Poor Prospects for Kitco/Perth/Matthey

(Oh what a tangled web they weave!)

Silver Stock Report

by Jason Hommel, May 19th, 2008

A concerned reader reports:

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Jason, 
I phoned AJR Mathey in Auckland today to see if they had any silver in stock. In the past I’ve been able to walk in and buy a few one kilo bars(cash only). The young gal said they had none in stock and that they were proving hard to get; some were ordered and I could pay my money and lock in a price and wait my turn. Asked what they had, she replied 2 two kilogram bars. Not that New Zealand is a gold-bug hot bed; I think only the Asians invest in the metals, but it does underscore your contention that the metal is short. 

Regards, Doug 
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Why is this important? Because Perth Mint has about $880 million of precious metal loans, and about $380 million of that is loaned to AGR Matthey, and AGR Matthey is reported by one of my readers to not have 2 silver kilo bars to rub together!

As I discovered two days ago, and wrote here:
https://revealingfraud.com/2008/05/silver-gold/kitco-perth-mint-agr-matthey-bullion-bank-connections/

Kitco’s online store sells Perth Mint Certificates. 
https://online.kitco.com/

The Perth Mint owns 40% of AGR Matthey.
http://www.perthmint.com.au/about_us_the_perth_mint_group_structure.aspx

If The Perth Mint is storing your metal, they admit that they may have loaned your metal out to AGR Matthey.

“The $880 million of precious metals deposited by Perth Mint Depository clients (note 17) was used in operations by Gold Corporation as inventory ($381 million – Note 8b) with the balance in the refining operations of AGR Matthey (Note 8a).
http://www.perthmint.com.au//documents/Annual%20Report%202007.pdf
p. 81, bottom:

“AGR Matthey has well established relationships with the major bullion banks and regularly supplies to them on a contractual basis .”
http://www.agrmatthey.com.au/wps/wcm/connect/AGRInternet/agr/refinery/value_added_bullion_product/

I can’t figure out where the bullion went, and why I keep hearing reports that it is not available for purchase. And fortunately, I don’t have to. It’s not my concern. I don’t own any Perth Mint Certificates. 

Who knows what the word “operations” means, when they say it was used in “refining operations” when inventory seems to not exist. Maybe they used it to pay executive salaries, or electric bills, or rent, or used it to fund operations of a business that was losing money, who knows, I certainly don’t know. Clearly, the inventory cannot all be in a continual molten state. Either you have 1000 oz. bars, or you have melted it into 100 oz. bars, or kilo bars, or 1 ounce coins, or something, but there should be some inventory available, if AGR Matthey borrowed $380 million in physical inventory. And if they have $380 million in inventory, I don’t understand why I keep hearing that they have a shortage, and have no silver available to sell!

Perhaps Matthey, or Perth Mint, or Kitco, or Bart Kitner, or Jon Nadler can explain this mystery, but I won’t hold my breath.

In the recent CFTC report, there was one bit of advice that clearly rings true, “consider the source”.

My bias is clear. I own silver, and it’s not for sale.

Jon Nadler, who writes bearish precious metals commentary for Kitco has a bias, too. On the internet I read how they are now calling him “Mr. Tinfoil” and “Nadless” because of his gutless and cowardly nature to continue to denigrate those who write bullish commentary on precious metals, but he refuses to debate Bill Murphy of GATA.org at the upcoming gold show in Vancouver http://www.cambridgehouse.ca/ because of Murphy’s similar language. What a hypocrite! 

While we are considering the source, let’s examine the claims by a Barclays analyst that is making the rounds. Barclays is the sponsor of the Silver ETF, which supposedly has more silver than any other hoard on the face of the earth, but in reality, if they don’t have the silver, then they, like Kitco/Perth/Matthey, have a silver liability, but to SLV shareholders! 

Mineweb reports:
http://www.mineweb.com/mineweb/view/mineweb/en/page36?oid=53202&sn=Detail
Barclays Capital forecast a “tarnished outlook” for silver this year, asserting that “silver’s fundamentals appear to be the weakest within the precious metals complex.”

Bloomberg reports:
http://www.bloomberg.com/apps/news?pid=newsarchive&sid=aSkV5UwQ6_Jw
Supplies of silver will exceed demand from jewelers and other manufacturers by 2,691 metric tons, the highest in more than 20 years, Barclays Capital analyst Suki Cooper in London estimated in a report last week. Including investor demand and reduced sales of hedged production by miners, the surplus will be 541 tons compared with a deficit of 1,345 tons last year, according to the report.

They suspiciously use the intimidating word “surplus”, which I’ve clarified is an accounting term, and that there is such thing as surplus silver.
There is no Silver Surplus January 29, 2008 

The real truth is that only about 10% of annual silver mine supply is being consumed by investors, which is about 75 million ounces, which is about the 2600 tons they mention. Investor demand for 2007 was up about 50% over 2006, which saw about 50 million oz. of investor demand, according to the CPM group.

At $15/oz., 75 million oz. is a paltry $1.1 billion dollars! That’s small potatoes in the world of finance.

However, given Perth Mint’s $880 million precious metals liability, their liability is huge by comparison!

The truth is that 95% of gold is consumed by investors, which is 95% of 4000 tonnes of gold, which is about 1500 tonnes of central bank sales and about 2500 tonnes of mine supply.

Thus, if there is a market dependent on investor demand, it’s gold, not silver.

Furthermore, silver’s “investment demand” is so tiny, that it can explode at any time, given the relative size of the $1 billion of investor money going into the silver market each year compared to the $50,000 billion bond market, and it’s especially good for silver given the horrific rates of inflation we are now seeing, with rates of money creation exceeding 20%.

At this rate of investment, silver will go up for the next 50,000 years! Clearly, this bull market in silver will soon rapidly accelerate, and cannot last that long!

Silver is especially attractive now that silver has had a recent 5 year performance of about 32% per year, as it has gained from $4.15/oz in 2003 to $17/oz. in 2008. 

Therefore, silver’s fundamentals are far stronger than gold, and stronger than just about any other investment on the face of the earth. 

Furthermore, we have all seen gold, platinum, and palladium break out to highs well above their prior peaks in 1980, but silver is the only precious metal that remains below the 1980 peak of $50/oz.

Clearly, then, silver’s fundamentals are far superior to the rest of the precious metals, and far superior to the prospects for Kitco, Perth, or Matthey.

And I don’t think you will ever hear these fundamentals from Matthey, the Perth Mint, Kitco, or Nadler, or from any major bank analyst.

And since the fundamentals don’t change much from month to month, I don’t have to write daily commentary, but I can take a break for weeks at a time when I feel like it.





Sincerely, 

Jason Hommel