19 June 2008

Perth Mint Silver Certificate, real money: Crikey!

I've got a reasonable degree of confidence in the Perth Mint but the Hommel story has hit the boys a Crikey.com. They should be very conservative going forward otherwise they are going to get nailed like they did with Paladium a few years back. Fact is, the era of financial engineering and massive paper ponzi games is over. If the Perth Mint has a problem funding a proper silver depository they should introduce a small storage charge for their unallocated silver. One thing is for sure much higher prices for silver are coming and a renewed focus on silver and gold as mediums of exchange can only enhance Australia going forward. Instead the RBA has joined the UK and the US in handing out money for "securitised for the purpose of a RBA handout" mortgages.

People want the security of a financial asset that is not someone else's liability, that's why they invested in the PMCP. If the Perth Mint isn't able to fund its storage via spreads and leases silver to entities with relationships with bullion banks then the whole point of the the yield free investment is moot.

Bullion banks business model is now dead and buried, the world of declining precious metal prices is behind us for the forseeable future.

The Perth Mint needs to get it hands on lots of silver so its cred doesn't get undermined by slow delivery.

"A storm appears to be brewing around The Perth Mint, with speculation that the Mint’s precious metals pool has run dry. There have been recent reports from customers of delays or refusals from the Mint when making requests for the delivery of silver.

The Perth Mint Certificate Program allows customers to purchase precious metals without the burden of having to personally store them. However, dozens of customers have reported long delays or straight refusals from the Perth Mint when trying to physically collect their silver.


The Mint is wholly-owned by the Western Australian Government, who fully guarantee the certificate program. The PMCP is the only certificate program in the world which has such government backing.


Currently the Mint has a precious metals liability of $880 million dollars, with $380 million going to subsidiaries to be used as an operating pool. With this much liability it seems inconceivable that the Mint could have run short of silver, and yet the signs seem to point to this. The Mint has told customers that there is no shortage, and that the delay is in production. But surely with an $880 million dollar operating pool they could ensure that production is completed on time.


Jason Hommel from SilverStockReport.com has had complaints from 30-50 of his 80,000 subscribers, and has informed the WA government on their behalf -- to no avail.

Two readers also sent in emails they had received from Nigel Moffet, the Treasurer and manager of The Perth Mint, which suggested an unhealthy reliance on the government.


Moffet reportedly said that investors in the certificates do not need to worry about the solvency of the Perth Mint, but rather the solvency of the government of Western Australia, which has a surplus of $2 billion/year.

If The Perth Mint were selling silver futures without the actual bullion, it would be a serious breach of the Fair Trading Act.


Hommel believes that any sort of government bail-out would send silver prices skyrocketing, as has happened before with gold prices, and could further destabilise world currencies.


The Perth Mint has refuted these “absolutely baseless” allegations and stressed that they are “audited rigourously” by the WA government and independent companies such as PricewaterhouseCoopers.


They also pointed out that all PMCP precious metals are insured by Lloyd’s of London, and that the Western Australian government has a AAA rating from Standard and Poor’s.


But with the price of silver set to soar (and therefore the amount of the Mint’s liability), troubling questions still remain.

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