Silver American Eagle planchet suppliers elusive

The United States Mint has the production capacity to strike between 50 million and 60 million American Eagle silver bullion coins annually to meet demand, but ongoing inability to secure sufficient planchets stifles full use of that capacity.

Deputy U.S. Mint Director Richard A. Peterson told Coin World April 18 that the bureau is struggling with a lack of success in its efforts to find additional planchet suppliers. Currently, the Mint secures finished planchets from Sunshine Mint in Couer d’Alene, Idaho; Vennerbeck Stern-Leach in Lincoln, R.I.; and GSM Metals in Cranston, R.I.

The Mint increased production of the silver bullion coins by 20 percent in January 2013 to meet projected demand, but the increase over January 2012 levels, when 6,107,000 coins were sold, was insufficient, Peterson said.

Quick depletion of its 2013 American Eagle silver bullion coin inventory within the first two weeks of sales forced suspension of sales to the Mint’s 13 authorized purchasers for a week while inventory was slowly replenished, Peterson said. Initial sales began Jan. 7.

When sales resumed in late January, the authorized purchasers were placed on an allocation system that restricts the number of coins any one purchaser may secure. Total orders are limited to the number of coins available in any given week.

Demand reached a record high in January with 7,498,000 American Eagle silver bullion coins sold to authorized purchasers.

The flourishing secondary market for American Eagle silver bullion coins further rose in lockstep with a drop in the spot price of silver April 12 to its lowest level in two years. That slide continued into the week beginning April 15. The London PM spot price closed at $27.40 April 12, and fell to $23.54 on April 15. The London PM fix was $23.51 on April 18.

Shifting production

Peterson said the West Point and San Francisco Mints combined are striking an average of 800,000 American Eagle silver bullion coins weekly. The San Francisco Mint is executing roughly 15 to 20 percent of the overall production.

Peterson said the distribution of production fluctuates depending on other demands at the West Point Mint. More production can be diverted to the San Francisco facility on weeks that the West Point Mint is producing coins for other programs, Peterson said.

Peterson said shipments of some American Eagle silver bullion coins struck at the San Francisco Mint are loaded onto trucks containing numismatic products from the same facility that are bound for the U.S. Mint’s contracted order fulfillment center, Pitney-Bowes Government Solutions, in Plainfield, Ind.

After unloading the numismatic product in Indiana, a truck with the silver American Eagles still on board continues to the West Point Mint for final unloading. The Mint takes this step at no additional shipping cost or premium to the authorized purchaser, Peterson said.

Authorized purchasers pay the spot price of the metal per ounce on a given day plus a $2 premium per coin. An authorized purchaser must pick up the coins at either the West Point or San Francisco Mint and deliver them to its own facilities at its own expense. By delivering some of the San Francisco Mint coins to the West Point Mint, the U.S. Mint helps authorized purchasers east of the Mississippi River to keep their shipping costs down.

Rising premiums

Jim Hausman, owner of The Gold Center, an authorized purchaser in Springfield, Ill., said April 17 that two weeks before, the wholesale premium for silver American Eagles was around $2.25, but that premium had nearly doubled in the weeks since.

Whatever coins he is able to secure sell out quickly, regardless of the premium, Hausman said.

“There’s no cheap silver out there,” he said.

Dave Cooper with Upstate Coin and & Gold Center, Fayetteville, N.Y., said the wholesale market premium per silver American Eagle for 500-coin boxes was roughly $3 on April 10. When the firm offered 20,000 coins wholesale the morning of April 18, the premium had climbed to $4.90. The entire offering sold in five minutes, Cooper said.

“Retailers are willing to pay $4 to $5 over spot and selling them for $6 to $8 over spot,” Cooper said. “And investors and collectors are happy to buy them at those levels.”

The drop in the spot price has raised the premiums on $1,000 face value bags of 90 percent silver coins by 20 to 25 percent, Cooper said, to between $4.50 and $5 per ounce. Each 90 percent silver bag contains 715 ounces of silver.

A spokesman for Dillon Gage, an authorized purchaser in Addison, Texas, said April 18 that demand for American Eagle silver bullion coins has been outstripping production for months, with the firm on allocation from the Mint for the past three months. The spokesman said at the time of Coin World’s telephone call that the wholesale premium was $5 per coin “for eventual delivery” since a specific date could not be guaranteed. The premium at the time an order is placed is locked in for the future delivery, with no adjustments made should the future premium go up or down, the spokesman said.

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