$17.00 to Produce an Ounce of Silver

The people who handle/sell silver do NOT make a 20% profit!

3-5% is the most they make, if they're lucky...

 

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Absolutely correct. It is one of several rationalizations supposedly supporting higher silver prices, a twin to (supposed) supply deficits.

The prior post on cost accounting is also highly relevant. Once a silver mine has been opened, the sunk costs to do it are gone. So whether the silver spot price is below the "all in" cost from an accounting standpoint is not necessarily relevant and may be totally irrelevant. It may make sense to continue to operate a mine at loss from a GAAP or internal accounting basis as long as the selling price exceeds the marginal cost of production, otherwise known as positive operating cash flow.

 

I agree. Non-accountants like to think such a thing as a "cost" is fixed and knowable. "Cost" is a fuzzy term, and I have seem many companies go out of business from using a "cost" that, while true theoretically, was not the correct "cost" to use in their specific situation.

 

Total BS that has been refuted lots of times. Plenty of silver left in the ground and every year the mining industry produces more and more.

As to the cost of producing an ounce of silver that varies from mine to mine. Think about it. Each mine is a unique entity with different circumstances. I know one Canadian mine was so off the beaten path that their power was being supplied by generators. You can imagine what that did to their energy cost. Is it a new mine or an old mine? Is the vein nearly depleted or going strong? Is it strip mining or deep mining?

That is just to get an ounce of raw silver. Then it goes to a smelter to be melted and impurities taken out. Then to a refiner who gets any remaining impurities out and produces it in whatever form the mint wants due to the thickness and size of the coins or bars.

Then there is the cost of designing and actually striking or pouring the end product. So it varies a lot and you can't depend on the CEO's giving you accurate information because they want to look good to their stockholders and keep their competitors in the dark.

 

How to tell when ANYONE selling metals is lying - they're speaking. The "cost" of producing an ounce of silver is the price at which each mine shuts down, period.

There IS NO SHORTAGE OF SILVER! Anyone who says there is, is a liar.

 

Thus explaining Mezak's prices. You don't expect him to settle for such a miserly profit do you?

 

Oded clearly does NOT live where I do. EVERY dealer who operates in my area at least TRIES to steal the stuff at such a low price as to make 40 points of margin if they can find a sucker.

The ONLY place I've EVER been to where margins are as narrow as Oded reports was an ANA show.

 

I have to agree. I have been in coin stores, knowing their sell price is say 15x, overhearing him offering someone walking in 12x or less.

However, this is gross profit. Maybe Oded was talking about total profit. One thing we need to be cognizant of is the dealer is taking a risk. He could be buying Chinese fake bullion, it could be stolen, (in which case he has to forfeit the bullion to the police), he has to pay rent, etc. 30 or 40 percent markup might sound exorbitant, and it would be if the dealer had no risks, could sell tomorrow, had no rent, etc.

 

Monster boxes cost me spot +$2.15 today. I sell singles for $23.00.

Last week at my club show I was selling them for $22.00.

Figure it out for yourselves.

 

Where I live, BEFORE the recent run-up in bullion, the lowest I had seen was $25. You figure it out. And that was when spot was $17ish. At the same time, 90% silver frequently runs UNDER spot at our club auctions, except for Morgans, which apparently are made of magic. Hence, people act accordingly. And this is a very LOW cost of living area.

 

Sell you all you want for 50¢ over my cost.

 

Not going to get rich from me. "All I want" is about 2-3 a year for me. I'm one of those crazy Keynesians. I think silver is an asinine investment.