Tag: amrk

The US Mint is one of the largest producers of coins and also happens to be one of the oldest continually operating minting operations in the world. However, this year a variety of production problems have struck the mint related to the production of bullion coins leading to tremendous volatility with Silver Eagle premiums in recent months.

Some investors have continued buying Silver Eagles, hoping that their dollar-cost average, along with rising commodities prices will offset the rising cost. Other investors are seeking out alternatives and buying bullion coins from other government mints.

Results from a recent third-party audit have shown that the Mint’s production techniques remain some of the most efficient because of regular and ongoing continuous improvements for the last 75 years.

Although newer processes exist for manufacturing large volumes of small parts (such as injection molding), the Mint’s ability to produce the quantity and quality of metal stampings are far more economically cost effective.

Silver Eagle Production Costs

The Mint does no longer operates refineries and provides limited assay services. Instead, the US Mint purchases raw materials for coins either in large rolls of sheets of metal strips or as ready-to-strike planchets from a select few approved suppliers such as Sunshine Minting, Coins’N’Things and other precious metals producers.

Prior to minting, the blanks are sent through a furnace in a process to soften the material, referred to as “annealing”. The blanks are then rinsed and cleaned before the “upsetting” step. The upsetting step raises the edges or rim of the blank to turn it into a planchet. The planchet is then ready to be struck into a coin.

In addition to wages, each of these steps in the production process cost the Mint resources, such as electricity, water, tools, dies and other materials. It is established by law that the Mint must charge a premium to cover the cost of production of each silver coin to prevent the program from operating at a loss.

The premium that the Mint charges at a wholesale level to the Authorized Purchasers includes the production costs reflect the amount of work the Mint does to produce, package and distribute each coin.

The West Point Mint is currently the only facility that produces Silver Eagle bullion coins.

Authorized Purchasers

Only companies that meet very stringent criteria are allowed to buy Silver Eagle coins wholesale directly from the mint. There are just ten companies in the US that are “Authorized Purchasers” of the US Mint. The criteria and process to become an AP is arduous and requires a significant amount of financial capital.

Some of the Authorized Purchasers are companies that are familiar to precious metals investors as they include wholesalers and one major online bullion dealer. Others include financial and banking institutions that provide an array of investment solutions.

Company	Headquarters	Authorized Metals
A-Mark Precious Metals Inc (AMRK)	El Segundo, CA	Silver, Gold, Platinum & Palladium
American Precious Metals Exchange (APMEX)	Oklahoma City, Oklahoma	Silver, Gold Platinum & Palladium
Coins & Things, Inc. (CNT)	Bridgewater, Mass.	Silver, Gold Platinum & Palladium
Dillon Gage Inc. of Dallas	Addison, Texas	Silver, Gold Platinum & Palladium
Fidelitrade, Inc.	Wilmington, Delaware	Silver, Gold Platinum & Palladium
Jack Hunt Coin Broker, Inc.	Kenmore, New York	Silver, Gold Platinum & Palladium
Manfra, Tordella, & Brookes, Inc. (MTB)	New York, New York	Silver, Gold Platinum & Palladium
ScotiaMocatta (Scotia Bank)	New York, New York	Silver, Gold Platinum & Palladium
StoneX Bullion	Santa Monica, California	Silver, Gold Platinum & Palladium
The Gold Center	Springfield, Illinois	Silver only

Monthly Silver Eagle Sales Volume

The US Mint provides reports that show the monthly sales of bullion coins. The sales reports are effectively mintage reports since the Mint only manufactures coins based on pre-sales from Authorized Purchasers.

The largest mintage year for 1 oz Silver Eagle coins was 2015. That year, the Mint produced more than 47 million coins. This indicates that the West Point Mint is capable of producing nearly 4 million coins per month.

Yet, sales reports for the first few months of this year indicate that the mint has been producing only 900,000 coins per month, the equivalent to just 1,800 monster boxes. This is drastically lower than current demand and restricts the supply of current year coins.

Since restarting operations following pandemic shutdowns in 2020, the Mint has issued several press releases indicating difficulty sourcing suitable blank planchets from providers like Sunshine Minting, Coins’n’Things and other suppliers. This led to the cancellation of the 2022 Morgan Silver Dollar and Peace Silver Dollar commemorative issues from being produced. The fate of this and other coin programs remains unknown.

Coincidentally, the providers of blank planchets are owned by the same companies that are also Authorized Purchasers. This creates what is effectively closed-looped for the production and distribution of silver bullion coins, with the US Mint providing manufacturing services at a fixed cost. The control of the wholesale market is controlled by less than a dozen companies, with several of those companies also being primary suppliers of the raw materials and blank planchets.

As the future of the economy continues to be filled with uncertainty, many investors are driven to precious metals as a safe-haven.

Across the market, it is apparent that premiums on 1 oz silver coins from other sovereign mints have remained lower than Eagles throughout the recent financial crisis. Some investors perceive retail premiums on Silver Eagle coins to be artificially high.

There has been many posts on Reddit and other social media forums in recent months questioning the current Silver Eagle premiums. Some have speculated that suppliers may be intentionally restricting the supply of blanks as a mechanism to increase wholesale profits among the Authorized Purchasers.