Gold & Silver Forum - Canadian Mint opens new Silver Refinery (and MSM spin)

Booming gold business pushes Mint into silver

New refinery expected to produce two million troy ounces of silver annually

OTTAWA -- The Royal Canadian Mint says it's been handed a golden opportunity to take a new plunge into the silver business -- and it can't afford to turn it down.

The Mint, best known for making the coins that jingle in your pocket, is doing so much gold refining that it now makes sense to set up a new silver refinery.

Unrefined silver is one of the byproducts of gold refining because the two precious metals are often found in the same deposits. So the greater-than-usual volume at the Mint's gold refinery has left it with more silver than normal, and more incentive to refine it.

"We're actually turning business away right now," said David Madge, the Mint's executive director of bullion and refinery services.

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The Mint will tomorrow unveil the new silver refinery, which is expected to produce two million troy ounces a year.

The new operation, which will have the capacity for up to 10 million ounces a year, will be able to produce 99.99-per-cent pure silver without effluent.

The Mint will use much of that output for its own production of domestic and foreign coins, refined bars, wafers, investment products, and collector coins.

Mr. Madge said the shift to internal production will allow the federal Crown corporation to save money, and to ensure access to top-quality supply. The Mint, the country's oldest refiner, has for more than a decade relied on Canadian and foreign mining companies and silver recyclers for its refined silver supply.

According to its 2005 annual report, the Mint posted refining revenue of $4.4-million in 2005, down sharply from $6.3-million a year earlier. In 2003, however, the figure was just $3.1-million.

Despite the increased demand for the Mint's refined gold products, recent reports tell an odd tale of two distinct precious metals markets: the physical market, where there are fewer buyers, and the financial one, which is attracting boatloads of capital.

Although silver demand at the Mint tripled in the first quarter, much of the new capital attracted to silver has been speculative, as investors wait for the kickoff of a silver exchanged-traded fund (ETF).

Patricia Mohr, Bank of Nova Scotia's vice-president of commodity market research, said investors have also flocked to precious metals because of concern over the strength of the U.S. currency and geo-political tension. "It's exceptionally volatile."

A longer-term look back at the market, however, indicates rising demand and prices.

According to the Silver Institute, the price of silver has more than tripled in less than three years, despite an expansion of mine supply.

"The obvious explanation for why the price has nevertheless performed so strongly is the reappearance of investment on the demand side of the equation," the Silver Institute said last week, when it released its 2006 global outlook.

SIMON TUCK
http://www.theglobeandmail.com/servlet/story/LAC.20060529.RMINT29/TPStory/Business