Monday, November 24, 2008

Perth Mint Fraud Revealed

At last, the media wakes up.

Silver Stock Report

by Jason Hommel, November 23rd, 2008

Of all the frauds that I work to expose, one of the hardest for people to see is the Perth Mint Fraud.  The Perth Mint has issued $1.5 billion in gold and silver certificates, for the express purpose of "working inventory," but it is probably being used for "legacy debt," and so, I believe most of it is totally unbacked, based on customer complaints and reports of how they operate. 

Some Perth customers can't see it, because they claim to be able to get silver or gold from Perth on a regular basis.  Clearly, banks can continue to operate on a 1% reserve requirement, and continue to pay out depositors, and stay in business, despite not having reserves to back up 99% of depositors.  Other customers are clearly able to see the fraud, based on the delays, high costs, and extra fees that the Perth Mint charges.

But a recent press release exposes their fraud even more than I ever did.

Mint suspends orders amid rush to buy bullion,28124,24687337-643,00.html

Reportedly, the Perth Mint has suspended orders until January.  But, despite having $1.5 billion to be used for working inventory so that they can fill orders, they cannot fill orders. 

That should be enough to settle the matter.  It shows that if you have any Perth certificates, you should GET OUT. 

But there's more evidence:

Reportedly, "One European client purchased 30,000 ounces for $33 million."  The math is critically important here to show the fraud.  That purchase is for gold at $1100/oz.!  That's quite a bit above spot!  That's $350/oz. above spot!

Either Perth Mint is lying, or there is a very naive investor desperately trying to buy $33 million worth of Perth Mint overpriced gold.  Let's assume Perth is telling the truth about this purchase.

It actually costs the SAME amount to mint gold, as silver.  The only difference is that you need more capital costs, more gold, to mint gold, because some gold is always "in flux" in the minting process.  But with the Perth Mint having a reported $1.5 billion in silver and gold to be used for that, at zero interest rate, thanks to the certificate holders, this is not a cost for them.

So, if we assume $1/oz. in costs, then Perth has earned, on that one reported gold deal, at least $349 x 30,000, which is $10.4 million dollars.  This is important to note, because it's enough to fund the development of from 20 to 40 new mints with all state of the art equipment.  Therefore it's telling for me to read that they are working "non stop" to fill orders.  Why can't they spend money to expand capacity 20 to 40 fold?

I think it's because $10 million is not enough to pay back a $1.5 billion legacy debt.

What's more revealing is what I exposed in my last report:
Where's the Abundance of Perth Mint Rounds?! September 6, 2008

I noted:  "If only 1/10th of the $880 million of gold and silver certificates is in silver (and they don't reveal what percentage it is), then that would be $88 million.  Divide by $13 = 6.8 million ounces of silver.  If that much were minted monthly, that would come out to 81 million one ounce rounds, which would be 4 times as many coins minted by the U.S. Mint."

Since that report, Perth revealed that their certificates are $1.5 billion, not the $880 million as of last year. 

Again, let's run some math.  If we assume 1/4 of the $1.5 billion is in silver, that's $375 million, at $10/oz, that's 37.5 million oz.  If we assume a minting turn around time of a full one month, that amount of "working inventory" could be used to mint (37.5 x 12) 450 million ounces per year.


The U.S. Mint only makes 20 million oz. per year, since doubling capacity in 2008!  Clearly, the Perth Mint is practicing "standard fractional reserve banking" type fraud, since they need to shut down because of too many orders.

This shows that probably 99% of Perth Mint issued certificates are fraudulent, and backed by nothing more than a promise to repay. 

Why is this important?  Because $1.5 million worth of investment demand was siphoned away from gold and silver and into Perth Mint gold and silver certifiate fraud instead.  If $1.5 million went into silver, instead, the silver price would probably be more than $25/oz.  That, according to Ted Butler, could have added about $10 billion worth to the existing stock of real silver, and another $10 billion in market cap to the silver stocks.  Fruad hurts more than just the people defrauded, it hurts the entire industry.  It also hurts the entire world.

I'm surprised that more people are not outraged by this fraud.

To see more of my reports on the Perth fraud, see here:

Where's the Abundance of Perth Mint Rounds?! September 6, 2008 
Nadler, Kitco, Perth, Matthey; Sold Out! September 3, 2008 
Perth Mint Crisis Watch 5 June 6, 2008 
Perth Mint Crisis Watch May 23, 2008 
Perth Mint Crisis: Solutions and Ramifications May 23, 2008 
To the largest newspapers in Australia May 22, 2008 
To the government of Western Australia May 21, 2008 
Poor Prospects for Kitco/Perth/Matthey May 19, 2008  
Kitco / Perth Mint / AGR Matthey / Bullion Bank Connections May 17, 2008 
Will Kitco Sue me?! May 16, 2008  
Silver Shortage Drives Men Nuts March 31, 2008 
Perth Mint and Kitco Scheme Exposed March 26, 2008


    Jason Hommel

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