In a post the other day I put up a competition after charting some data which I found particularly interesting (guess the mystery chart). The competition was won by euphoria who guessed correctly that it was Gold Anomaly Limited shares issued (with Beer Holiday deserving special mention for initially guessing what it was, but not the company).
Here is the chart again:
CLICK CHART TO ENLARGE
Following the IPO, the first quarterly (Q4, 2002) showed the number of shares on issue as 20,590,454 and following a recent 2:3 rights issue this number now stands 182 times higher at 3,745,558,220. To put this in perspective if you'd owned a stake of 1,000,000 shares in the company in late 2002, you owned 4.85% of the company, if you hadn't bought any since and simply held this parcel over the 10 years you would own 0.0267% of the company today. You would have paid 25c each for your shares ($250,000 total) and today they are trading at less than a cent (closed Friday at .004, though have traded lower) and your 1,000,000 shares are now worth $4,000.
Here is a weekly chart of the share price over the last decade:
CLICK CHART TO ENLARGE
Unfortunately GOA's story is not an uncommon one in the small cap exploration and mining sector.
Many exploration companies have struggled to issue capital since the GFC and are preyed upon by financiers which ultimately destroy value for shareholders by issuing new capital well below the current share price.
Juniors have been making big mistakes too
This failure to read the gold market extends across the junior sector too. From 2001 to 2007, it was easy to raise money. Exploration companies would issue shares, raise capital, go out and drill, hopefully declare something half decent, then go and raise some more money at a higher price.
Then we got the credit crunch, and funding dried up. Yet so many companies are still trying to follow this broken business model. They have been decimated this year. The only ones that have done well in 2011 are those that have mined metal at a low price, and sold it at a higher one. It really isn’t rocket science. That’s what gold miners are supposed to do. But often they don’t.
I have long railed about this. The gold price is high, and the credit markets are dead. Gold won’t be this high forever – so mine the easy-to-get stuff and sell it while you can. Forget expanding the resource, or doing anything else – just get mining. This market isn’t interested in blue-sky stuff – it isn’t interested in dreams, it wants hard cash. Money Week
Some of these junior companies make promises of self funding future expansion through start-up of small scale Gold production (something GOA has been suggesting there is the potential for since 2009 or earlier), however there have been many speculators/investors (including yours truly) burned by such empty promises.
It's not only explorers which can be hit by these problems. Even producers with high cash costs (cash cost may be below spot price, but administration, development and exploration costs soak up profit and require the company to continue raising capital) can experience similar issues. Apex Minerals (AXM) is a marginal Gold producer that comes to mind and has been hit hard over recent years. Trading well over $1 in 2008 they fell to less than 1c and then earlier this year had a 100:1 consolidation following which the share price continued to fall. Such consolidations often hide the true extent to which a company has been allowed to print shares in order to continue trading.
Hedge fund boss John Paulson has often made the conventional wisdom case for owning gold shares - that mining companies enjoy superior leverage to gold prices, perhaps rising as much as 2-3 times as much as the gold price. As noted recently in the Wall Street Journal, he’s backed up his thesis with big slugs of gold equities.
Color us skeptical.
We mean no disrespect to the likes of Paulson. But the case for equity leverage to gold is diminishing and will continue to do so until mining company executives and their bankers stop the addiction to deal-making. Until then, non-insider investors in precious metal equities will continue to bear the brunt of the penchant for financial engineering that is based on a permissive attitude to the stock register.
We’re not naive about the temptations and opportunities for stuffing scrip down the market’s throat. When you own a money printing press you tend to use it, especially when your performance is incentivized primarily through near-term movements in stock prices.
Yet who cannot be galled to hear precious metal miners cooing and tut-tutting about profligate central bankers and leveraged sovereigns even as they issue stock at rates to make even Ben Bernanke blush, make high risk bets on the far distant future, and spend more on fees and commissions than dividends. Mine Fund
At times I've heard from various readers (either through comments on the blog and forums, emails or in person) that they miss the stock profiles that I have written in the past, but this has come from an inclination to move more of my capital from stocks into physical. With less capital available for stocks this has meant less time allocated to research and keeping up to date with progress of mining companies. While I do still keep an eye on those companies I hold in my Super, the mismanagement of many junior companies balance sheets and capital structure over the last 12-24 months in particular has kept me wary of re-entering this sector with any significant positions.
I'm not saying that there aren't exceptions. There are exceptional junior exploration companies who have managed their finances and capital structure, some of them covered on this blog in the past, such as Cobar Consolidated who raised capital above the share price on multiple occasions & Royalco Resources who have a unique royalty focus which allows them to avoid dilution and even pay shareholders a good dividend. It's not an easy process to pick the right mining companies and even when you have the right company you might be holding at the wrong time or hold them for too long. The good thing about holding physical is that while it's not without its risks, you have a much greater level of control over that risk (for example you can secure your physical in a safety deposit box facility). Holding physical you are not at the mercy of central bankers or resource companies (who can evidently be as bad, if not worse) who can print their scrip at will.
I have constructed the below chart with some data I collected this evening.
I am putting out a challenge to any readers who are interested in winning some free Silver. Guess what this chart is (answer has to be specific) and I will post you a free ounce of Silver (you will get a choice from a few nice coins). Only the first person to guess will win the Silver. Will post worldwide. No maximum number of entries so you can keep guessing, but only 1 guess allowed per comment (so if you want to make 3 guesses then they need to be in 3 separate comments). Only entries in comments section of this blog will be accepted.
Important: You need to post your entry to the blog with an account (leave an email address in the comment or use a username that you use on a forum like Silver Stackers or Kitcomm) or I will not be able to contact the winner.
I will give out some clues over the next couple of days (will update the post) and probably close this off Sunday afternoon/evening if no one has guessed correctly (and I will keep my ounce of Silver). I will tweet any new clues (once posted on the blog) so follow me on Twitter (@bullionbaron) for notification of updates.
The first clue: I am finance/market related. Just because the number rises doesn't mean my owners wealth increases.
CLICK CHART TO ENLARGE
Friday Morning Clues: I've had a couple of suggestions that it could be the Fed or another central bank balance sheet. While that fits the theme of the first clue it's not a central bank balance sheet. The number set that is charted starts around 20 million and recently almost doubled to a little under 4 billion.
Question: Is it precious metals related? Answer: A good question to narrow it down. Yes it is precious metals related (more info in afternoon clue). There has been a break in the mystery... from Beer Holiday:
Number of gold mining co shares issued. On the ASX I guess. I don't follow the penny stocks, hopefully they had lots of placements this year. As per above, I need specifics (company name)... but the above should help considerably to final answer.
The answer was guessed correctly by euphoria, it is the issued shares over a 10 year period for Gold Anomaly Limited (GOA) on the ASX. I will put up a post later tonight or over the weekend with more information. But it's something to think about in the meantime. Some of these small cap mining stocks are better scrip printers than Bernanke himself.
You can also ask questions in the comments section to try and narrow down where to look for the answer. It's very unlikely you've seen this exact data charted before.
So put your thinking cap on and start guessing below!
It is one thing for tungsten-filled gold bars to appear in the UK, or in Germany:
after all out of sight, and across the Atlantic, certainly must mean
out of mind, and out of the safe. However, when a 10 ounce 999.9 gold
bar bearing the stamp of the reputable Swiss Produits Artistiques Métaux
Précieux (PAMP, with owner MTP) and a serial number (serial #038892,
likely rehypothecated in at least 10 gold ETFs across the world but
that's a different story), mysteriously emerges in the heart of the
world's jewerly district located on 47th street in Manhattan, things get
real quick. Moments ago, Myfoxny reported that
a 10-ounce gold bar costing nearly $18,000 turned out to be a
counterfeit. The discovery was made by the dealer Ibrahim Fadl, who
bought the PAMP bar in question from a merchant who has sold him real
gold before. "But he heard counterfeit gold bars were going around, so
he drilled into several of his gold bars worth $100,000 and saw gray
tungsten -- not gold. The bar was filled with tungsten, which weighs
nearly the same as gold but costs just over a dollar an ounce."
Something that readers may not be aware of is that Tungsten filled Gold bars are far from a new scam. I was reading back through some old articles on Gold today and spotted two different scares, in January 1975 and June/July 1982. Below are two of the articles I found (click article to enlarge) and may be of interest:
I had a chuckle at a post on Zero Hedge this morning which listed some of the reasons you might be considered a conspiracy theorist:
You Know You Are A Conspiracy Theorist If...
You are capable of critical thinking.
You distrust mainstream media.
You think that drones in America might not be for Al Qaeda.
You think it’s a little strange that WTC building 7 came down at free fall speed on 9/11 yet it was never hit by a plane.
You think you have the right to protest.
You think the War on Terror is a scam.
You think the War on Drugs is a scam.
You think the anger directed at America from the Middle East could possibly be related to our foreign policy rather than hating how amazingly free we are.
You don’t own a television, and if you do, all you watch is RT, especially the Keiser Report and Capital Account.
You think rich, powerful and connected people should be subject to the rule of law and go to jail if they commit crimes. Even if they are bankers and work at JP Morgan or Goldman Sachs.
You grow your own food.
You buy raw milk.
You think allowing a small group of unelected people (The Federal Reserve) to print unlimited amounts of money and distribute it as they please might not be a good idea.
One of those things you read and laugh because there is truth to it (Government or regular people probably think you are a conspiracy nut for such thoughts or actions) at the same time that it is absurd that such thoughts or actions should be considered conspiratorial.
Then later in the day I was linked to an article where a former Reserve Bank Official is suggesting the removal of $50 & $100 notes from circulation in order to curb pensioners, criminals and tax evaders from hoarding the notes (article is trimmed, click here to read in entirety):
ELDERLY Australians committing welfare fraud on a massive scale are behind the extraordinarily high number of $100 notes in circulation, a former senior Reserve Bank official says.
Yesterday the Herald revealed there are now 10 $100 notes in circulation for each Australian, far more than the more commonly seen $20 notes.
One popular explanation is that they are used for illegal transactions as part of the cash economy, something the former Reserve official, Peter Mair, rejects as a "furphy".
In a letter to the Reserve Bank governor, Glenn Stevens, dated July 4, Mr Mair laid the blame squarely on elderly people wanting to get the pension and hiding their income in cash to ensure they qualified for the means-tested benefit.
"The bank is basically facilitating a tax avoidance scheme by issuing high denomination notes," he told the Herald. "They are not needed for day-to-day transaction purposes, or even as reasonable stores of value."
Mr Mair said the return for an Australian close to getting the pension who held $10,000 in cash, rather than declaring it, was "enormous".
"If putting it under the bed or in a cupboard means you qualify for the pensioner card, you get discounted council rates, discounted car registration, discounted phone rental - in percentage terms the return is enormous," he said.
His letter to the governor proposes phasing out the $100 and $50 denominations.
"Cards and the internet have delivered a body blow to high-denomination bank notes. They are redundant," he said. "There is no longer any point in issuing them except to facilitate tax dodging.
The authorities would announce that from, say, June 2015 every $100 and $50 note could be redeemed but no new notes would be issued. After June 2017 every note could only be redeemed at an annual discount of 10 per cent. It would mean that after two years, each $100 note could only be redeemed for $80, and so on."
The letter acknowledges the proposal would be contentious and says it should not be done "in any way precipitously", but as payments become more electronic it will become inevitable.
"What would remain in circulation are coins and a modestly expanded issue of currency notes in the $10 and $20 denominations. There is every reason to expect that a national currency issue of this character would soon be adequate." SMH
The Australian $100 note was introduced in 1984. If we use the RBA Inflation Calculator (Link) we can measure that $100 in 1984 would buy a basket of goods valued at $270 in 2011 Dollars. By the time we were to phase out the $100 bill in 2017 it would purchase less than a third of the equivalent 1984 basket of goods (with an inflation rate of 3% between now and then).
Granted we use a lot more electronic transactions today than in 1984 (EFTPOS didn't become widely adopted until the early to mid 90s), however it shouldn't be assumed that those preferring to go about their business with cash are doing so unlawfully. Some just prefer the privacy or convenience that comes with using cash.
Another recent concern is the push for surveillance of citizens via having their internet & telecommunication services monitored:
AUSTRALIA'S security and law enforcement agencies are world leaders in telecommunications interception and data access and like most successful industries, they want more. Federal Attorney-General Nicola Roxon is canvassing a further expansion of surveillance powers, most controversially a requirement that telecommunications and internet service providers retain at least two years of data for access by government agencies. The Age
We are heading toward an Orwellian State on the current trajectory.
Based on the way Australia is heading with new legislation requesting ISPs keep 2 years internet history logs and the suggestion that we remove $50 & $100 bills from circulation I thought it would be worth coming up with a localised checklist... hence:
You know you are a pension cheat, criminal or tax evader if...
You put some cash aside every week and keep it in your house to give out to the grand kids at Christmas time (my Nana did this).
You are old enough to remember past bank collapses, understand not to take the system for granted and keep your savings in cash to protect yourself in the high risk environment that we face today.
You prefer $100 notes over $50s as you can hold more $ in your wallet with fewer notes.
You like keeping any note larger than $20 in your wallet because keeping the number of $20's required to get through your week in your wallet would put your back out every time you sat down.
You prefer to draw out cash on an irregular basis to use for daily transactions in order to avoid bank transaction fees.
You find it easier/more convenient to manage a budget when you can quickly check your remaining balance by opening your wallet or purse, rather than having to make a phone call or access the internet.
You prefer to use cash in order to maintain a reasonable level of privacy when it comes to your personal spending.
You hold onto some cash in the event of another global financial crisis where some types of accounts may be frozen in order to prevent a bank run.
You hold some cash outside of the banking system given the increasing frequency of bank network outages which take down ATM and EFTPOS services.
You use "non-conventional" methods of preserving your purchasing power (such as using cash to purchase and store bullion).
You prefer to keep what little money you have in cash to avoid an increasing number of electronic fraud transactions which banks can take significant lengths of time to resolve (4-6 weeks).
You prefer to save in a form of money (Gold/Silver) which has been in use for thousands of years rather than one which has been around for less than half a century.
You have a joint savings account with your partner and want to buy them a large gift with cash to avoid them finding out about it.
You ask to withdraw a large amount of cash in order to purchase a vehicle as the current owner doesn't want to take a cheque.
You refuse to provide a private business with your ID in order to secure a purchase of bullion (who wants a business to have your address where they suspect you might store the purchase).
You run a small business and need to keep a cash float on hand to operate smoothly.
You don't do anything illegal, but would prefer to keep your transactional or internet browsing history private anyway, it's none of the Governments business.
You aren't doing anything illegal online, but you might still be prejudiced against for your activities anyway (e.g. organising anti-Government rally).
You are pretty sure that there is a greater chance of someone doing something illegal with your information in the department gathering the data than of doing something illegal yourself so would rather keep your data private.
You would prefer not to have a Government whose representatives have been known to lie, cheat, steal, spend wastefully, look up inappropriate websites & act like clowns in general to have even greater control over your life than they already do.
I could probably come up with a trillion more (remember the good old days when it was enough to exaggerate with the word million?), but there are only so many hours in the day. If you can think of some good ones drop them below in the comments and I will add them to the post.
Royal Silver Club - World's First Silver Bond from Royal Silver Company
You might not be familiar with Royal Silver Company if you don't follow the Silver coin market, but over the last 24 months this company has built quite a name amongst coin collectors for their .99999 (5 x 9s) Silver coin products (technically they are rounds as they aren't legal tender). Most Silver coins are produced in a lower finesse such as the American Silver Eagle (.999) or Canadian Silver Maple (.9999), so these new coins from Royal Silver Company became somewhat a novelty for collectors, chasing the finest Silver coin available on the market.
This is a blurb available on the Royal Silver Company's website:
Royal Silver Company is Bolivia's only silver refinery and custom smelter. We sell a retail product: the world s first .99999 pure silver coins. Our retail product is sought after by collectors and silver coin investors, for its unique purity and limited availability. We charge a high premium over spot silver, limiting sales to match our production capacity.
In mid 2010 they released their first coin in this fine grade, the 2010 Andean Cat:
Royal Silver Company 2010 Andean Cat 1oz Silver Coin
While I can appreciate the novelty of owning the finest Silver coin I must admit their first coin certainly didn't do much for me from an aesthetic point of view. However their designs have improved over the course of the past two years:
Royal Silver Company 2011 Blue Throated Macaw & 2012 Anaconda
Around 12 months ago (July/August 2011) the Royal Silver Company started offering (reportedly the world's first) "Silver Bonds" in order to expand their operation in Bolivia. A total of 400 certificated were/are on offer at a cost of $5000 (potentially raising up to 2 Million Dollars).
This Royal Silver Company Silver Bonds made news on Yahoo Finance:
Royal Silver Company is a Panama corporation with a wholly-owned subsidiary in Bolivia. The company uses an advanced hydro-metallurgical method for producing silver from mined ores. Furthermore, the company uses zero emission technology in order to produce certified .99999 silver. The company currently employs about 75 people. The company has a new limited membership opportunity for silver. Royal Silver Company is offering 400 memberships at a cost of $5,000 each, as long as spot silver is between $35 and $40. The cost of membership climbs to $5,625 if spot silver is between $40 and $45. Each membership acts like a bond, a silver bond. Each silver bond entitles the holder to receive a 1 oz silver coin each month until the silver bond matures in 2 years (24 total silver coins). Upon maturity, the holder receives their initial dollar investment back. This may appeal to investors, because it is rare to find an investment that pays you interest or dividends in physical silver . However, the downside of course is that the initial payment is paid back after two years in U.S. Dollars . The company’s website contains more details and even explains that investors can sell their membership back to Royal Silver Company anytime before the 2 year maturity is due. Yahoo Finance
Well known YouTube personality stellaconcepts (aka John Christian, online entrepreneur behind Top Stocks & Spotmex) also plugged these Silver Bonds on his YouTube channel:
These paper certificates were to provide bond holders (/club members) with a regular stream of Silver coins paid (in place of cash interest a bond would normally pay), with the redemption of the bond possible at any time over it's life or otherwise paid out in full at the end of the 2 year term (in US Dollars). As stellaconcepts points out in the above video, it's possible to hedge your exposure to currency movements for those who were concerned about loss from a change in the exchange rate.
Being a member of the club also allowed you to purchase coins wholesale up to the value of your bond ownership (e.g. owning a single $5000 bond allowed you to purchase up to $5000 in Royal Silver Company coins at wholesale prices, $3 over spot), meaning return on investment would be quite significant (should everything go to plan):
Royal Silver Company - Silver Club Projected Return
You can read more about the bonds on the Royal Silver Company website (they call the program Royal Silver Club): Link to Brochure.
The brochure outlines risks associated with the investment including the following warning:
LOSS OF CAPITAL Risk: Royal Silver Company could become insolvent and unable to pay back Royal Silver Club members.
Management response: Royal Silver Club membership funds will be used to buy silver concentrates, crude silver, and crude gold. Club funds will be liquid, either as concentrates, silver, silver coins, or gold and gold coins. Only 400 memberships will be sold. Management will do everything possible to build a loyal investor base for future projects. Our best interest is served by making The Royal Silver Club an outstanding success.
There was little said about the program (from those who invested) for some months. Some positive feedback from a member on Silver Stackers was reported in January:
"I just want to give some good feedback about Royal Silver Company. 6
months ago I bought into the Royal Silver Company Clubmembership (1
bond) and to date I have 6 coins as promised with no dramas." Link
It seemed that all was on track.
The CEO of the company (Brian McConnell) posted every now and again on the Silver Stackers forum, including this in April this year:
What a difference 9 months makes. If a person had invested $5K in
physical silver at $41.66 and purchased 120 ounces, he or she would be
losing 26%--a $1,300 loss on a $5,000 investment. But those who advised
buying silver and who said Royal Silver Company would not honor its
bond, don't post in hindsight to say they were wrong. So I thought I'd
point out the obvious answer to the original post--buying a Membership
was the best decision. From the time of the post, Members of the Royal
Silver Club have received 6 to 9 free coins per Membership and their
investment has increased in value against the AUD. All Members wishing
refunds have received them, so their investment has been proven liquid.
Some Members make money buying our coins for wholesale and re-selling
at higher prices. In all, Members have received the benefits of free
silver, wholesale silver, and capital preservation. Buying the world's
first silver bond--The Royal Silver Club--has proven to be a sound
investment with a good return--and most important--no loss of capital.
Obviously the skeptics will have something negative to post as soon as I
put this up, but facts are difficult to deny. Oh, yes, in case it is
not obvious, I am the CEO of Royal Silver Company. I am grateful to
this forum for helping to develop our world-wide reputation for
producing nice rounds. And I thank forum members who have invested with
our company. Link
However on June 13th this year Silver Stackers forum member Dusty posted discontent with the service he had received from the Royal Silver Company (relating to timely delivery of coins as part of the Royal Silver Club of which he had 3 memberships) and advising us that he had cancelled his memberships to this program (and in turn expecting return of his capital within 30 days as per conditions outlines by the company). You can read the post in it's entirety here (Link) and Dusty is also organising a sorted timeline of events for me which I will post on the blog at a later date.
The thread also highlighted other poor turn around times which customers of the company had received (although not all explicitly the fault of Royal Silver Company):
1. "I too am having problems with RSC. I placed an order on June 5 and wired
out the money. As of right now, they still do not show the wired funds
in my account and they have not responded to my email from the other
day."
2. "I had a serious wait to get the 2010 cats. I ordered them late November
'10 and got them April '11. Sounds like the communication system hasn't
improved from the time I ordered to the OP's experience. I recall
sending numerous emails and although I got responses promising they'd be
sent soon, at the end it went silent until I received a PM here that
my coins might be in a lot this person received from Brian and indeed
they were."
3. "Same experience when I did the first group buy for Andean Cats a year or
so ago. Between the wire fees, delays, dealing with FedEx/Customs, was a
terrible experience. Despite many many requests to do another group
buy, I just didn't want to deal with the hassle."
Brian McConnell (CEO, Royal Silver Company) also responded in this thread (here), part of which is below:
Royal Silver Company has successfully delivered coins around the world for 2 years, since we first started minting. EVERY order on our books has been delivered or will be delivered. Anybody who has ever canceled an order has received a refund. Anybody who wanted a coin replaced has received a replacement. (We replaced hundreds of early coins, at our cost, with higher-quality strikes). We do this from the most challenging business environment in the Western Hemisphere, from a land-locked, impoverished country high in the Andes Mountains--a country with little industrial development, expensive transportation to world markets, no access to capital markets, governed by people who do not share our free-enterprise values, where the rule of law is a foreign concept, and where people speak Spanish, not English. Holidays are many, strikes are common, blockades are the order of the day. Bolivia is the Wild West in every sense of the word. Continues
Later in the thread Dusty says his refund was supposedly being processed on June 13th, the day he posted the thread, however as of July 26th he was yet to receive a refund or be kept filled in on it's progress (and was also missing several dividend coins).
On August 6th Dusty advised members on Silver Stackers that the CEO of Royal Silver Company had promised the return of his $15,000 (for 3 Royal Silver Club memberships) by the 15th of August. The date came and went and Dusty still hasn't received a refund of his $15,000 invested into the Silver Bonds. 73 days later when the company claims they will repay within 30.
Another member on Silver Stackers (Wiowi) who private messaged me said the following about his experience with Royal Silver Company:
I too have come against a blank wall with responses from RSC/Brian
MCConnell. I have one membership, the certificate was signed on
3/01/2012. I received 3 coins at that same time, but none since then. I
thought this was a poor performance from RSC and Brian, and after
reading about your (Dusty's) misfortune I decided to ask a few questions
too. During the last 10 days I have sent emails to RSC via their
"contact us" on the website, to Brian directly and to the Commercial
Registry of Bolivia (FUNDEMPRESA). In those emails I requested return
of my $US5000.00 (giving 30 days notice) and that they forward me my
outstanding membership coins. I also requested acknowledgement of my
emails, but I have not received a reply.
The last communication I had from Brian was this on 14/07/2012....
"(my name): We
have been delayed to all customers and Members on silver coins for
refining issues that have been resolved, finally. Australian Members
are behind by 6 months. We will be sending coins to Australia shortly
to bring everybody up to date. Thank you for your patience. Regards Brian"
This brings us to the question posed in the post title: Are the Royal Silver Company (Royal Silver Club) Silver Bonds a ponzi scheme or is the company just plodding (slow) with delivering what they promise?
My read of the situation (given most customers appear to eventually receive their products) is that the company most likely just has cash flow issues, rather than it being intentional purpose to deceive and retain customer funds. However an investment like this can go bad even the most well intentioned people at the head of the company.
These events are likely to leave a bad taste in the mouths of those involved and who have read the experiences of those affected, so it makes me wonder how easy the next company with an innovative investment opportunity might fare in the precious metals coin market...
My advice if you want a guaranteed investment in the precious metals market, then forget mining companies, forget unallocated accounts, forget bonds or any other form of paper investment and stick with purchasing physical Gold and Silver!
Addendum (added October 18th, 2012):
As of late September Dusty had received a full refund for his bond holdings (Royal Silver Club), but others I'm aware of who had also submitted requests for refund are still waiting (Edit December 31st, since confirm received). In short I don't think Royal Silver Company is trying to "scam" any bond holders, but these liquidity issues should make readers think about the risks associated with investing in the Royal Silver Club (Silver Bond Program).
Response from Royal Silver Company CEO Brian McConnell (added December 31st, 2012):
Dear Bullion Baron--thank you for being fair minded. Of course, you have only heard one side of the story, since dissatisfied customers are quick to complain on the internet, but slow (or never) to write that their issues have been resolved, which leads the average reader of your posts to assume that our company is a scam, which it is not. Please take the time to read this response to the negative things you have posted against Royal Silver Company.
Here are the facts: except for 3 recent requests, all Membership refunds have been wired to the Members requesting refunds, and we most-times include extra to cover their bank fees. The remaining 3 refund requests will be wired after the New Year’s break (around January 7). Yes, it is true that we were delayed with refunds beginning May of 2012, as one irate Australian customer frightened other Members into asking for refunds as he flamed us on the Silver Stackers forum to such an extent that the moderators closed his posts, only to have him continue his rants on YouTube, other forums, and other threads on the same forum. Only reluctantly and only when asked directly by other Silver Stackers did he admit that yes, he had received his refund. After that, his credibility was called into question. However, he did cause a “run-on-the-bank” that saw us refunding over $400,000 in Memberships. For a modest-sized company such as Royal Silver Company, this reversal in cash flow took a while to resolve. We stand behind our promise to Members that their investment is liquid and that we will refund their investment, when asked. If I can plug my own product for a moment, please bear in mind that The Royal Silver Club was the world’s first silver bond and that it proved a good investment during 2011 and 2012 as silver declined in price. Our investors did well, since their capital is safe and they have received silver coins with no cost basis (free), such that they now own 15 to 18 silver coins (or less, depending on when they purchased a Membership) that are basically free. Even at today’s silver price, this is a better return than a typical bond--plus our coins do not re-sell for the price of silver, but for much more, so the return on investment is much higher than any other corporate bond. Besides being an unique investment, The Royal Silver Club has proven to be a profitable and safe investment--considering how many corporate and sovereign bonds have become worthless since last year, I feel we offered our customers a good return in a product that means more to them than the few dollars that the normal bond or savings account pays these days.
Regarding delays in the delivery of coins. Yes, it is also true that Members in Australia in particular suffered long delays in receiving their free coins as we developed distribution channels. I admit that delivering coins free of charge to customers on every continent from the land-locked country of Bolivia proved to be more of a challenge than I first expected, but as I write this, most free coins have been delivered already, with more on the way the first week of January. All Members will be brought up-to-date by January. What most complainers fail to mention is that I voluntarily added one extra free coin to the 12 free coins per year that we contracted. In other words, Members received or will receive an additional coin, even though that was never part of the original contract. We added the additional coin because the decline in the price of silver went in our favor, so I decided to give our customers something extra. What other company have you ever heard of that voluntarily pays their bond-holders more than originally contracted? None, except Royal Silver Company.
Coin customers who pay for their orders receive them within our Terms of Service, with few exceptions. Yes, there were some exceptions in 2012, especially as our ability to make silver was hampered by the “run-on-the-bank” that impacted our cash flow. However, all credit card customers receive their orders within our Terms of Service (most people fail to read the fine print, but they agree to our Terms of Service with each and every coin order), and most cash customers also receive their shipments within our Terms or shortly thereafter.
Please understand that we are the only mint in the world to take raw rock, extract the silver with zero-emissions patented technology (US Patent 7,892,505), refine the silver to the highest purity, and mint proof-like finish coins, all under one roof and with no pollution to the environment whatsoever. Then we ship each order to the customer, no matter where in the world they live, from the impoverished country of Bolivia (one of the most challenging business environments in the Western Hemisphere). Also, we are the only mint to offer customers an independent certification of the purity of each and every batch of silver we refine. Other mints offer absolutely no assay of purity, or only an in-house assay signed by their own assayer. SGS, the largest standards and testing organization in the world, independently certifies cuttings we take from each batch of silver coins. So customers can be sure that Royal Silver Company truly offers the purest silver coins in all of human history. It may take longer, but we refine each batch of silver to 5x9, even if we have to re-refine several times. This sort of extraordinary craftsmanship takes time and effort. For the modest premium we ask, we offer the most unique silver coins in the world, that in all parts of the world re-sell for much more than our store premium. And Club Members receive our coins for wholesale price, less than the cost of the average generic rounds that have no re-sell premium at all.
Regarding me being slow to respond to emails, please be fair. I receive about 200 emails per day, most of which require some response. At times I travel to remote parts of Bolivia and my inbox fills beyond my ability to go through it quickly. I defy you or anybody to write to Bart Kitner of Kitco about a coin order and receive a personal reply, or to the Director of the Perth Mint, or US Mint, or Chinese Mint about a small coins order and receive a personal reply, yet I try and respond to everybody who writes, no matter if they only ordered one coin. All you ever see is “Brian does not return my emails.” Wow. If people would write to us using their Royal Silver Company store account, then our English-speaking customer service rep will see their mail and respond quickly, but many customers write to me directly on my personal email and expect an immediate reply. That is unrealistic to say the least. Yet I do respond eventually. Please believe me when I say that dealing with the retail public around the world requires the patience of the biblical Job. I am not complaining, just explaining.
In 2013 Royal Silver Company will expand operations to become Bolivia’s largest zinc and silver smelter. We hit a speed-bump in 2012, but have overcome the difficulties of working from Bolivia to build our company into one of the largest. You and others will read about us in the popular press as we become the most important zinc and silver producer (metallic silver and zinc, not just minerals) in our region of the world. It takes guts and courage to invest in Bolivia these days, let me tell you, but we are committed to the industrialization of Bolivia more than any other company I know.
Finally, if customers would apply a reasonable amount of patience, they will receive the most ethical, and purest silver coins on Earth. Every order on our books has been or will be shipped. Period. If you and your readers will just look at the YouTube videos of satisfied customers opening their packages and displaying their Royal Silver Company coins, you will see a level of enjoyment and awe that is rarely shown for other silver coins. These days, a modest amount of money rarely buys the sort of satisfaction you see expressed by our customers as they proudly show off their silver coins from Royal Silver Company. I can’t offer the fastest, but I do offer the world’s best.
Thank you again for reading this post.
Best regards, Brian McConnell, CEO Royal Silver Company
