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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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A New Way To Invest In Platinum

Topics [ Australian Platypus platinum bullion coin bullion coins ]

BULLION BARS AND COINS

Please find a copy of today's Media Release announcing the forthcoming availability of our new Australian Platypus bullion coin:

Monday 31 January 2011

PERTH MINT RELEASES PLATINUM PLATYPUS INVESTMENT COIN

The Perth Mint has introduced an Australian Platypus platinum investment coin to complement the popular range of gold and silver offerings which comprise Australia's official bullion coin program.

Struck from 1 ounce of 99.95% pure platinum, the Australian Platypus portrays the aquatic mammal diving beneath the water among the reeds and incorporates The Perth Mint‟s traditional 'P' mintmark. Illustrating identical artistry each year, the feature design is bordered by the inscriptions AUSTRALIAN PLATYPUS, the year-date, and the weight and purity of the coin.

The new coin fills a gap in The Perth Mint‟s line up of investment coins, which has existed since the withdrawal of the platinum Australian Koala series in 2000.

Sales and Marketing Director Ron Currie said there was renewed demand for platinum, following a tremendous ride in 2010 which delivered double digit percentage gains to investors.

“Once again we're pleased to offer the Australian Bullion Coin Program in a trio of precious metals – gold, silver and platinum,” he said. “Growing interest in platinum, limited availability and a beautiful animal design provide plenty of incentive to acquire this stunning addition to the range.”

Issued as legal tender under the Australian Currency Act 1965, the coin's obverse features the Ian Rank-Broadley effigy of Her Majesty Queen Elizabeth II.

No more than 30,000 coins will be issued in 2011, with all subsequent annual releases subject to the same limited mintage.



The Australian Platypus is available worldwide from 1 March 2011. Together with the complete range of 2011 Australian gold and silver bullion coins and bars currently on offer, the Australian Platypus can be purchased at The Perth Mint Shop located at 310 Hay Street, East Perth, by telephoning The Perth Mint BullionLine on FREECALL 1300 201 112 or from leading coin distributors.

END

FURTHER INFORMATION:
Ron Currie, Sales and Marketing Director, The Perth Mint
Telephone (08) 9421 7269 Mobile 0412 559 067
Email ron.currie@perthmint.com.au

A beautiful design? Tell us what you think by clicking 'Comments' below.

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Debasement and Inflation

Topics [ gold market silver silver coins gold ]

WHAT OTHERS ARE THINKING

Currency in Rome was composed of four key denominations:

Aureus = 8g of gold
Denarius = 4.5g of silver
Sestertius = 1.2g of silver
Assarius = Copper

An Aureus was equal to 25 Denarii, which equates to a gold/silver ratio of 11.6. This is significantly different to today’s ratio, which averages around 60, reflecting the fact that silver is less rare today relative to gold than it was in Roman times. Some argue that with continued industrial use silver’s rarity will increase, resulting in a more rapid increase in silver’s price relative to gold and thus a drop in the gold/silver ratio back towards that of ancient times.

The silver Denarius was the key Roman coin from 211 BC until around 350 AD. In fact, across the world money was primarily defined in terms of silver, not gold – the world operated on a “Silver Standard”. The “Gold Standard” is a relatively recent phenomenon, only coming into existence across the world during the 1800s.

Rome mostly obtained gold and silver via wars and tributes and taxes on the newly acquired territory. However, when Rome ceased to expand it had to rely on newly mined silver, which was not enough to pay for wars to defend its territory and indulgences (eg Colosseum).

Instead of reducing its spending and balancing its budget, it was easier to debase (reduce in value) the coinage. This was done by decreasing the amount of silver in each coin, as demonstrated in the chart below (source). By doing this, Rome could produce more coins and "stretch" their budget, allowing them to spend more than it had.

The public were not fooled, however, and demanded more coins for their wages and goods they produced so they would get the same amount of silver. Asking for “more coins” is another way of saying prices increased, which is now commonly called inflation (although inflation is strictly defined as an increase in the amount of money, a symptom of which is increasing prices).

For example, the pay of a Roman soldier increased from 225 denarii a year during the time of Jesus to 500 denarii a year 200 years later. Over the same time the price of grain more than tripled.

So the story of Rome is one of politicians wanting to spend more than they collect in taxes which leads to debasement of the currency (today this is done by just printing money) which leads to inflation. Has much has changed over the last 2000 years?

Information for this article came from Ancient Coins and of course Wikipedia. If you’re interested in ancient prices, Marion Butler has a good article on the topic.

 

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Response To Bix Weir Questions

Topics [ depository services store bullion ]

TREASURY VIEW

Bix Weir of Road to Roota left a comment to my previous post. This post answers his questions.

1. Metal Leasing

That section of the website is a copy of text on the old Refinery website when it was a standalone partnership between Perth Mint (40%), Newmont (40%) and Johnson Matthey (20%). The Refinery’s Treasury did some of those activities but now that we fully own the Refinery business, we don’t get involved in Leasing or Funding Facilities (there is some small consignment stock), which is why it is zero in our current annual report. Important point is that even if we did have a request from a miner or other customer to borrow gold, we would first lease in paper gold from a bullion bank and absolutely not use Depository client metal. We cannot stress this point enough and it is an overriding consideration in anything we do.

We will get that part of the website updated to explicitly confirm that any such “services” will not use Depository metal and will be funded from borrowing in metal so there is a clear segregation.

The prior annual reports do show a outward lease, but the notes to the account say that this was to the old Refinery partnership (AGR Matthey). We were prepared to lend Depository client metal to the Refinery even though it was a separate legal entity only because:

a.   We owned 40% of AGR Matthey.
b.   We had representation on the AGR Matthey Board of Directors and Audit Committee.
c.   The above gave us detailed insight into their activities and veto if we thought what they were doing was against our clients’ or Government’s interests.
d.   We had explicit undertakings from them that they would not onlend any metal lent to them, it could only be used to support their physical refinery operations.

2. Delivery Problems

Jason’s article makes a lot of outrageous conclusions, particularly in respect of the fact that we are running some type of ponzi scheme. The idea that we would NOT buy gold when clients buy from us just makes no logical sense – we are a Mint, we need physical gold for our business to operate, not paper money. I responded to a similar question in this personal blog entry for those who wish to look at this issue in detail.

Jason’s key misunderstanding was that he held the view that our Unallocated metal was held in the form of a stockpile of bars, waiting to be shipped. This is not the case. Unallocated metal is backed, but by operational metal. Some of that may be in the form of finished coins and bars, but most is held in semi-fabricated form as work-in-progress and raw gold (400oz or 1000oz bars). As a result, if every Depository client wanted to take delivery, there would be a delay while we turned all our metal into finished product as the coin presses and other processes can only work so fast, but ultimately, every client would get his/her gold.

That is why we wrote about a “3 staged approach” on our website that you quoted in your article. This was done before we had a bull market in gold, well before anyone even thought about the idea of there being stresses in worldwide gold market. Our objective was to be clear to clients what the risk was with Unallocated (because you don’t get something – 0% storage fee – for nothing). That risk is one of delivery delays if everyone wants physical. However, importantly, this is not the same as the risk that we don’t have the metal. Delivery delays result from production capacity limitations, not a limitation or absence of underlying metal (in our case anyway, this does not apply to all unallocated offerings from other organisations).

Having said that, we admit that in the past some deliveries to Depository clients were delayed and that is was not acceptable. We would note that the number of complaints that Jason got were said to be in the order of 20 to 40 and he was never clear about how many of those were specifically about Depository clients (to whom we have an obligation to deliver physical) versus cash customers. Compare those numbers to the total number of Depository clients at the time, which were around 6,500. That does not constitute “many, many”.

This is not to excuse any delays to Depository clients. It resulted from a lack of coordination between our Depository, retail shop and wholesale coin divisions. During that crazy time the wholesale division took orders from distributors for large quantities of coins which locked out our production capacity for a few months, without being aware of the impact of that on Depository’s obligations. As a result of that event, we have improved internal communication and instituted internal policies to prioritise Depository orders.

3. Times of Distress

The extreme “times of real trouble” you mention will put holders of partially or totally unbacked paper gold at risk. The comments above show that we do not run that sort of paper metal business. We, like our clients, are very risk adverse. We run the Depository business on the expectation that we will get a large number of sell orders or collect orders at any time.

In the scenario of large and consistent physical conversion by our Unallocated clients, our response will be to stop or heavily restrict all sales of coins and bars to non-Depository customers and direct our entire production capacity to servicing Depository client collection requests. As we delivered the gold, we would replace the gold needed for our processes with leased in gold. We are confident we will be able to handle such extreme market conditions.

We agreed that physical gold and silver are counterparty risk free, but we also understand there are investors who are not comfortable with personal storage of their precious metals. That is why we created the Depository business and take our responsibility to protect their metal seriously.

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Road To Roota Wrong On Perth Mint Unallocated

Topics [ depository services certificates bullion ]

TREASURY VIEW

Bix Weir’s recent article SILVER: What Happens When… gets it wrong when he says that The Perth Mint’s Depository “customers cannot convert” to physical and “cash settlement may be the only option”.

Bix’s misunderstanding stems from taking the comments of the Mint’s Treasurer out of context and assuming that the statement “cannot meet all the enquiries” was about all enquiries across the diverse business units of the Mint. I can confirm that the Treasurer’s comments were only in respect of the wholesale market and not in reference to retail or Depository demand.

Usually the context or target of these sorts of newswire articles is the wholesale market. This is alluded to in the quote “the biggest demand is coming from banks and traders looking for kilo bars” but to be fair to Bix this is probably not clear, especially after journalists edit a full interview down into catchy quotes.

In actuality, the fact that the Mint cannot meet all wholesale enquiries is proof that Depository clients are protected and safe, contrary to Bix’s conclusion. The Perth Mint understands its obligations to its Depository clients and its policy is to prioritise unallocated conversions to allocated or delivery. It is only after fulfilling Depository conversion/delivery requests from its stockpiles and approximately 300 tonnes per year of new mine production that the Mint’s Treasurer will offer what is left to the wholesale market (that is, the bullion banks).

If you think about it, prioritising Depository and retail bullion sales demand is not some ethical decision but perfect commercial sense – why supply to wholesalers at lower fabrication premiums when your retail premiums are higher?

The Treasurer’s statement that “demand for our coins and medallions is strong” is alluding to our Depository and retail bullion trading demand. Since this is strong, supplies to the wholesale market are restricted and hence we are unable to “meet all the enquiries” of the bullion banks.

There are also a few other incorrect statements in the article that need clarifying.

BIX: “runs quite a large paper gold and silver operation with their unallocated pooled accounts and metal leasing operations”

Bix’s reference to “metal leasing operations” is totally without basis. If he had read a few more paragraphs down from his own quote from our website he would have found the following:

“The Perth Mint is not a bullion bank and does not provide project financing or bullion lending/derivative services to mining companies or other entities.  It does not lend client's unallocated metal to support short selling transactions or other derivative activities.  The unallocated metal is utilised solely to fund the Mint's operations.”

Can’t get any clearer than that. Furthermore, if he looked at our latest annual report, we disclose ZERO outward precious metal leases (loans).

BIX: “The business model is massively flawed because the offering entity doesn't even charge enough to cover obvious expenses like insuring metal, storing physical metal, tracking, collecting, administration”

I’m assuming Bix is referring to Unallocated here, because Allocated  storage has a 1.5% pa charge that I think anyone would be hard pressed to claim is too low. However, Bix says “charge enough”, which is a little confusing because we don’t charge ANYTHING for Unallocated storage. This is not a massively flawed business model as he claims. In fact if we did charge a fee on Unallocated for insurance and storage it would be double dipping!

This is because the costs Bix refers to are costs associated with production of our coins and bars and as a result are covered by our fabrication premiums. Before the Depository business existed we incurred these costs and customers buying our coins and bars “paid” for these costs via our fabrication premiums. Nothing has changed just because our physical operational metal is now owned by our Depository clients rather than bullion banks as it was in the past. To then claim that we need to charge Unallocated clients a fee because we have storage and insurance costs, when those costs have always been and still are covered by fabrication premiums could possibly be considered deceptive.

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Normal Service Resumed

The technical problem reported yesterday, which had been preventing readers from commenting on the blog, has now been fixed. We look forward to hearing from you.



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Interview With Dow Jones Newswire

Topics [ gold investing gold coins gold prices gold bullion bars ]

TREASURY VIEW

Enquiries at The Perth Mint from a multitude of banks and other professional buyers has been intense since gold’s correction to under $1,400 an ounce. Dow Jones Newswire reporter James Campbell summed up the situation neatly after I spoke to him earlier this week. You may have seen the story, which has been picked up by a number of media outlets. If not, James has given me permission to reproduce his report here:

DJ Physical Gold Demand Exceeds Current Availability - Perth Mint
Tue Jan 11 01:26:37 2011 EST

SINGAPORE (Dow Jones)–Demand for gold bullion from Australia’s Perth Mint has been unrelenting since gold’s price dropped below $1,400 an ounce, a senior Mint official said Tuesday.

"At the moment demand is such that we cannot meet all the enquiries that we are getting," said Nigel Moffatt, Treasurer of the Perth Mint, one of the world’s largest gold refiners and distributors.

"Demand for our coins and medallions is strong, but the biggest demand is coming from banks and traders looking for kilo bars," he told Dow Jones Newswires.

One-kilogram bars are the most popular trading instrument in Asia’s physical market.

Demand doesn’t appear to be directly related to the upcoming Chinese Lunar New Year, with buying also coming from in from India, Moffatt said.

"The way I see it at this point, it is because of the current correction in the price rather than anything else," he said.

Spot gold has declined 3.1% since the start of 2011 to $1,376/oz during Asian trade Tuesday after hitting a low of $1,353/oz Friday.

Moffatt said premiums for physical gold had "doubled" in the past week, but declined to provide any figures.

Mitsui Global Precious Metals said in a report that gold was trading at premiums of up to $3 an ounce over the spot price in Hong Kong Monday.

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