US Mint Silver Shortage – An Inside Look (Audio)

SilverDoctors.com interviewed Tom Power, the CEO of Sunshine Minting. Sunshine is one of the biggest suppliers of silver blanks to the United States Mint, which the Mint uses to strike the American Silver Eagle coins. Sunshine also also supplies gold and silver blanks to producers around the world, and has its own line of very popular privately minted products.

This interview provides an inside look into the precious metals industry, which is currently gridlocked with huge demand and supply shortages. Power explains the mechanics behind these shortages, and why Sunshine Minting is experiencing demand that far exceeds that of 2011.

We’re running 24/7, and we have been running 24/7 literally since 2009 to meet the demands of the market… The kind of growth we’ve seen is that in 2007, 2008, our total annual output of finished product was in the neighborhood of probably 25-30 million ounces a year. We thought 2011 was our best year ever at 55 million ounces. We’re on track to exceed 75-80 million ounces this year…”

Highlights from the interview:

“Sunshine has a long history supplying into the silver markets. We have the benefit of 30 plus years of history here… What we’re seeing right now is reminiscent of what happened 2009 through 2011. I actually think it’s even stronger now than it was back then. The surge in demand for any product is something I haven’t seen… Silver Eagles are people’s number one go-to product, but it seems now people are clamoring for any product they can get their hands on. It’s an incredible market out there right now, especially on the supply side. We’re faced with capacity challenges…

“The US Mint – we’ve obviously had to bump up our production for them, especially when they sold out of allocation several months ago. They’ve been much better in the last couple years about doing their planning and trying to ensure they had inventory… When the market took off, within two weeks basically sold them out of all the product that they had, and they had no blank inventory or anything. As a supplier, the challenge for us is for us to ramp up to meet their demand and the demand of other customers…

“You have to be cautious as a manufacturer to not overbuild your capacity… Working closely with the US government and other governments, and seeing what their demands are, we build our capacity to that. But when all of a sudden that surges, the challenge in our industry is that a lot of the equipment we use has a very long lead time. If you were to go and buy a new coining press… they are 6-8 month lead time for a single piece of equipment…

“Between our two facilities, since 2007 we have tripled our capacities, and it is still not enough. That’s just how the market has continued to grow. It’s a crazy market…

“We’re running 24/7, and we have been running 24/7 literally since 2009 to meet the demands of the market. We had to bring on our second operation in Nevada two years ago to help with that increase in demand. They’re running 24/7 as well now too… The US Mint has the same capacity issues…

“We act as a conduit for the US Mint for acquisition of silver on the market. We go out on a weekly basis and put bids out for the supply of the 1000-ounce bars – the raw materials – that we use for the US Mint…

“For the non-US government materials, it was interesting. I was walking through our factory today and I was noticing people seem to be digging deep into the vaults and pulling out a lot of old stock that has been sitting there for a while. I’ve seen some old product in the plant today that I haven’t seen in decades… You can always tell when the market starts to get a little tight…

“The kind of growth we’ve seen is that in 2007, 2008, our total annual output of finished product was in the neighborhood of probably 25-30 million ounces a year. We thought 2011 was our best year ever at 55 million ounces. We’re on track to exceed 75-80 million ounces this year…

“[Precious metals are well below 1% of overall investments.] I tell that to people all the time. If all the sudden 5% of the population become interested in buying precious metals for investment, there’s no way that we could meet the demand in the next 10 years…

“The other thing our distributors are seeing is that people are purchasing more products more frequently, but on a smaller dollar amount basis… They said years ago, especially in 08, 09, people were walking in and buying $10,000 worth of silver. As much as they could without having to fill out all the forms for the government. Now they’re seeing these online transactions where they’re buying $500 here, $1,000 here, $2,000. But they’re buying more frequently…”

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