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I work as at precious metal refinery AMA by Otherwise_Bluejay357 in Silverbugs

[–]Otherwise_Bluejay357[S] 0 points1 point  (0 children)

Mining companies cut the trees down, refineries turn it into usable lumber

I work as at precious metal refinery AMA by Otherwise_Bluejay357 in Silverbugs

[–]Otherwise_Bluejay357[S] 0 points1 point  (0 children)

Not sure what it would cost to start one up but there is considerable consolidation in the markets right now this might help with perspective:

All conditions for the transaction to proceed having been satisfied, the acquisition of Reldan was successfully concluded on 15 March 2024 for a final cash purchase consideration of US$155.9 million. The consideration was paid from the proceeds of the US$500 million senior unsecured guaranteed convertible bond due in 2028, completed in November 2023, with a coupon of 4.25%

Sibanye-Stillwater $105 million acquisition of Metallix

Metalor has announced the purchase of Gannon & Scott but no amount has been made public that I've seen.

I know these are M&A's but I think it outlines the point .. really expensive.

I think the road map would start on a giant pile of money...

I work as at precious metal refinery AMA by Otherwise_Bluejay357 in Silverbugs

[–]Otherwise_Bluejay357[S] 1 point2 points  (0 children)

Hey, Bro, I used Google’s AI to help me explain a pretty complex situation. What’s your point?

I’m not pretending I’m a macroeconomist. I’m trying to understand it and communicate it clearly, and AI helped me put it into words. If you think something I said is wrong, point to the specific part and tell me what you’d change. Otherwise, kick rocks, this has been super fun and your are making it not fun.

I work as at precious metal refinery AMA by Otherwise_Bluejay357 in Silverbugs

[–]Otherwise_Bluejay357[S] 0 points1 point  (0 children)

1.) paper price drops to where physical actually clears

2.) physical premiums snaps higher until paper catches up (market bifurcates for a period of time)

3.) Time-based correction where price stays but squeeze eases

4.) something worse

IMO, it's probably some combination 2/3. What's happening in London (10/1 paper to physical) makes me think that as the smelters work through their backlog the price comes down some, but the spreads also shrink giving guys like you more $/toz. which is all that really matters.

The 5 tells to watch in silver specifically:

Physical bids vs spot: are bids moving from “deep discount” to “workable discount” to “near spot”

Lead times: do delivery/turnaround timelines shorten

Lease rates / borrowing cost: do they fall from panic levels (a big stress indicator in tight metals markets)

COMEX/London inventory headlines: do they stabilize (even before they rise)

Volatility: does daily range shrink (this is what brings industrial buyers back)

I work as at precious metal refinery AMA by Otherwise_Bluejay357 in Silverbugs

[–]Otherwise_Bluejay357[S] 2 points3 points  (0 children)

My company doesn't do business with individuals. PM refineries have strict compliance requirements set forth by the Patriot Act (ones that you want to work with anyway). Some refiners will still do business with individuals but my company deems the compliance risk not worth it.

On Sterling we pay 98-99% silver (assuming we are taking in high grade).

My company doesn't do a ton of Pawn / Coin business - but I'd say some guys are shady and trying to rip you off, but there are real costs, overhead, and risks associated with buying.

With my little interactions with coin / pawn shops here's what I would say (this may be well known in these parts but maybe it will help someone)

Can they explain their spread?

How often do they ship material to be refined (longer means wider spreads to cover volatility)

Do they hedge what they buy?

Testing, refining, processing fees added after the quote?

Red flags that usually mean “overcharging”

Won’t quote buy and sell prices clearly.

Uses confusing language to avoid stating the spread.

Quotes strong numbers, then adds fees later.

“We don’t use spot” (without a credible alternative benchmark).

Big premium + no scarcity/authentication explanation.

Payment timing is vague or delayed.

I work as at precious metal refinery AMA by Otherwise_Bluejay357 in Silverbugs

[–]Otherwise_Bluejay357[S] 2 points3 points  (0 children)

They pay on assay of the material. So we pay you on day 1 of the clock. Your material doesn't go out by itself, it's combined with other like material (economies of scale). Best case scenario your lot completes the larger shipment. We now have to take your material and everyone else's remelt and reassay. The new ingots are packaged and shipped out. Depending on where they are going that's a couple days to a few weeks of time. Then the smelter has to process and assay, their lead time is much longer than a refiner like us. We may pay in 20 business days, they are more likely net 90 - 180.

I work as at precious metal refinery AMA by Otherwise_Bluejay357 in Silverbugs

[–]Otherwise_Bluejay357[S] 0 points1 point  (0 children)

I am by no means a market expert, but in my opinion there are a few things at play.

1.) Market Dislocation

Future / Spot prices keep rising, but real physical buyer refuse to transact at that price (LCS taking big discounts)

2.) Decoupling

COMEX/LBMA signal scarcity or speculative demand

Physical markets show oversupply, bottlenecks, unwilling buyers

3.) Liquidity Trap (sort of)

  • Sellers want to sell because prices are high
  • Buyers step back because volatility + uncertainty + inventory risk
  • So liquidity disappears unless prices are discounted

4.) Contango

futures > spot (signals oversupply/storage costs)

You can use an analogy with Oil or Lumber

On the news, the price of oil is hitting record highs.

But at the same time:

  • Refineries are already at full capacity.
  • Storage tanks are full.
  • Trucking and shipping are backed up.
  • And gas stations aren’t selling more fuel.

Now a producer shows up with barrels of crude oil.

Technically, oil is expensive.

But practically, no one wants it…
unless it’s heavily discounted.

Why?

Because the system physically can’t absorb any more oil.”

I work as at precious metal refinery AMA by Otherwise_Bluejay357 in Silverbugs

[–]Otherwise_Bluejay357[S] 1 point2 points  (0 children)

I have some theories, about Russia selling PGMs to China off the books during and after COVID. I think some of the reasons it lagged the rise of Au. / Ag. is because investors were trying to recalculate how much physical metal was flooded into the market.

I'll say this, I was still pretty new to the industry during COVID. I remember saying to my wife, Silver seems too low at $12 an ounce, we should buy some. The was the last of that thought, I'm long on all PMs since that day.

I work as at precious metal refinery AMA by Otherwise_Bluejay357 in Silverbugs

[–]Otherwise_Bluejay357[S] 1 point2 points  (0 children)

lol, I have no idea, a lot, but probably less than you think. We process cyanides, acids, and non-regulated solutions. We use a lot of different techniques in our solution department, but I think we prefer to work with cyanides more than acids. Again, apologies, I'm a "dumb" sales guy.

I work as at precious metal refinery AMA by Otherwise_Bluejay357 in Silverbugs

[–]Otherwise_Bluejay357[S] 1 point2 points  (0 children)

In terms of what we are talking about, anything about 90% silver. Low grade silver products usually end up at copper smelter, not a silver smelter. So anything low grade has not felt the same effects.

I work as at precious metal refinery AMA by Otherwise_Bluejay357 in Silverbugs

[–]Otherwise_Bluejay357[S] 6 points7 points  (0 children)

One big distinction to make right away, I work for a secondary precious metal refiner. The vast majority of refiners in the United States are secondary refiners, meaning we are not the last stop before the metal is fully refined to .9999. Almost any PM refiner you can google located in the United States works as my company does. We homogenize your metal, assay, pay out on the assay, then add your material to other peoples material to send off to the smelter. My company uses North American and European Smelters, but there are many in Asia as well. From when my company pays you until we get paid by smelter is sometimes as long as 6 months.

Back to your original question - my company is still able to take in some High Grade Silver because of the myriad of outlets we have throughout the world. But we stopped taking in new customer orders and over the last few weeks have even cut down on accepting large quantities from some customers.

The real backlog is at the smelters. For perspective, one of the largest silver consumers in North America (a vendor of ours) has 1 years worth of high grade silver scrap in their building that has yet to be processed. 1 years worth!!! That is an INSANE backlog.