The Perth Mint is introducing a new product called Pool Allocated Silver for Depository and Certificate clients and making changes to Allocated storage fees.
The new product, which will be available from 1 May 2011, operates in a similar way to the current Unallocated silver storage option, which will be withdrawn on the same date. Pricing and other details for this and for Allocated storage fees can be found at the end of this article.
With Unallocated silver storage, clients purchased an interest in a pool of silver used to support our refining and manufacturing businesses. We backed every investment by purchasing an equivalent amount of silver from the spot market.
The new Pool Allocated product will also be 100% backed, but by specific physical bars stored in The Perth Mint’s vaults. Clients will own a share of this pool of bars, although an individual’s holding will not relate to any specific bar.
Lists detailing the weights and numbers of these silver bars will be published daily, along with the total number of pooled bars held on behalf of clients on The Perth Mint corporate website.
We’re making the change from Unallocated to Pool Allocated because the amount of Unallocated silver we hold on behalf of clients now exceeds that required to support our business activities. We had targeted a certain amount of excess Unallocated “buffer stock” but rising insurance and other costs plus growing demand have accelerated our decision to close Unallocated.
One of the chief benefits of pooling silver bars is that it allows us to offer a low storage fee of 0.95% per annum. Pool Allocated clients will be able to convert their holdings into coins or bars for collection or to store with the Mint as Allocated.
From 1 May 2011, no new Unallocated silver accounts will be opened. Existing Unallocated accounts will remain open and free of storage. However, clients will not be permitted to add to their unallocated balances and will only be able to sell or collect.
The Perth Mint cannot foresee reopening Unallocated silver for some time. This would only occur if we encountered significant and continued selling by existing Unallocated silver holders. We have primarily attracted buy-and-hold investors and we do not currently see, nor expect to see, any change in this regard.
At this stage Unallocated gold is not affected but it too will close at some point as gold demand also continues to be strong.
Revised Product Information Statements and Agreements will be available at http://www.perthmint.com.au/investment.aspx
Summary of pricing and other changes:
The fees below will apply to all clients, existing and new.
Perth Mint Certificates are only sold through Approved Dealers, who each charge different trading fees. Clients should contact their Approved Dealer for their fees.
For direct Perth Mint Depository Program clients a 2% buy (entry) fee and 1% sell (exit) fee will apply to Australian & New Zealand clients with account balances under $50,000 AUD and International clients with accounts under $250,000 USD. No entry or exit fee applies to direct clients with account balances greater than those amounts.
Storage Fees – Allocated and Pool Allocated Holdings
Storage fees for both Allocated and Pool Allocated holdings will be charged quarterly in advance, payable on 30 June and 31 December. There will be no refunds if selling during a quarter.
The percentage per annum rates below will apply based on the beginning of quarter market value of the metal. Existing Allocated clients have had fees based on their historical purchase value. As our insurance cost is based on current market value, this was no longer sustainable. However, in acknowledgement of the increase in metal prices our clients have enjoyed, we will reduce the percentage rates to reduce the impact.
• Allocated Gold - 1.00% (reduced from 1.5%)
• Allocated Silver - 1.90% (reduced from 2.5%)
• Allocated Platinum - 1.00% (reduced from 1.5%)
• Pool Allocated Silver - 0.95%
• Unallocated Gold – will remain free for new and existing clients
• Unallocated Silver – will remain free for existing clients only
For comparison, we note that the GLD ETFs charges 0.40% and Sprott’s Silver ETF 0.45%. We feel our Allocated gold at 1.00% and Pool Allocated Silver at 0.95% compare favourably with the ETFs when the Perth Mint’s Government Guarantee as well as the ability to take delivery in any of the Perth Mint’s coin and bar products are taken into consideration.
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