($500 million silver default?!)
Silver Stock Report
by Jason Hommel, September 3, 2008
In an interesting twist, Jon Nadler posted a report by a blogger two days ago that I could mostly agree with.
The blog post is by an “industry insider,” who tries to explain the “normality” of the shortages of silver and gold.
I also think it’s normal for there to be shortages of silver and gold when inflation is raging out of control, and when the markets are manipulated, but I suppose we don’t agree on reasons like that.
I left several comments on that blog, here:
My key question: If there is no shortage of actual silver, as opposed to only shortage of “investment silver”, where can I go to buy that real actual silver? As of last night, there was no answer.
Today, a reply came, but no answer.
The blogger works at Perth Mint, and writes:
“When I say that wholesale bars are available, it means in wholesale quantities. I cannot speak for Kitco, but I went upstairs and spoke to the Treasurer and he will do deals for a minimum of 20 tonnes of silver and 1 tonne of gold. Call Nigel Moffatt on (08) 9421 7403. Price will be on a deal-by-deal basis.”
That’s insane. Right downstairs, they often run out of 100 oz. bars, and reportedly have no 1000 oz. bars for sale.
Besides, that’s a lie. Wholesale quantities in silver are 1 silver futures contract of 5000 ounces, which is about 1/6th of a tonne, not 20 tonnes!
Further, I note that Nigel did NOT say he would SELL 20 tonnes of silver. He only wants to “deal” in that, minimum. He probably needs to buy that much to pull his fat out of the fire, as I will explain below.
But first, people keep asking me “What’s up with Jon Nadler, that guy who bashes metal, yet works for Kitco, who sells metal? I don’t get it?”
Kitco runs a “pool” account where they hold the metal for investors, or in other words, they OWE precious metal to their clients.
Kitco also sells Perth Mint certificates, which also represents precious metal owed to clients.
Maybe that explains it?
Usually that’s all I need to say to those who ask me, and the person replies, “Oh, of course. Thank you.”
Perhaps that’s one reason why Nadler posted the article by a Perth guy; they are connected, they both owe metal, and Perth uses Kitco, or Nadler specifically, as a mouthpiece.
If you click on Nadler’s bio link at the top of any of his articles, it says that he may have helped government mints, like Perth, in the past:
“He has long-standing ties in the precious global metals community and has consulted on marketing and product development issues to government mints, precious metals retailers, as well as to trade and membership organizations, such as the World Gold Council.”
Interestingly, Nadler boasts about his background in banking, and not just for a small banking outfit, but Bank of America, America’s second largest bank!
“Jon established and managed several precious metals operations at major USA-based financial institutions (Deak-Perera, Republic National Bank, and Bank of America).”
Bank of America has the second largest derivatives position of all the Banks in America, right behind JP Morgan, at $28 trillion, yes, Trillion, with a T.
And, Bank of America was a member of the Silver User’s Association, a group devoted to the conflicting goals of keeping silver prices low and keeping silver available for users. Low prices create shortages, of course. And you can’t buy silver at Bank of America, of course.
I don’t think Jon Nadler is ignorant on purpose. I don’t believe anyone can actually be that stupid on a regular basis, so the people who have repeatedly nominated him for the “Moron of the Year” award don’t see the big picture. Instead, I give Nadler more credit than that. I think he’s a human of somewhat higher intelligence than normal, but his wisdom score is extremely low. Either that, or he has a very high wisdom score, but he just works with black chaotic magic, instead of embracing the light of truth, or something like that. I think he has a clear agenda, he is actively making a war on gold and silver with his words, on a daily basis, and he is paid to do that.
There are more key connections I must reveal, based on reports from out of Australia about two weeks ago.
The Perth Mint owns 40% of AGR Matthey, in Australia.
AGR Matthey supposedly was using some of Perth’s silver and gold that backs the Perth Mint silver certificate program, that is sold by Kitco.
Proof: The Perth Mint’s annual report discloses the precious metal loan to AGR Matthey, as I reported previously.
“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).
p. 81, bottom
I never took a class in deciphering “Ogre-speak”, and certified accountants can’t decipher Perth’s annual report either, but did Perth Mint mean to say or imply that AGR Matthey has “the balance” between $880 million and $381 million, which would be about $500 million worth of gold and silver backing the certificate program?
Wait, that’s not the shocking part, I’m getting to it.
Here’s the bombshell shocker:
AGR Matthey closed their silver operations! There is no news of this item, it’s only available at the Kitco chat boards directly!
Two of my readers reported the same thing. AGR Matthey offices closed. What?? Why?!
AGR Matthey supposedly has all this gold and silver on loan from Perth Mint’s certificate program with which to operate and conduct operations, to enable them to have metal for use in refining operations, so that they can take those abundant 1000 oz. bars, and make them into 100 oz. bars, and sell metal to the public, and now, during a time of record demand from the public, when little old me can sell 25 bars at a $4.01 premium to the spot price, when AGR Matthey should be well funded, with plenty of metal, and capable of making a killing on manufacturing bars with their own top industry and famous and desired trademark, they decide to close up shop?
Their story makes no sense. It make more sense that they have been operating at a loss for years, and used up the loan of precious metal in operations years ago (a loan that would have been fantastic to have during a bear market in metals, which, if you used accounting gimmicks right, you could say that the loan was brining in “profits”, but not in a bull market). So, most likely, the managers recognize that they cannot buy more metal today, and cannot get the metal back to pay back the growing metal loan. It makes more sense that as the silver market is manipulated down, when inflation is raging, and when investors are all buying, and not selling, that they cannot source metal from the public anymore, and so they have closed up shop for that reason.
So, look, AGR Matthey’s closure of silver operations might have been a $500 million precious metals default to Perth Mint in the last two weeks. No wonder the Perth Mint wants to deal in 20 tonnes of silver minimum, which would still only be about $10 million worth. (20 tonnes x 32,151oz/tonne = 643,020 oz. x $13? = $8.3 million!)
But hey, I’m sure someone like Nadler can be hired to say things like “move along”, “nothing to see here”, the business was “just not profitable”. Really! Ya think?
If silver is abundant, why can’t AGR Matthey use their ($500 million?) pool of abundant and borrowed metal to make 100 oz. bars to sell to the public at a premium, and just buy more abundant 1000 oz. bars with the profits and make a killing?!
I believe that this is the first major “hidden” default, or emerging default, that has the potential to cause the bankruptcy of the Perth Mint, and/or bankruptcy and/or silver default at the COMEX, if they are not all bankrupt already.
The closing of AGR Matthey calls into question the validity of the entire Perth Mint certificate program, and Kitco, and Nadler.
I think Perth Mint certificate holders should either be investigating, or redeeming their certificates for real physical metal, while they still can.
It appears as if the Perth Mint took my advice a few months ago, and bought at least some silver at higher prices to make available to people, to calm down the constant stream of reports of delays of 2 months. But now, it appears as if things are much, much, much worse than a mere 2 month delivery delay.
It seems as if Perth’s 2 month delay has turned into Johnson Matthey’s 2 month delay!
The other connection and warning that must be made now, is about Johnson Matthey, because AGR Matthey is one of their divisions.
Johnson Matthey, of course, is the largest silver refiner in the U.S., and was 8-10 weeks behind on orders for 100 ounce silver bars, and in the last week or so, stopped taking orders for silver. Matthey has a capacity of manufacturing 300-400 bars per week. 7th Grade Math warning: 400 bars x 100 oz.. each x 10 weeks = 400,000 ounces of silver = 12 tonnes, that JM is behind, backordered.
Interesting that that amount is just under the “minimum deal size” of 20 tonnes as Nigel said at Perth.
COMEX contracts are for 5000 ounces, or about 1/6th of a tonne. Why not just take delivery of 120 contracts Nigel?
But wait, if 20 tonnes is the minimum deal size, does that mean that Perth does not buy any silver when investors buy certificates for less than that, after all, that’s their minimum deal size!?
So, it’s not we silver investors who need to take delivery of the COMEX contracts. We silver investors already placed the orders. It’s them, the companies who owe silver to the investors, who need to take delivery, and apparently cannot.
Johnson Matthey’s primary distributor is AMARK. Amark is the largest bullion trader in the U.S. Amark is out of all silver products, so they are essentially “out of business” with a “shut down” silver division too, until they get silver.
Most other major dealers deal direct with Johnson Matthey, or Amark.
Here is another major shocker that I just heard today. CNI Numismatics, at golddealer.com, who is one of the most trusted silver dealers of which I know, verifies and confirms this overall story with a shocker admission from Johnson Matthey.
JM told CNI that JM is “ramping down” production of 100 ounce bars!!!
What? JM is backlogged 8-10 weeks, and refusing orders to try to catch up, yet is “RAMPING DOWN production”? That confirms the AGR Matthey shut down. And that can only mean one thing. There is a shortage of 1000 oz. bars or any other form of silver to make into 100 ounce bars.
This is why there is a shortage, world wide. The largest silver providers can’t find enough silver to provide it. And this is why the shortage is denied by those in that camp. Their businesses may well be at risk right now, and the worst lot of them are in desperate need of you to send them money now to wait for silver that has an indefinite wait time attached.
KITCO NOTICE ADMITS THEY WANT TO DEFRAUD YOU BY HOLDING YOUR MONEY POTENTIALLY FOREVER, AND IF YOU ASK FOR A REFUND, THEY WILL CHARGE YOU EXTRA.
IMPORTANT NEW NOTICE: Demand for bullion products has increased significantly in recent days. As a result, we may experience delays in supply and possibly delays in processing and shipping by our vaults. We apologize for this inconvenience and will do everything in our power to service your orders as quickly as possible. While cancellation fees still apply, prices are guaranteed regardless of the length of the delay. We remain committed to providing you the best service no matter what market conditions prevail.
Don’t fall for it. Not now.
Be careful out there. Defaults are either ongoing, or imminent.
If you want to help break these guys, there’s one key way to do it. Make sure you buy and sell your silver at an ever increasing premium over their “spot” price or paper price. As that starts to happen, the paper hedging contracts cannot be used to purchase silver from the public, because the public’s silver will cost too much. And if the paper system cannot provide enough silver either, then their game is over.
We are closer than ever to a major explosion in the silver price. In fact, it’s already begun in the premiums for “walking silver” as opposed to “paper silver”. What’s “walking silver”? The stuff you can walk out of the store with!