US Mint Issues False Statement on Silver Bullion Sourcing

[webmaster]

Subject:US Mint Issues False Statement on Silver Bullion Sourcing
By: Bix Weir

Overview: There is no reference to silver bullion having to be “newly mined” or being sourced domestically in the US coinage law 31USC5112, but there are specific laws passed to ensure that there is NO LIMITATION on the silver bullion available for the US Silver Eagle Program.

Link: http://news.silverseek.com/SilverSeek/1212780400.php

[Holidaysilver]

The following is from Numismastic News. Follow the link to read the entire letter:

http://www.numismaticnews.net/buzz/P...a7bb53730.aspx



June 6, 2008

MEMORANDUM TO ALL AMERICAN EAGLE AUTHORIZED PURCHASERS

FROM: Cathy Laperle
Team Lead, Bullion Program
United States Mint

SUBJECT: American Eagle Silver Bullion Coin Update


The United States Mint has been informed by its silver blank vendors
that the volume of blanks they will be shipping to us in the coming
weeks will be significantly reduced. Specifically, the quantities they
will ship to us during the week of June 9 are expected to be less than
half the quantities they shipped to us during the week of June 2. Our
vendors, however, expect to be able to make incremental increases in
supplies each week thereafter. In the mean time, the significant
reduction in the number of blanks they supply to us will, of course,
directly affect the quantity of coins we can make available for
allocation to our Authorized Purchasers. Accordingly, the United States
Mint will continue allocating American Eagle Silver Bullion Coins per
the process initiated on April 21, 2008.

continued...www.numismaticnews.net

[pkrebaum]

Even if there were a requirement to use "mined silver from domestic sources" there would still not be a problem. First, the production side of the "problem":

U.S. silver mine output in 2007 was 37.3 MOz.

http://www.silverinstitute.org/supply/production.php

Of that, 16.33 MOz. was from "primary" silver mines, or mines which are run for the high grade silver ore they produce. The other 21 MOz. was from "secondary" mines, or mines in which silver is a byproduct of the primary mining activity, usually for gold, lead, copper, or zinc. Both sources count as domestically mined silver.

Now for the demand side:

In 2007 the U.S. Mint issued 9.8 MOz. of silver coinage (their data). In 2008, by the end of May, they had issued 7.25 MOz. of silver coinage. If we extrapolate this to a years production that would equal 21.75 MOz.

So there would still be a surplus of over 15 MOz. of domestic silver available, if they could get it and if they were willing to perhaps pay a small premium for it. By "if they could get it" I don't mean to imply a shortage of raw silver, but rather of domestic silver, the rest of it having already been tied up in long-term contracts to buyers other than the U.S. Mint. Silver would have to be imported to cover these pre-existing contracts to make all the domestic silver available for the U.S. Mint. Not a problem, since I doubt that anyone else has such a silly requirement (hypothetical, imaginary even, requirement...) to use domestic silver. Being a scientist, I'd like to shrink myself down really, really, really small and ask a few of the silver atoms in a 1000 Oz. COMEX bar if they flippin' cared about which country they were mined in. Unfortunately I don't think their answer would be fit to print in this upstanding forum.
*************

NOW THEN.....What's Really Up With The Mint ?????

IMHO, orders for SAEs have way outstripped the physical capacity to produce them. Stamping machinery can only produce so much good product per hour, period. Trying to produce faster just creates more scrap. The only way to expand capacity is to buy more presses, and these can have very long leadtimes. And be very expensive. It seems they don't produce their own blanks, either.... it's not good (foolish, even) to have your potential rate-limiting production step being done out-of-house.

The demand for SAEs spiked in October 2007 and has been high ever since. They did not see this coming. Methinks they also probably thought it was a fad and would soon disappear. You don't want to be stuck with millions of dollars worth of excess capital equipment you bought just to take care of a fad, ...instead, you make people wait. A lack of foresight combined with bureaucratic procrastination has left their production capacity caught with their proverbial pants down.
*************

How much could the Mint mint if the Mint could mint SAEs ???

IMHO, based on their past production data, about 2,300,000 per month, PEAK. Peak meaning they can only keep up that rate for a month or two, because they have to mint a lot of other stuff too, and I doubt all their presses for SAEs are soley dedicated to that product line.
*************

How much longer will we have to wait for SAEs to be fully available ??

IMHO, based on my own industrial production experience, about six months....based on two assumptions:
1) The demand keeps up.
2) They decide that this is not a passing fad and that it's necessary to invest in more equipment after all.

Unlike private industry they can not legally outsource the final production steps. >>>Step right up folks, get your genuine U.S. SAEs Made In CHINA !!! Try selling that one to the public...Ron Paul would probably have a stroke...<<< I heard they have had quality problems with their outsourced blanks, however I'm quite skeptical of that excuse ... it would take a real idiot to screw up a blanking operation. And if they don't decide to spend the money to upgrade their plant.... well, I hear that the Royal Canadian Mint is really making an all-out effort to increase their production capacity ... Silver Maple Leafs are very pretty too,... and available for a lower premium than SAEs. Not to be unpatriotic or anything, I'm just sayin' : U.S. Mint get your act together !

[NNZ]

Great explanation! I absolutely agree.

Canada will increase the annual output to 8 million ounces. The Austrian Mint will produce at least 3 million Silver Philharmoniker and it seems to me as if Mexico has increased the production of the Libertad too. In the past Libertads always had a higher premium than other bullion coins, now all 4 bullion coins are offered at the same price. The large Aussie kilo coins are slightly cheaper.

I don't think that buying bullion silver has anything to do with patriotism. It's just a way to save your money and most people won't care what the silver looks like.

[Bixrocks]

Hi gang. Did you happen to notice that the new press release specifically removed all references to having to source the silver bullion domestically?! THIS IS HUGE! It is an acknowledgment that they MADE A MISTAKE by only using domestic metal. Looks like we won that battle.

The good news is the US Mint is now looking to buy blanks from around the world!

Also, as far as production, they are not claiming that they do not have the capacity...only insufficient blanks. They can legally produce SAE's from any of the US mints but were only producing out of West Point (supposedly). Here's a little hint into the future...the San Francisco Mint is currently in the process of an $85M "historical" retrofit. They can produce 1 oz silver coins TODAY from brand new mechanical coining machines. I believe they are preparing for the return of silver and gold used as money....Long story but too many facts link up for it not to be true. See my Road to Roota articles 1-4 on LemetropoleCafe.

Should be an interesting few weeks!

All the best.

Bix

[paker]

I read that the worlds largest silver mine, in Peru, I believe, is going on strike on June 16. The miners want better pay. I wonder if that's going to have any effect on silver eagles and the silver market in general?

[pkrebaum]

Here's a great explanation of how the U.S. Mint produces coins:

http://www.coinworld.com/NewCollecto...ingProcess.asp

Based on that info I'd guess that the major problem is a shortage of blanks, although that begs the question .... why?. Not having this capacity in-house is penny-wise pound-foolish. Or perhaps dollar-wise, SAE-foolish.

In contrast, production for silver coins at the RCM is vertically integrated from the melting of industrial silver bars through the entire process of coin manufacture. It's more complex doing it this way, and reaction time can be slower if there are multiple production bottlenecks to be overcome, but at least you don't have to worry about anyone else's incompetencies getting in your way.