gold will not be affected.

    The Pool Allocated product will operate in a similar fashion to Unallocated, except that the metal backing it will be stored in physical bar form in The Perth Mint's vaults and the bar lists detailing bar weights and numbers will be published daily, along with total Pool Allocated client holdings, on The Perth Mint website (www.perthmint.com.au). Clients will own a share of this pool of bars although an individual's holding will not relate to any specific bar. This pooling enables The Perth Mint to offer a low storage fee of 0.95% per annum for Pool Allocated, which will be charged quarterly in advance, payable in six-monthly intervals. Pool Allocated clients will be able to convert their holding into physical metal for collection or specific Allocated storage.

    From 1 May 2011, no new Unallocated silver accounts will be opened. Existing Unallocated accounts will remain open as before but clients will not be permitted to add to their balances.

    We have also taken this opportunity to update the Terms and Conditions that apply to The Perth Mint's Depository products and under existing Terms and Conditions we are required to give 30 days' notice in the event of any change. These changes relate mainly to revised storage charges and billing periods, and the identification documents required to open a new account under Australian Anti Money Laundering legislation. You will find the revised Terms and Conditions at http://www.perthmint.com.au/investment.aspx. We will be writing separately to all existing Allocated depositors who will be affected by these changes. Please note that these changes will become effective on 1 May 2011.

    Should you have any queries arising from the changes outlined in this letter, please contact your Approved Dealer or The Perth Mint directly.
     
  2. 2ds

    2ds New Member

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    Hardly supprising really considering the uptake of AG in the last couple of years, especially when you consider that unallocated was created to make it easier for the mint to keep a decent supply of stock on hand without having to pay for it. simply an arrangement of convenience that is no longer convenient for the mint.

    Bron, can you tell us how much demand for unallocated has increased in the last 2 years?
     
  3. Big A.D.

    Big A.D. Well-Known Member Silver Stacker

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    Seems like a shift from a production management stop-gap to a full product offering.

    Nice work.

    Hopefully it will reduce confusion about what "unallocated" actually is too. The whole the-metal-is-somewhere-in-the-mint's-production-line-but-we-can't-point-to-it-because-it's-in-production explanation has caused soooooo much pointless discussion. "See that big pile of bars in the corner? That's the Pool silver."
     
  4. goldpelican

    goldpelican Administrator Staff Member

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    Well that's going to cause a revisit of my SMSF strategy!

    Any idea on the competitiveness of the new Pool Allocated - will the spreads be similar, and will there still be the extra 2%/1% entry/exit fees on Australian customer balances under $50k?

    Thanks for sharing this here.
     
  5. goldpelican

    goldpelican Administrator Staff Member

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  6. bron suchecki

    bron suchecki Active Member Silver Stacker

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    Pretty much pool allocated is replacing unallocated, so spreads and entry/exit fees the same.

    Note one big change is to storage fees, which will move to current market price, not historical buy price (our insurance is based on market price). But we will be dropping % rates at same time.

    Allocated Gold 1.00% (was 1.5%)
    Allocated Silver 1.90% (was 2.5%)
    Allocated Platinum 1.00% (was 1.5%)
    Pool Allocated Silver 0.95%
     
  7. silvertongue

    silvertongue Member Silver Stacker

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    LOL!!
     
  8. goldpelican

    goldpelican Administrator Staff Member

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    So - what bar sizes will be used as the backing? ~1000oz bars or smaller? If it's 1000oz bars, can delivery be taken of a bar from the pool allocated without incurring fabrication charges? I mean, if the bars are already there - would be nice for some to be able to take delivery of a ~1000oz bar and have the actual bar weight deducted from their balance (I know they range in size from 950 to 1050oz etc).
     
  9. SilverQueen

    SilverQueen New Member

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    Any advice on forum got any advice what to do? So does that mean with Pool Allocated they are not using the pool for their production usage? so what is the main difference of Pool Allocated and unallocated? one charge fee the other don't?

    So is it still viable to have metals stored with PerthMint or

    (1) convert all to physical bars for delivery? - % change fabrication + % delivery?
    (2) is the current storage fees% competitive in Australia? do we have another alternative?

    PerthMint has to be more transparent & crystal clear into their definition of things if not investors will worry that Perth mint is hiding something and it goes viral into investment community.

    Strange things are happening and hope PerthMint is not turning out to be empty like COMEX & LBMA.
     
  10. goldpelican

    goldpelican Administrator Staff Member

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    Thought this was answered by

    So Pool Allocated is literally a pile of numbered bulk bars that are "allocated" to backing the balances of Pool Allocated holdings, with daily published lists. 10 clients with 100oz each, there's a 1000oz bar numbered 123456 sitting there to provide the physical backing, as opposed to saying "well there's about 1000oz of rounds sitting in the planchet hopper at the moment, so that's counted towards backing unallocated accounts".
     
  11. 2ds

    2ds New Member

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    Gah, dont' be paranoid.

    The reasons for this are obvious, unallocated was a service offered by the mint because it was mutually beneficial. The mint could keep a big stock of raw materials so in the case of supply shortages or supply chain hiccups their operations were not adversely affected. Correspondingly stackers got to store bullion with no rental costs.

    This worked until too many people wanted unallocated, at that point the mint had way too much silver in storage as part of the production chain and they had to build new facilities to house it in (which costs money, which means you have to charge for it). The rising popularity of PMs is what has triggered this change.
     
  12. bron suchecki

    bron suchecki Active Member Silver Stacker

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    Gee, I should employ you guys to write responses for me, couldn't have said it better myself. It will be backed by 1000oz bars.

    I forgot to mention that 50% of the fabrication fee for the bars is paid upfront, the other 50% when you take delivery.

    SilverQueen - as to unallocated vs pool allocated, come 1 May you won't have to worry about that because you won't be able to buy unallocated.

    I personally look forward to never having to explain the unallocated concept.
     
  13. goldpelican

    goldpelican Administrator Staff Member

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    So Bron, how did unallocated work back then the mint offered it? :lol:

    Did you see my earlier post about taking delivery direct from Pool Allocated?
     
  14. Captain Kookaburra

    Captain Kookaburra Well-Known Member Silver Stacker

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    I wonder if you get a refund too seeing as though 50% of the fabrication fee is up front ;)
     
  15. bron suchecki

    bron suchecki Active Member Silver Stacker

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    Yes, you can take delivery in actual 1000oz bars and just pay the remaining 50% fabrication. You can also just sell it and buy smaller bars/coins if you want delivery in other forms. The 50% paid upfront won't be refunded, as that covers our cost in sourcing/making the bars and when we eventually see selling we will incur costs having to ship it to London and we will just get spot for it.
     
  16. goldpelican

    goldpelican Administrator Staff Member

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    Oh, so no discounts for taking it in bulk :) Was wondering if there might be a "wholesale" option for taking delivery of 1000oz bars instead of having to pay for fabrication into say 100oz or 1kg bars.
     
  17. rbaggio

    rbaggio Active Member Silver Stacker

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    Thanks for explanation Bron.
     
  18. Matthew 26:14

    Matthew 26:14 New Member

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    I wonder if you will now have to pay cap gains tax in your smsf now you have in effect been forced to sell your holdings?
     
  19. Big A.D.

    Big A.D. Well-Known Member Silver Stacker

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    Interesting question.

    I suspect it would depend on how the mint handles the change over (they say they'll be writing to everyone affected), but it might be possible that there isn't a CGT event if one product is being withdrawn and replaced with a similar product of the same value. Its basically just a change in the terms and conditions of how the Perth Mint handles a certain number of ounces that you own (and a fancy new name for the type of account they're held under), so you might not actually be selling your unallocated metal and repurchasing it in semi-allocated form.

    (Disclaimer: I am not an accountant. I'm certainly not your accountant. Contact the Perth Mint if you are affected by the change and seek professional advice if required).
     
  20. goldpelican

    goldpelican Administrator Staff Member

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    Shouldn't be an issue for existing unallocated holders - they just can't add to the balance.
     

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