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  • » Perth Mint to close unallocated silver

#1 2011-03-28 23:21:52

bron suchecki
Silver Stacker
From: Perth, Western Australia
Registered: 2009-07-09
Posts: 1,311
Website

Perth Mint to close unallocated silver

FYI, this letter has just been sent to all Depository clients. I'll be writing a blog on it shortly, let me know if you have any questions or stuff to clarify and I'll address it in the blog annoucement.

Peter Schiff has apparently sent a letter to his clients, if you want to read it, it is on goldismoney2.com forum. Not surprisingly some of the first knee jerk reactions are negative, eg "This is an obvious and transparent attempt to drum up demand for yet more worthless unbacked silver paper, and to take pressure off of the physical market". Hmm, but we are CLOSING it, if we wanted to take pressure off they physical market wouldn't we be continuing to sell it?!? hmm

Dear Depositor,

Since the inception of The Perth Mint's Depository and Certificate Programs, clients have had the option of holding their metal in Allocated or Unallocated form at the Perth Mint.  Allocated metal is stored in specific coin or bar form on a client's behalf whereas Unallocated metal can be in the many different forms of gold and silver used to support our refining and manufacturing businesses.  In recent years the amount of Unallocated silver we hold on behalf of clients has exceeded that which we need to support our business activities, and the rising insurance and other costs associated with maintaining these balances have impacted on our profitability. 

For this reason, The Perth Mint will be withdrawing the Unallocated silver option as of 1 May 2011 and replacing it with a new product called Pool Allocated silver.

At this stage Unallocated gold will not be affected.

The Pool Allocated product will operate in a similar fashion to Unallocated, except that the metal backing it will be stored in physical bar form in The Perth Mint's vaults and the bar lists detailing bar weights and numbers will be published daily, along with total Pool Allocated client holdings, on The Perth Mint website (www.perthmint.com.au).  Clients will own a share of this pool of bars although an individual's holding will not relate to any specific bar.  This pooling enables The Perth Mint to offer a low storage fee of  0.95% per annum for Pool Allocated, which will be charged quarterly in advance, payable in six-monthly intervals.  Pool Allocated clients will be able to convert their holding into physical metal for collection or specific Allocated storage.

From 1 May 2011, no new Unallocated silver accounts will be opened.  Existing Unallocated accounts will remain open as before but clients will not be permitted to add to their balances.

We have also taken this opportunity to update the Terms and Conditions that apply to The Perth Mint's Depository products and under existing Terms and Conditions we are required to give 30 days' notice in the event of any change.  These changes relate mainly to revised storage charges and billing periods, and the identification documents required to open a new account under Australian Anti Money Laundering legislation.  You will find the revised Terms and Conditions at http://www.perthmint.com.au/investment.aspx. We will be writing separately to all existing Allocated depositors who will be affected by these changes.  Please note that these changes will become effective on 1 May 2011.

Should you have any queries arising from the changes outlined in this letter, please contact your Approved Dealer or The Perth Mint directly.

Last edited by bron suchecki (2011-03-28 23:22:12)


Disclosure: I work for the Perth Mint. What I say is done in a personal capacity and is not endorsed by the Mint.

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#2 2011-03-28 23:27:28

2ds
Member
From: Victoria
Registered: 2010-10-19
Posts: 933
Trades :   41 

Re: Perth Mint to close unallocated silver

Hardly supprising really considering the uptake of AG in the last couple of years, especially when you consider that unallocated was created to make it easier for the mint to keep a decent supply of stock on hand without having to pay for it. simply an arrangement of convenience that is no longer convenient for the mint.

Bron, can you tell us how much demand for unallocated has increased in the last 2 years?

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#3 2011-03-28 23:39:43

Big A.D.
Silver Stacker
From: Sydney
Registered: 2009-10-29
Posts: 6,436
Trades :   52 

Re: Perth Mint to close unallocated silver

Seems like a shift from a production management stop-gap to a full product offering.

Nice work.

Hopefully it will reduce confusion about what "unallocated" actually is too. The whole the-metal-is-somewhere-in-the-mint's-production-line-but-we-can't-point-to-it-because-it's-in-production explanation has caused soooooo much pointless discussion. "See that big pile of bars in the corner? That's the Pool silver."


I am the Leafy Sea Dragon.

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#4 2011-03-28 23:47:09

goldpelican
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From: Aust/USA
Registered: 2009-06-29
Posts: 17,984
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Re: Perth Mint to close unallocated silver

Well that's going to cause a revisit of my SMSF strategy!

Any idea on the competitiveness of the new Pool Allocated - will the spreads be similar, and will there still be the extra 2%/1% entry/exit fees on Australian customer balances under $50k?

Thanks for sharing this here.


My posts on Silver Stackers are either personal opinion or acting in the capacity of site administrator. Opinions offered do not constitute professional or financial advice.

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#5 2011-03-28 23:48:35

goldpelican
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Re: Perth Mint to close unallocated silver

Big A.D. wrote:

"See that big pile of bars in the corner? That's the Pool silver."

"Oh, the pile with the sign that says 'Do not sell to Art65'?"


My posts on Silver Stackers are either personal opinion or acting in the capacity of site administrator. Opinions offered do not constitute professional or financial advice.

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#6 2011-03-29 00:20:27

bron suchecki
Silver Stacker
From: Perth, Western Australia
Registered: 2009-07-09
Posts: 1,311
Website

Re: Perth Mint to close unallocated silver

Pretty much pool allocated is replacing unallocated, so spreads and entry/exit fees the same.

Note one big change is to storage fees, which will move to current market price, not historical buy price (our insurance is based on market price). But we will be dropping % rates at same time.

Allocated Gold 1.00% (was 1.5%)
Allocated Silver 1.90% (was 2.5%)
Allocated Platinum 1.00% (was 1.5%)
Pool Allocated Silver 0.95%


Disclosure: I work for the Perth Mint. What I say is done in a personal capacity and is not endorsed by the Mint.

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#7 2011-03-29 00:22:37

silvertongue
Silver Stacker
From: Depends on the day
Registered: 2010-10-17
Posts: 926
Trades :   89 

Re: Perth Mint to close unallocated silver

goldpelican wrote:
Big A.D. wrote:

"See that big pile of bars in the corner? That's the Pool silver."

"Oh, the pile with the sign that says 'Do not sell to Art65'?"

LOL!!


If you are not willing to risk the unusual, you have to settle for the ordinary.

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#8 2011-03-29 01:22:33

goldpelican
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Re: Perth Mint to close unallocated silver

So - what bar sizes will be used as the backing? ~1000oz bars or smaller? If it's 1000oz bars, can delivery be taken of a bar from the pool allocated without incurring fabrication charges? I mean, if the bars are already there - would be nice for some to be able to take delivery of a ~1000oz bar and have the actual bar weight deducted from their balance (I know they range in size from 950 to 1050oz etc).


My posts on Silver Stackers are either personal opinion or acting in the capacity of site administrator. Opinions offered do not constitute professional or financial advice.

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#9 2011-03-29 01:28:34

SilverQueen
Member
From: VIC
Registered: 2011-03-09
Posts: 61
Trades :   21 

Re: Perth Mint to close unallocated silver

Any advice on forum got any advice what to do? So does that mean with Pool Allocated they are not using the pool for their production usage? so what is the main difference of Pool Allocated and unallocated? one charge fee the other don't?

So is it still viable to have metals stored with PerthMint or

(1) convert all to physical bars for delivery? - % change fabrication + % delivery?
(2) is the current storage fees% competitive in Australia? do we have another alternative?

PerthMint has to be more transparent & crystal clear into their definition of things if not investors will worry that Perth mint is hiding something and it goes viral into investment community.

Strange things are happening and hope PerthMint is not turning out to be empty like COMEX & LBMA.

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#10 2011-03-29 01:35:58

goldpelican
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From: Aust/USA
Registered: 2009-06-29
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Re: Perth Mint to close unallocated silver

SilverQueen wrote:

so what is the main difference of Pool Allocated and unallocated? one charge fee the other don't?

Thought this was answered by

The Pool Allocated product will operate in a similar fashion to Unallocated, except that the metal backing it will be stored in physical bar form in The Perth Mint's vaults and the bar lists detailing bar weights and numbers will be published daily, along with total Pool Allocated client holdings, on The Perth Mint website (www.perthmint.com.au).  Clients will own a share of this pool of bars although an individual's holding will not relate to any specific bar.

So Pool Allocated is literally a pile of numbered bulk bars that are "allocated" to backing the balances of Pool Allocated holdings, with daily published lists. 10 clients with 100oz each, there's a 1000oz bar numbered 123456 sitting there to provide the physical backing, as opposed to saying "well there's about 1000oz of rounds sitting in the planchet hopper at the moment, so that's counted towards backing unallocated accounts".


My posts on Silver Stackers are either personal opinion or acting in the capacity of site administrator. Opinions offered do not constitute professional or financial advice.

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#11 2011-03-29 01:37:34

2ds
Member
From: Victoria
Registered: 2010-10-19
Posts: 933
Trades :   41 

Re: Perth Mint to close unallocated silver

SilverQueen wrote:

Any advice on forum got any advice what to do? So does that mean with Pool Allocated they are not using the pool for their production usage? so what is the main difference of Pool Allocated and unallocated? one charge fee the other don't?

So is it still viable to have metals stored with PerthMint or

(1) convert all to physical bars for delivery? - % change fabrication + % delivery?
(2) is the current storage fees% competitive in Australia? do we have another alternative?

PerthMint has to be more transparent & crystal clear into their definition of things if not investors will worry that Perth mint is hiding something and it goes viral into investment community.

Strange things are happening and hope PerthMint is not turning out to be empty like COMEX & LBMA.

Gah, dont' be paranoid.

The reasons for this are obvious, unallocated was a service offered by the mint because it was mutually beneficial. The mint could keep a big stock of raw materials so in the case of supply shortages or supply chain hiccups their operations were not adversely affected. Correspondingly stackers got to store bullion with no rental costs.

This worked until too many people wanted unallocated, at that point the mint had way too much silver in storage as part of the production chain and they had to build new facilities to house it in (which costs money, which means you have to charge for it). The rising popularity of PMs is what has triggered this change.

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#12 2011-03-29 01:53:20

bron suchecki
Silver Stacker
From: Perth, Western Australia
Registered: 2009-07-09
Posts: 1,311
Website

Re: Perth Mint to close unallocated silver

Gee, I should employ you guys to write responses for me, couldn't have said it better myself. It will be backed by 1000oz bars.

I forgot to mention that 50% of the fabrication fee for the bars is paid upfront, the other 50% when you take delivery.

SilverQueen - as to unallocated vs pool allocated, come 1 May you won't have to worry about that because you won't be able to buy unallocated.

I personally look forward to never having to explain the unallocated concept.


Disclosure: I work for the Perth Mint. What I say is done in a personal capacity and is not endorsed by the Mint.

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#13 2011-03-29 02:03:56

goldpelican
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From: Aust/USA
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Posts: 17,984
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Re: Perth Mint to close unallocated silver

So Bron, how did unallocated work back then the mint offered it? lol

Did you see my earlier post about taking delivery direct from Pool Allocated?


My posts on Silver Stackers are either personal opinion or acting in the capacity of site administrator. Opinions offered do not constitute professional or financial advice.

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#14 2011-03-29 02:12:34

Captain Kookaburra
Silver Stacker
From: Melbourne
Registered: 2010-04-15
Posts: 4,676
Trades :   147 

Re: Perth Mint to close unallocated silver

goldpelican wrote:

Did you see my earlier post about taking delivery direct from Pool Allocated?

I wonder if you get a refund too seeing as though 50% of the fabrication fee is up front wink

Last edited by Captain Kookaburra (2011-03-29 02:12:43)


Metal or Nothing ...... Fiats belong in garages, not money paper clips.

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#15 2011-03-29 05:13:22

bron suchecki
Silver Stacker
From: Perth, Western Australia
Registered: 2009-07-09
Posts: 1,311
Website

Re: Perth Mint to close unallocated silver

goldpelican wrote:

Did you see my earlier post about taking delivery direct from Pool Allocated?

Yes, you can take delivery in actual 1000oz bars and just pay the remaining 50% fabrication. You can also just sell it and buy smaller bars/coins if you want delivery in other forms. The 50% paid upfront won't be refunded, as that covers our cost in sourcing/making the bars and when we eventually see selling we will incur costs having to ship it to London and we will just get spot for it.


Disclosure: I work for the Perth Mint. What I say is done in a personal capacity and is not endorsed by the Mint.

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#16 2011-03-29 05:14:49

goldpelican
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From: Aust/USA
Registered: 2009-06-29
Posts: 17,984
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Re: Perth Mint to close unallocated silver

Oh, so no discounts for taking it in bulk smile Was wondering if there might be a "wholesale" option for taking delivery of 1000oz bars instead of having to pay for fabrication into say 100oz or 1kg bars.


My posts on Silver Stackers are either personal opinion or acting in the capacity of site administrator. Opinions offered do not constitute professional or financial advice.

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#17 2011-03-29 05:42:15

rbaggio
Silver Stacker
From: Australia
Registered: 2010-08-05
Posts: 4,485

Re: Perth Mint to close unallocated silver

Thanks for explanation Bron.

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#18 2011-03-29 08:38:52

Matthew 26:14
Banned
From: Victoria
Registered: 2010-09-03
Posts: 3,426
Trades :   66 

Re: Perth Mint to close unallocated silver

goldpelican wrote:

Well that's going to cause a revisit of my SMSF strategy!

Any idea on the competitiveness of the new Pool Allocated - will the spreads be similar, and will there still be the extra 2%/1% entry/exit fees on Australian customer balances under $50k?

Thanks for sharing this here.

I wonder if you will now have to pay cap gains tax in your smsf now you have in effect been forced to sell your holdings?

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#19 2011-03-29 08:52:36

Big A.D.
Silver Stacker
From: Sydney
Registered: 2009-10-29
Posts: 6,436
Trades :   52 

Re: Perth Mint to close unallocated silver

Matthew 26:14 wrote:

I wonder if you will now have to pay cap gains tax in your smsf now you have in effect been forced to sell your holdings?

Interesting question.

I suspect it would depend on how the mint handles the change over (they say they'll be writing to everyone affected), but it might be possible that there isn't a CGT event if one product is being withdrawn and replaced with a similar product of the same value. Its basically just a change in the terms and conditions of how the Perth Mint handles a certain number of ounces that you own (and a fancy new name for the type of account they're held under), so you might not actually be selling your unallocated metal and repurchasing it in semi-allocated form.

(Disclaimer: I am not an accountant. I'm certainly not your accountant. Contact the Perth Mint if you are affected by the change and seek professional advice if required).


I am the Leafy Sea Dragon.

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#20 2011-03-29 09:04:55

goldpelican
Administrator
From: Aust/USA
Registered: 2009-06-29
Posts: 17,984
Trades :   153 
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Re: Perth Mint to close unallocated silver

Shouldn't be an issue for existing unallocated holders - they just can't add to the balance.


My posts on Silver Stackers are either personal opinion or acting in the capacity of site administrator. Opinions offered do not constitute professional or financial advice.

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#21 2011-03-29 18:09:19

Forge
Member
From: Launceston, TAS
Registered: 2010-07-06
Posts: 897
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Re: Perth Mint to close unallocated silver

Bron, one query. 

Will an existing holding of unallocated silver be transferred to a 'Pool Allocated' form (with the associated charges etc) or will it remain as unallocated with a different charge structure?


Cash for today.  Silver for tomorrow.  Gold for a life time.

Your wealth.  Your responsibility.

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#22 2011-03-29 18:22:39

Yippe-Ki-Ya
Banned
From: The Land of Guilty by Default
Registered: 2011-02-23
Posts: 5,892
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Re: Perth Mint to close unallocated silver

Matthew 26:14 wrote:
goldpelican wrote:

Well that's going to cause a revisit of my SMSF strategy!

Any idea on the competitiveness of the new Pool Allocated - will the spreads be similar, and will there still be the extra 2%/1% entry/exit fees on Australian customer balances under $50k?

Thanks for sharing this here.

I wonder if you will now have to pay cap gains tax in your smsf now you have in effect been forced to sell your holdings?


ummm.... with SMSF you pay capital gains tax every year on unrealised profits - just as if you had in fact sold everything at the current market value as at 30 June 20xx   wink
This differs from when you hold PM in your private capacity where you only pay CGT on a sale/swap.

This is one of the disadvantages of super tax law - i.e. that you pay taxes with REAL CURRENCY on phantom profits ...
The only upside is that its "only" 15% ...

But still, it is a joke really, because if your SMSF stack grows quite large, you may find that your phantom "profits" in a given tax year are more than the amount being paid into your SMSF for that particular year at which point you'll have to liquidate some PMs just in order to meet the tax bill on your phantom gains - which = increase in value over that given tax year - whether you've sold anything OR NOT!

Lovely tax system we have dont you think??


mmm....shiney! wrote: House prices are the leading indicator of what???????????

Yippe-Ki-Ya wrote: gubmint meddling  lol

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#23 2011-03-29 18:28:38

Yippe-Ki-Ya
Banned
From: The Land of Guilty by Default
Registered: 2011-02-23
Posts: 5,892
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Re: Perth Mint to close unallocated silver

I should qualify the above by saying that this is the case if your SMSF holds physical PMs


mmm....shiney! wrote: House prices are the leading indicator of what???????????

Yippe-Ki-Ya wrote: gubmint meddling  lol

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#24 2011-03-29 18:28:42

Forge
Member
From: Launceston, TAS
Registered: 2010-07-06
Posts: 897
Trades :   
Website

Re: Perth Mint to close unallocated silver

And a comment now that I've had a quick look at the referenced goldismoney2 thread.

Firstly, our forum is pretty sane comparatively.

Secondly, Peter Schiff's letter is well put.

Thirdly, do people not realise both refinery and mint operations require physical to operate?  Logically, the suggestion that the refinery or mint holds paper is ludicrous. 

Paper does not refine into metal.  Paper does not mint into coin.

Finally (to paraphrase slightly):

You are my Hero.
Idiot.

is just wonderfully put.


Cash for today.  Silver for tomorrow.  Gold for a life time.

Your wealth.  Your responsibility.

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#25 2011-03-29 20:38:49

Slam
Silver Stacker
From: Au
Registered: 2010-09-27
Posts: 1,313

Re: Perth Mint to close unallocated silver

Yippe-Ki-Ya wrote:
Matthew 26:14 wrote:
goldpelican wrote:

Well that's going to cause a revisit of my SMSF strategy!

Any idea on the competitiveness of the new Pool Allocated - will the spreads be similar, and will there still be the extra 2%/1% entry/exit fees on Australian customer balances under $50k?

Thanks for sharing this here.

I wonder if you will now have to pay cap gains tax in your smsf now you have in effect been forced to sell your holdings?


ummm.... with SMSF you pay capital gains tax every year on unrealised profits - just as if you had in fact sold everything at the current market value as at 30 June 20xx   wink
This differs from when you hold PM in your private capacity where you only pay CGT on a sale/swap.

This is one of the disadvantages of super tax law - i.e. that you pay taxes with REAL CURRENCY on phantom profits ...
The only upside is that its "only" 15% ...

But still, it is a joke really, because if your SMSF stack grows quite large, you may find that your phantom "profits" in a given tax year are more than the amount being paid into your SMSF for that particular year at which point you'll have to liquidate some PMs just in order to meet the tax bill on your phantom gains - which = increase in value over that given tax year - whether you've sold anything OR NOT!

Lovely tax system we have dont you think??

I believe what you have just said is incorrect, AFAIK (which has been discussed before) you only pay tax when you realise the gains (ie. when you sell). I can sit on the PM's until I retire, why should I be paying tax each year on them when I have no intention to sell them until retirement. Isn't it the same with shares? you pay tax when you realise the gains?

Slam


By failing to prepare, you are preparing to fail.

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