Perth Mint to close unallocated silver

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

  1. Silvery Moon

    Silvery Moon New Member

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    Bron, dont misinterpret my posts as a personal attack on you. I have never met you and read little of what you have written generally. When I say that PM position with regards to the backing of the silver unallocated accounts can't be verified, it is simply that. It dos not mean I think PM is fraudulent, just that we cant know it isnt. You could swear on a stack of bibles and it wouldnt alter that fact.

    I am not alleging a cover up, merely observing we cant tell what the position is, as PM and the audit will not break down exactly how much physcial silver is held in PM possession.

    You know the verification I seek, confirmation from Perth Mint, with a suitable audit, of the following points:

    1. How many ounces of silver are held in PM unallocated silver accounts?
    2. At what average price was this silver purchased by investors?
    3. What is the total amount of actual physical silver held in PM vaults, or anywhere else within the confines of the Perth Mint vaults and workshops, to back the silver bought in point 1 above?
    4. Are any of the funds accepted by PM in the unallocated silver program used for ANYTHING else but buying physical silver, or is it used as funds to purchase equipment, pay wages, bonuses or any other of the running costs for the Mint? Answered, and I am satified there is no ambiguity on your response.
     
  2. Dwayne

    Dwayne New Member

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    Why on earth would you think you need to know point 2? Heck, I would think it's almost certain that Perth Mint wouldn't know that figure, and it's an ambiguous figure anyway with several different ways of calculating it even if you did have all the data on hand.
     
  3. bron suchecki

    bron suchecki Active Member Silver Stacker

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    OK, so you accept what I say but as Reagan said "trust but verify" and thus your issue is that while you accept the independently audited financial statements, they are not specific enough to verify your questions with regards to silver.

    Firstly, I am assuming that you accept note 25b to our annual report http://www.perthmint.com.au//documents/ RT_2010.pdf which confirms that our Depository liabilities and precious metal assets balance (never exactly because we often have long positions where we prebuy metal for collector coins that is a whole other discussion). If we kept clients' money and did not buy metal, the figures in this note would not balance and in addition, it would show up in our cash flow statement that any competent accountant would be able to discover through an analysis of our annual reports over time.

    Your issue then is that we "are talking about a total dollar value, not physical silver backing. Maybe PM are heavy on gold but light on silver. Dollar value would balance but not the type of metal."

    This statement of yours is crucial. For the benefit of everyone, lets make it clear what you are proposing we could be doing due to the opaque nature of note 25b which is not broken down by metal:

    1. PM receives $10,000 from a client to buy 50%/50% gold/silver at $1000 and $25 per ounce
    2. PM sends confirmation to client they have bought 5oz of gold and 200oz of silver
    3. PM Treasurer decides not to buy gold and silver, but thinks the gold price will rise more, so just buys 10oz of gold and no silver.
    4. At this point our balance sheet would say Metal Assets = $10,000 (10oz @ $1000) and Liabilities to Clients $10,000 (5oz @ $1000 & 200oz @ $25) so note 25b would balance but obviously the Mint has taken on a serious risk. Note we have no cash in our bank, we have spent it all buying gold.
    5. Let say gold declines to $900 and silver rises to $30.
    6. If it was the 30th of June, then our auditors would record Metal Assets = $9,000 (10oz @ $900) and Liabilities to Clients $10,500 (5oz @ $900 & 200oz @ $30) so note 25b would not balance and they would post a loss of $1,500.

    I will leave it to readers to ask themselves what motivation the Mint would have to play the gold:silver ratio, but the example above shows that as gold and silver prices move in percentage terms differently, it is impossible to maintain the balance in Assets and Liabilities in note25b from year to year without recording profits and losses.

    What is observable is that the figures in note25b balance (within reasonable tolerance) from year-to-year. How our Treasurer manages to achieve this balancing at 30 June without generating significant profits or losses (in the face of a bullish but volatile market and changing client buying and selling) I think stretches the bounds of credibility.

    You will also note that in the example above the dollar value of client liabilities is "marked-to-market" at the end of each year. From an accounting point of view the auditors do not care what the client paid, they only look at today's value (see note1g & 1l). This is why your question 2 about the average prices paid by our 18,000 or so Depository clients over 14 years is irrelevant. If you accept my answer to question 4 and note25b then this means we are not holding any "historical" amounts of cash paid by clients as we used that cash to buy metal. Note that ourcash is only $94m on our balance sheet compared to $2458m of Depository liabilities.

    I would also draw your attention to note1u where it says "The Corporation does not enter into commodity (precious metals) contracts other than to meet the Corporation's expected sale requirements, and then only on a back to back basis so as to eliminate the risk of movements in precious metal prices. The Corporation has a policy of minimising its long or short precious metal positions by utilising leased precious metal and unallocated precious metal owned by the Group's customers in its working inventories."

    You may well argue that "back to back so as to eliminate the risk of movements in precious metal prices" does not mean backing silver purchases by our Depository clients with silver purchases from the market, but if we did not then we would not be eliminating the risk of price movements and we and the auditors would be lying with that statement.

    It is also worth noting that we have an outside Big Four auditing firm who does our internal audits. Internal audits are detailed transactional-level audits to verify to the external auditors (who are a different Big Four auditing firm) and our Audit Committee that the Mint is complying with its policies (such as note1u) and identify any transactional or accounting irregularities and significant risks. Running a gold:silver speculative trading position would constitute such a risk. The unusual trades the Treasurer would have to enter into to result in a balanced note25b every year would also show up as transactional irregularities.

    Note25b answers your questions 1 & 3 but only in aggregate, so I assume that if note25b was broken down by metal you would be happy? Currently we do not break it down so as you say "we just have to trust them. Some will be okay with that, others clearly wont". What I put to you and those reading is that in light of my above response, do you think it reasonable that we would do what you are proposing, whether it is it even possible, and whether it would not get picked up during internal or external audits over 14 years?
     
  4. Clawhammer

    Clawhammer Well-Known Member Silver Stacker

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    Bron, I assume from this reply that you enjoy and are passionate about your job.

    I'm jealous, I hate mine :/
     
  5. BullionBull

    BullionBull New Member

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    Those percentages are still much too high for me.

    If I had $1M in allocated gold, let's say, which is a lump of metals the size of a loaf of bread, the Mint wants $10,000 a year to store it? Divide that by 10, and then you may have a deal.
     
  6. BullionBull

    BullionBull New Member

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    +1.

    You are only truly grown up when you realise nobody out there is looking out for you but yourself.
     
  7. WageSlave

    WageSlave New Member

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    You could always stick your million in gold wherever the storage is cheaper.


    Even more grown up would be not insinuating criminal activity with no actual evidence.
     
  8. Yippe-Ki-Ya

    Yippe-Ki-Ya New Member

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    I think you're being a little unfair here.
     
  9. BullionBull

    BullionBull New Member

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    I'll thank you not to put words in my mouth, matey.

    I was endorsing the sentiment expressed by Silver Moon, namely that a degree of faith, or "trust", is required when handing over care of precious metals to another party, and it becomes even more a matter of faith when the other party is not totally transparent.

    This has nothing to do with criminal activity.
     
  10. bron suchecki

    bron suchecki Active Member Silver Stacker

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    Those are retail rates. Anyway, where can you get 0.10% storage rates from for fully insured allocated?
     
  11. BullionBull

    BullionBull New Member

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    Bron, for that price ($10K/yr) I'd rather install this. It's much cheaper, and IMO offers adequate protection, especially if combined with surveillance, patrol and alarm systems:

    [​IMG]
     
  12. goldpelican

    goldpelican Administrator Staff Member

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    ...I don't see the little man inside that you ring up to tell "sell 3000oz at market"...
     
  13. renovator

    renovator Well-Known Member

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    now thats a safe !!!! ive got safe envy... dont know if its the safe or the contents
     
  14. BullionBull

    BullionBull New Member

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    Oh no, Pelican! I'm not a metals trader. This is money. This is for keeps. I'll trade out of it for other assets slowly and deliberately.
     
  15. WageSlave

    WageSlave New Member

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    Sorry BullionBull, was referring to Silvery Moon with that remark, not you. Yes, trust is necessary anytime you hand your money over to someone to manage - these operations are never completely transparent, not the Mint, not ETFs, not GoldMoney, not Kitco, not your super nor your mutual fund. Such is life. But suggesting the other party is doing anything untoward is bit much in the absence of evidence.
     
  16. domdolittle

    domdolittle Active Member Silver Stacker

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    That's a Safe, mate !

    It would be just right for my 1966 round 50c.

    I rather buy gold than guns, but I won't judge...

    I'll leave that to those who think they can. :rolleyes:
     
  17. Silvery Moon

    Silvery Moon New Member

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    Thanks Bron a much better response than talk of NWO and price suppression.

    I note the the annual report deals with the 09/10 financial year and show metal inventories of AUD2.7b. The price movement in gold and silver in that period does not correspond to the example you gave in point 5 above. I understand that you are trying to make the point that it would be difficult to balance the various metals liabilities, but given the actual figures for 09/10, it would be much less difficult than you are representing by saying gold went down to $900 and silver went up to $30 and the initial purchase was 50% each in dollar terms. Without knowing what the breakdown is between gold and silver assets and liabilities, it does not really led to any informed opinion on the actual physical backing of unallocated silver accounts. This may not be an issue when both metals price movement is somewhat corralleted, however if there is a really significant diversion (much greater then in the last six months)? ie what would happen with silver at $600 oz? Unless PM does indeed hold ounce for ounce, silver in PM physical possession, I can see that there would be the very real danger that PM entire equity could be wiped out.

    Again, assurances are one thing, evidence is another.

    Moreover, given the detail in the annual report, I am a loss to understand the PM position with regards to detailing the actual silver held in physical possession. That aspect is sorely lacking and an essential part of due dilligence. I see from an earlier post that you agree the information should be released, but that the PM policy is not to do so. I would suggest that PM is better served by being transparent on this issue.

    "The Corporation does not enter into commodity (precious metals) contracts other than to meet the Corporation's expected sale requirements, and then only on a back to back basis so as to eliminate the risk of movements in precious metal prices. The Corporation has a policy of minimising its long or short precious metal positions by utilising leased precious metal and unallocated precious metal owned by the Group's customers in its working inventories." This bears closer attention. Looking at 2008/09, the reports states metal liabilities of $2.021B and assets of $2.022B, however $635m of the assets was leased to AGR Matthey. All the leased assets were closed out in the following year, and counted as PM inventories, due to the dissolution of AGR Matthey. It would also be interestimng to see how much of that was silver.
     
  18. bron suchecki

    bron suchecki Active Member Silver Stacker

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    Note 25b was actually inserted at my request. Auditors love consistency and it was not seen as necessary because all the information was available in notes 8a, 8b, 15b & 18.

    My argument was that very few could analyse a balance sheet and 25b was necessary to make it more obvious. I will continue to make the case for a split by metal (or just metal ounce reporting) and see how it goes.

    Below is ten year's worth of the figures. Metal prices as at 30 June can be downloaded from http://www.perthmint.com.au/investment_invest_in_gold_precious_metal_prices.aspx

    A spreadsheet nerd may want to play around with them with some guessed gold/silver ounces held % split (plat & pall are irrelevant). Best I can do is say that the ratio of gold ounces to silver ounces over that time was increasing then relatively stable from 2006 onwards.

    Year Metal Assets Metal Liabilities Net Position
    2001 232741 234611 -1870
    2002 221512 222458 -946
    2003 409098 408116 982
    2004 548112 545151 2961
    2005 620291 620381 -90
    2006 1097262 1096361 901
    2007 1096820 1095829 991
    2008 1832068 1829431 2637
    2009 2024745 2021989 2756
    2010 2699127 2672120 27007
     
  19. calmwinds

    calmwinds New Member

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    thankyou for FFFFFFFFFIIIIIIIIIINNNNNNNNNNNNNNNNAAAAAAAAALLLLLLLLLLLLLLYYYYYYYYYYYYYYYYYYYY answering the question i have spent HHHOOOUUURRRSS reading this forum and googoogoogling to find out!!
     
  20. adze67

    adze67 Well-Known Member Silver Stacker

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    Posted on the 1st of the 4th by unfunk (had to look back a bit to find it)...roflmao...
    How did it take so long to ffffffiiiiiinnnnnnaaalllllyyyyyyyyy find it....hehehe
     

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