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This blog discusses The Perth Mint's bullion coins and bars, providing information about our latest designs, mintages, sales volumes and sell outs. On a broader front, we share relevant research and opinions for anyone interested in gold and silver bullion investing.

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Perth Mint's Investment In Capacity

Topics [ gold market ]

CEO STANDPOINT

This is an exciting year for The Perth Mint. Our capital expenditure programme continues – we will soon be commissioning our latest automatic coining press, to be followed by yet another in a few months. Our upgraded and extended bar casting facility should be running by July and we continue to invest in casting equipment, blank production capacity and surface treatment facilities for coin blanks. Then there are the absolutely necessary investments in waste reduction, efficiency, safety and environmental protection. There is a constant range of challenges we must address!

We have benefited from our investment programme – we would never have been able to meet demand over the last few years without it – but there is an issue which everyone in the precious metal industry faces: feast or famine.

Many of our critical pieces of equipment have only two modes of operation: either they are running at maximum on three shifts, or they are idling. There is rarely an in-between situation. There are times during which demand is so poor that everyone in the company is worried. We get down to one shift operation, shut down certain equipment and cut everything down to the bone. Just when we begin to question the wisdom of the amounts of money we have spent on plant over the last few years, the market suddenly picks up, we have to scramble to start up additional shifts and, before we know it, we have to cut back on accepting orders. It is like having a car with only two positions for the accelerator pedal – idling and “flat out”.

This feast or famine situation arises because the demand for precious metal in small bars or coins is unpredictable and extremely variable. Part of the reason for this is that, as an investment class, precious metal is a relatively small player. All the gold ever mined (just over 160,000 tonnes) would be worth $7 trillion in today’s values – a massive figure. But it pales when you consider that there are said to be financial assets valued at over $120 trillion in the world.

If only a small part of the $120 trillion is shifted into gold the market can easily get overwhelmed.

We will continue to improve our facilities and expand our capacity but we do not expect the “feast or famine” problem to be solved any time soon…

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