A Run on The Building & Loan

Before we study this week's Commitment of Traders report, we first need stop by Bedford Falls, circa 1933.

So your first assignment this weekend is to watch this clip. On one level, it's a wonderful explanation and indictment of fractional reserve banking. For this discussion, it's a great metaphor for the global paper charade, derivative leveraged and rehypothecated gold and silver markets.

 

What is the evil Mr. Potter doing in the clip? He instituted a bank run by calling the loans of the Bank of Bedford Falls and the Bailey Brothers Building & Loan. Once the cash on hand was gone (illiquidity), there was no money left over to pay out to depositors. Mr. Potter then offers "50¢ on the dollar" to anyone so frightened as to take whatever they can get. As Tom says after hearing that Randall has taken Potter's offer, "better to get half than nothing". Then, later in the clip, George Bailey offers the true explanation:

"Can't you understand what's happening here? Don't you see what's happening? Potter isn't selling, Potter's buying? And why? Because we're panicky and he's not, that's why."

As we relate this to the precious metals, what do we see? The collection of Bullion Banks, primarily JPMorgan, are today's "Mister Potter". (In fact, many cinema historians believe that Capra broadly based the character of Mr Potter on J.P. Morgan himself.)

When QE∞ was announced, the Bullion Banks were net short 737 metric tonnes of paper gold. As of today's CoT report, The Banks are now short 44,000 contracts or just 136 metric tonnes. That's a staggering drop of over 81%! I'll go one further for you...since the CoT-cutoff last Tuesday, total gold OI has risen by over 16,000 contracts while price has fallen by $75. Clearly, the vast majority of those new 16,000 contracts were fresh Large and Small Spec shorts. If that's the case, then right now...right this very instant...the total net short position of The Gold Cartel is around 30,000 contracts or just 93 metric tonnes. An incredible reduction 87%, all while price has fallen nearly $500.

Specs have sold, motivated by either fear or greed, and The Bullion Banks have bought. Just like Mr. Potter, The Banks aren't selling, they're buying. Using the fear and greed of the public at large to position themselves to dominate in the future.

The same is obviously true in silver, too. From a net short position last autumn that nearly exceeded 50,000 contracts, today's CoT showed a Silver Commercial net short position of just 6,000 contracts. This is a drop in excess of 90%! Just like gold, the total silver OI has increased since Tuesday, rising 4,000 contracts on a price drop of nearly $2. If The Silver Commercials absorbed all of this selling through buying longs and covering shorts, the total Silver Commercial net short position as we head into the weekend is likely under 2,000 contracts. That's incredible! While silver has fallen from $35 to $20, the Banks have been buying, not selling, and this has helped them to decrease their net short position from 7,800 metric tonnes down to just 311 metric tonnes.

Again, like Mister Potter, the Cartel Banks are using the public panic to BUY, not sell. They are positioning themselves for the next move up. So, are you Randall? Are you Ed? Are you Ms. Thompson? Or are you George Bailey, willing to stand against Mr. Potter and hold firm, keeping your emotions in check and remaining rational.

Those who remain steadfast now, defiant against the naysayers, will ultimately be proven correct. More importantly, they will have safe harbor from the coming storm and a position of strength preserved for when the storm finally passes.

TF

353 Comments

Turd Ferguson's picture

A little more CoT info

MODERATOR

For the week, gold was down $10 while its OI was up 3,262. Basically, the Large Specs sold and the Cartel bought. The Large Specs dumped 7,200 longs while adding 8,100 new shorts. (And remember, The Bernank selloff didn't begin until Wednesday.) In absorbing this Spec selling, The Gold Cartel added 8,800 new longs while covering 5,400 shorts. This brings The Gold Cartel net short ratio down to an amazingly low 1.28:1. WOW!

Silver was up 3¢ and its OI was up 2,716 so I expected some decent changes but I was wrong. The only real action came from the Small Specs who covered 750 shorts. This forced The Forces of Evil to add 750 fresh shorts. The Silver Commercial net short ratio remains at a preposterously low 1.09:1.

Turd Ferguson's picture

And one more thing...

MODERATOR

Anyone who reads Jim Sinclair's site can clearly tell that he is quite concerned that The End is nigh. He's practically pleading with CIGAs to come to one of his presentations/meetings and he's begging people to Get Out of The System (GOTS) before it's too late. To that end, Jim asked me if I would help him to promote his next three CIGA meetings. Of course I'm happy to oblige. I just wish that I was able to attend one of them but I can't make any of three. However, you should do everything in your power to make it to one. Every previous session has been met with rave reviews and I'm sure that each of these next three will be equally valuable.

The sessions will be in Chicago on July 8, Vancouver on July 10 and Scottsdale on July 12. You can read all about them and sign up here: http://www.jsmineset.com/2013/06/13/chicago-vancouver-and-scottsdale-qa-sessions-announced/

57Goldtop's picture

Saweet!

Safe at first.

philly's picture

aaaaahhhhhhh...a late Friday

aaaaahhhhhhh...a late Friday Top Five!!!

Spartacus Rex's picture

Let's Just Use

napalm_troll_be_gone-s480x384-126854-565

Weasel Tracker's picture

Thought I would post this again for morale

*Created using data from 12 miners, 8 of which are top 10 producers, with the help and inspiration from SRSRocco

Spartacus Rex's picture

FIRST...

To actually READ the Post & Hat Tip the Turd!

Weasel Tracker's picture

@ Spartacus

BUT did you do your homework for the weekend?

kingboo's picture

just poking my head in........

sf?f=423dd4fb3de53d035a56ab8ee0837b06.jp      Hey Turd....... i thought your podcast was absolutely outstanding.... it's always obvious when someone speaks with conviction and emotion.......well done buddy, its just what i needed to hear..

Howard Roark's picture

Nice way

to finish the week. And what a week!

Anybody smelling napalm on your clothes? Or it´s just me?

Stay brave.

Salut Community

HR

kingboo's picture

No. no napalm......

but i bet a lot of traders shit their pants! and that cant smell good.......

dgstage's picture

Turd

We all need to be out except for a few dollars and maybe a few is too many. So JS maybe trying to save some of his rich friends. Anyone hanging out here the last 4 weeks should have some idea. Buy some more food and have a protection plan.

Edit 

You only have what you can put your hands on!!!!!

ctob's picture

Gasp

*gasp* Are you trying to say bullion banks think bullion has some sort of like real value? That's unpossible.

Hold on, you sly devil, but what is an ounce of gold worth in arbitrarily defined and constantly changing statist bullshit units? Haha got you there, don't I? I bet it went down ... although if the unit is constantly changing how do we navigate a real direction or make any real comparisons? Whoa that like totally blew my mind, man.

Dimeboy's picture

Bailey wished he was dead..

and some around here probably feel the same way too.  However, I don't need an angel to know that stacking is the right thing to do - especially now.

(Accumulating silver dimes since 1965 when most TVs were still black and white...)

Spartacus Rex's picture

Atta (Dime) Boy!

Silver dimes & quarters will soon become quite handy and thus 'in vogue" for many necessary purchases!

Howard Roark's picture

@napalm

Well I believe that some dealers have made some money.

But we have been in the trenches (at the LCS?) fighting the Fight. Right?

Salut,

HR

p.s. - any insights regarding GoldMoney comments at the other thread?

ag1969's picture

Bacon

Spartacus Rex's picture

@ napalm

Actually, I usually get to those weak hands in the parking lot as they get out of their cars and make the better offer! Spot 'em right away by the look on their faces.

ag1969's picture

Someone in last thread pointed out....

Sorry don't remember who and I am not looking it up, that Bill Murphy suggests that JPM is still the huge short position and they have just transferred them to their own offshore accounts that they are calling "specs"

ag1969's picture

Schiff schools the propagandists

Occasnltrvlr's picture

I'll Say It One More Time

If this bond dump isn't corralled forthwith, there's gonna be:

And the IR books are gonna be:

Spartacus Rex's picture

Yves Smith:How Wall Street Fraudsters Plunder Public Finances...

How Wall Street Fraudsters Plunder Public Finances, And How to Fight Back

Yves here. This article, part of an ongoing AlterNet series, ‘The Age of Fraud,’ edited by Lynn Stuart Parramore, does the difficult and important feat of unpacking a financial structure that blew up a lot of municipalities in layperson-friendly terms. It also proposes some sound reform ideas. Circulate to friends and colleagues, particularly in communities that have been on the losing end of bad Wall Street deals.

One thing it weighs light on, due to space limitations, is what a cesspool municipal finance has long been. Not are there too often formal and informal kickbacks, but even among the better-indended officials, it’s way too easy for them to be snookered. They lack the expertise to evaluate fancy financial products. They too often fall prey to consultants, whose expertise they can’t readily assess, and their incentives are to recommend complex products. Who would pay a consultant a big fee to say, “Forget about these complex structures, any price savings mean you are eating a lot of hidden risk. Just finance a ten year project with a ten year fixed rate bond”?

By Alexander Arapoglou, professor of finance at the University of North Carolina’s Kenan-Flagler Business School, and a former derivatives trader and head of risk management worldwide and Jerri-Lynn Scofield, who has worked as a securities lawyer and a derivatives trader.

Say your town needs a new bridge. It might turn to Wall Street to come up with strategies to finance the project. This is supposed to be a win-win arrangement, but in the lucrative municipal finance business, one side has turned out to be the big loser. Guess which?

Nearly five years after Wall Street’s shady activities triggered massive funding crises for cities, states, and municipalities, the $3.7 trillion municipal finance cesspool has yet to be dredged. Banks continue to profit from their bad — or even fraudulent — advice that cost billions of dollars of taxpayer money. Meanwhile, the rest of us must tighten our belts, or pay higher taxes, or see services slide.

Let’s take a look at how bankers cooked up scams to drain the public coffers and why they continue to get away with it.

How Your Community Became Wall Street Prey

Many municipalities invested in flawed “structured finance” deals on the advice of bankers who said these complex transactions would give them a better deal than simpler, traditional products. So trusting public finance officials lined up to follow their advice — only to be told later that advice was not to be relied upon.

Tellingly, few (if any) corporations used similar structures to meet their funding needs. Nor did the banks themselves. Unfortunately, these products didn’t work as advertised, and public funding costs exploded as a result.

The financial structures bankers inflicted on the public are not easy to understand, but please try and stick with us: Banks rely on this complexity to obscure just how badly cities and states that followed their advice were hosed.

One common structure combined three key pieces: variable rate demand bonds (VRDBs), letters of credit and interest rate swaps. Municipal treasurers were looking to achieve the equivalent of a fixed rate financing— think of a 30-year mortgage—at lower than the market rate. And they signed on the dotted line in record numbers for these deals, with issuances of these complex bonds peaking in 2008.

Bankers realized that many professional investors — such as money market fund managers — cannot hold long-term debt, and instead prefer investments that can be dumped quickly when market conditions change. So bankers created VRDBs, which were “putable”— allowing buyers to get their money back, in most cases, every week, if they chose. Bankers thought these bonds, which in effect came with a money-back guarantee, would appeal to money market fund investors. At first, they did.

Alas, there’s no such thing as a free lunch. A bond that can be returned, with no penalty charges, every week doesn’t sound at all like the long-term infrastructure financing the city or state wanted. So banks promised municipal clients that if investors wanted to return bonds, the bank would find another buyer. Sounds like it might work out okay, right?

But what would happen if no one wanted to buy these returned bonds? To avoid leaving its municipal client and investors in a lurch, the bank created a guarantee, a letter of credit, that would provide alternative financing. Think of this letter of credit as insurance that would allow the city or state to continue to pay its bills if the market for its bonds dried up, while providingassurance to bond investors that the bond could be redeemed on demand.

The final piece of the structured contraption was a complex derivative, an interest rate swap. It was supposed to convert the weekly variable interest rate on the bonds to a fixed interest rate. This was another form of insurance that was meant to protect the public authority if interest rates went up.

Public finance officials were usually —and fraudulently — told they were getting interest rateswaps at zero cost, and unsurprisingly saw no point in shopping around and comparing terms. In fact, despite what they said, many bankers were ripping off their clients, substantially overcharging them for the swaps included in these defective transactions.

Bottom line: cities and states issued these special bonds, the banks agreed to remarket the bonds if necessary, and these municipal issuers purchased not one, but two types of insurance, at highly inflated costs, to protect themselves from different types of market fluctuations.

Breaking the Basic Laws of Finance

These structures violated a basic law of finance. The municipalities failed to match long-term borrowing with their long-term investments in infrastructure and other obligations. Instead they financed these long-term commitments with short-term borrowings that needed to be indefinitely refunded, week after week, often for as long as 20 years or more. All of the structures put in place to protect the borrowers — the letters of credit, the interest rate swaps — failed when put to the test by the financial crisis.

How? Banks marketed the VRDBs, based upon the credit quality of the banks issuing the letters of credit. When Lehman collapsed in September 2008, investors shunned bank credit. Cities and states found that many investors wanted to dump their VRDBs, and virtually no one wanted to buy them. Big problem, since cities and states still had to pay their bills. So many of them now had to go to plan B and draw on their letters of credit for necessary financing.

Banks Get Rewarded for Failure

The cities and states got a nasty surprise, and found themselves paying penalty interest rates to their bankers not because they’d done anything wrong, but because bank credit ratings had plummeted! Usually, the purpose for including a penalty rate in a standard letter of credit is to protect creditors from a borrower’s shortcomings. Here, cities and states were forced to pay a penalty rate for their bank’s shortcomings. Rather than being penalized for the failures and unsafe banking practices that caused the financial crisis and led bank credit ratings to nosedive, banks were instead rewarded with higher interest payments— a windfall. Needless to say, the cities and states had nothing to do with boneheaded banking moves.

So much for the protection they thought they’d bought. Instead, they ended up with the equivalent of an insurance policy that requires you to pay someone else when your house burns down. And this peculiar policy leaves you still on the hook for the costs of rebuilding your house.

And what about the second form of insurance, those interest rate swaps? Once again, despite paying more than top dollar, cities and states also didn’t get what they paid for. Wait a minute, you might ask. They couldn’t sell their bonds, and the only reason for having the swaps was to offset interest rate risk from selling bonds. So, no bonds, no need for swaps, right? Wrong. The terms of these deals required continued payment to the banks for these swaps, even though the underlying reason for buying them had vanished. This is a bit like forcing you to continue to pay a hefty homeowner’s insurance premium for years after your house has already burned down.

It gets worse. Not only were the swaps unnecessary, but also the payments cities and states were making on those swaps put them in the red— despite what they’d been promised. The banks, being on the other side of these swaps, were earning money from their positions — and so they were in no hurry to make things right.

Getting a handle on the total costs of these deals to taxpayers—and the offsetting profits to banks — is difficult. But research shows that a subset of these swaps alone costs taxpayers more than $2.5 billion per year.

Unlike China, the U.S. doesn’t execute fraudsters. But if a contractor builds a defective bridge, and it collapses, the city or state that commissioned the project can sue for damages. In extreme cases, criminal charges follow. Bankers follow different rules: When the financial gizmos they designed blew up, they didn’t make good. Instead, they insisted on holding onto the windfalls while blaming the victims for accepting the bank’s bad advice.

No Recovery in Sight

Very little’s been done to get this money back. Elected state and municipal financial officers certainly don’t want to level with constituents about just how badly they were hornswoggled by bank derivatives sales teams. An even bigger problem is our corrupt campaign finance system. National political parties control large war chests necessary for governors and other state officials to run successful state political campaigns. Much of these campaign funds come from financial institutions. You do the math.

If bankers had cheated their private company clients so badly, you can bet that these companies would be demanding their day in court. Notably, some foreign municipal borrowers, such as the city of Milan, Italy, have not been shy about entering courtrooms, and in December, won a major legal judgment against four banks, for aggravated fraud for mis-selling an interest rate swap.

But in the U.S., both political parties seem willing to let these claims go — sweeping them under the rug or settling for pennies on the dollar. Further, public officials haven’t exploited the considerable leverage they have to award or withhold lucrative new municipal business in order to force Wall Street to give taxpayers a break and refinance these deals, as Gretchen Morgenson of the New York Times has recognized.

Regulation: Why it’s Failed and Why it Matters

The structured finance fiasco we’ve outlined is only one drop in the cesspool of municipal finance. Congress has exempted municipal bonds from most major provisions of the federal securities laws that corporations must follow. So, as the SEC admitted in a July 2012 report: “[investors] in municipal securities are often not afforded access to the types of timely and accurate information available to investors in other securities.”

Since the financial crisis broke and as cities and states struggle to pay their bills, Congress and the major regulators have done little to clean up the mess. This is a big problem, because bankers are not stupid. They know that banks have largely paid, at most, token penalties for structuring defective municipal deals, and have in fact, made more money on these bad deals than they would have on simpler deals that didn’t misfire. So what do you think they’ll do, going forward? Clean up their act, and serve the best needs of their clients? Or continue to do whatever they think they can get away with to make the most money, whether or not it suits the needs of their public clients (and taxpayers), chanting caveat emptor under their breath.

Five Fixes: How to Prevent History from Repeating Itself

Existing municipal bond regulation currently focuses on purchasers of these bonds, and financial firms who underwrite, structure, and market such securities. By design, there’s almost no attention to the municipal issuers themselves, and especially, to how Wall Street firms played these cities, states, and other public issuers. That’s where the source of the 2008 municipal finance crisis lies, and where the regulatory spotlight should shine.

Here are five suggestions for reform, which won’t solve all problems, but can serve as first steps to stop Wall Street from making off with more taxpayers’ money.

1. Increase penalties for financial fraud: Congress and the Obama administration have shown little appetite for tackling this problem. States and some cities, however, have their own independent tools for dealing with financial fraud schemes, particularly those that affect their own financings. New York, for example, has its Martin Act, a broad anti-fraud statute that predates federal securities laws and allows the state to aggressively pursue financial frauds. Similarly, California can use its business practices statute to pursue similar ends. Other states have their own remedies. States and cities now should go even further to take the lead in either imposing new penalties, or increasing existing ones, for defrauding them.

2. Adopt explicit derivatives suitability standards: The self-regulatory Municipal Securities Rulemaking Board is currently working on revising standards for what types of municipal securities or municipal structured products investors may purchase. In a largely unregulated market, this is a good idea.

But investor suitability requirements are only the tip of the iceberg. The real issue is suitability standards for the issuing cities and states themselves, particularly for derivatives and structured financial products. We need to ask what types of products are suitable for Wall Street to sell to meet public financing needs.

Currently, deals are conducted according to the fiction that they’re arms-length transactions between equal partners. But that’s far from the case, and banks should understand that they’ll in future be held to a clear set of explicit suitability standards for their sales of derivatives and other structured financial products. Billions of dollars of structured transactions blew up in 2008: How many times must we rerun the same playbook?

3. Empower lawyers to be bounty hunters: Over the last two decades, the combination of a business-friendly Supreme Court and various state and federal legal “reforms” have made it much harder for plaintiffs to win lawsuits. Nonetheless, states, and even cities and municipalities could empower more private lawyers to act as bounty hunters and pursue municipal finance fraud claims on their behalf.

This has worked in the past: The 1998 Tobacco Master Settlement Agreement came about because some state attorneys general enlisted the services of prominent trial lawyers in targeting tobacco companies. That policy was by no means unique: States often farm out litigation to private lawyers. These policies could be expanded at minimal upfront costs, by hiring trial lawyers on a contingency basis, so they’d get a percentage of any money they recover, rather than an hourly fee. Such an arrangement costs the public nothing if the trial lawyers lose lawsuits, and has a huge potential upside if they win. Compare how we regulated and treated tobacco companies, say in the late 1980s, and how we do so now, and imagine what private lawyers might do if we took the leashes off and set them on the trail of municipal finance fraud.

4. Fix arbitration’s pro-banking bias: Wall Street usually tries to get parties to sign agreements to settle potential disputes by arbitration, rather than giving an injured party her day in court. Unsurprisingly, banks have rigged the process to suit their needs. Parties to the arbitration get to select their arbitrators, and this tends to help banks, since they’re repeat customers. Unlike public court proceedings, arbitration procedures aren’t transparent. Decisions aren’t made public, and the supporting reasoning isn’t available to serve as guidance, or precedent, for similar controversies.

Working together, states and cities could use their power to change the standards that apply to the arbitration agreements they sign, making selection of arbitrators fairer, increasing transparency, and publishing decisions, to serve as guidance for future settlements.

5. Make pay more competitive: Competent finance professionals lose out financially, big-time, by pursuing a career in public finance. And the lure of a possible future lucrative private sector job leads many public servants to avoid getting a reputation for rocking the boat.

For cities and states to attract top financial talent, and avoid succumbing to Wall Street snake-oil salesman, they must address this disparity in financial firepower. Here, we can learn from other countries: Singapore combines a tough legal code with high pay for regulators, and gets less corruption and better regulation in return. By contrast, in the U.S., the highest-paid state employee is usually the state university’s head football or basketball coach. States may be broke, but if they can find money to pay the football coach, they should be able to pay what’s necessary to hire people with sufficient financial expertise to prevent taxpayers from being ripped off.

Conclusion: Wall Street sold its municipal clients the financial equivalent of multiple bridges that collapsed. Since Congress and the Obama financial regulators are MIA on cleaning up this mess, it’s now up to states, cities, and municipalities to adopt some obvious fixes to make it harder for Wall Street to bamboozle them — and us, the taxpayers. http://www.nakedcapitalism.com/2013/06/how-wall-street-fraudsters-plunder-public-finances-and-how-to-fight-back.html

Rumpelstiltskin's picture

Great post Turd

> Using the fear and greed of the public at large to position themselves to dominate in the future.

I'm not sure how much the public at large is subject to fear and greed, however the public at large is very open to manipulation by the Federal Reserve, Wall Street and the Media. We as investors are blessed to have Turdville during these end of times.

Keep up the great work and keep the information flowing.

Rumpelstiltskin

GM Jenkins's picture

Question

If the commercials were net short for a bullish decade, then why can't they be net long for a bearish decade? (I don't think we're in a decade long bear market, btw, but for argument's sake). Even if there has been a pretty obvious association between heavily net short commercial positioning and short-term market tops, wouldn't the analogy now be the association between heavily net long positions and short-term bottoms? Obviously the commercials are not yet heavily net long.

I may be missing something obvious, as i don't know much about the particulars of the COT or even really think about it much.

That_1_Guy's picture

Putting the Pieces together.

So the guy who stood me up on the perth bars called today. He said that he hadnt seen the price go down before he agreed to sell to me at spot. He also said when he noticed the price was lower he didnt know what else to do but not show. I was like how about a call? I sat in the bank for 25 minutes.

We have an agreement of $2100 USD per bar, I think its fair. Perth 100 ozers. Always wanted some.

On another note. I see alot of people distracted, upset and they dont get why they are. I would advise you to watch this video ...all of you.... try on what this guy is saying and critically think. Im not hoping for alot of feedback. I hardly ever get replies. Unless they are private. I am curious what you guys/gals think of this.

The Story of Your Enslavement.

Who knows maybe ill even get an answer....

Guy

ancientmoney's picture

As we get deeper into the morass . . .

it will be ever more important to deal with reputable PM dealers, and not ones who like to do a version of fractional reserving.  you may get caught short, and simply get your fiat back at a time most inopportune for you.

Sneed Hearn's picture

VERY likely

While we will continue to hope/expect the manipulation will fail at some point the idea that now, at this point in time, JPM will suddenly reverse course and look to manipulate the PM price upwards strikes me as preposterous. Why in the world would their enablers at the Fed & Treasury want that to happen now? I mean really! How would such an event serve their interests? No, it may come but I strongly doubt it's coming soon although I'd truly love to be wrong about this.

Something else that is related is the professed 100% certainty of many PM bloggers that it's just a matter of time before all is well in the PM world. I call BS. From the preface to Nobel Prize-winning author Czeslaw Milosz's The Captive Mind:

When someone is honestly 55% right, that’s very good and there’s no use wrangling. And if someone is 60% right, it’s wonderful, it’s great luck, and let him thank God. But what’s to be said about 75% right? Wise people say this is suspicious. Well, and what about 100% right? Whoever say he’s 100% right is a fanatic, a thug, and the worst kind of rascal.

The people I'm talking about no doubt believe subjectively what they are saying but objectively their claims of certainty are nonsense. And that's a fact.

ancientmoney's picture

@Sneed Hearn re:very likely . . .

"Something else that is related is the professed 100% certainty of many PM bloggers that it's just a matter of time before all is well in the PM world. I call BS."

------------------------------------------------------------------------------------------------

That's your call to make if you wish.

Historically there is a 100% certainty of fiat systems failing.  The corollary is that for 5000 years gold and silver has been the anti-fiat.  So, history is on the PM bloggers' side on this one.

The Watchman's picture

Every Miner Should Do THIS

Title: Golden Minerals Announces Suspension Of Production

Date(s): 21-Jun-2013 4:07 PM

For a complete listing of our news releases, please visit http://goldenminerals.com/press.php

 

GOLDEN, Colo., June 21, 2013 /PRNewswire/ -- Golden Minerals Company (NYSE MKT: AUMN); (TSX: AUM) ("Golden Minerals" or "the Company") announced that it has suspended operations at its Velardena mine as of June 21, 2013, in order to conserve the asset until operating plans and prices for silver and gold indicate a sustainable cash margin for operations. The employees at the Velardena mine were informed of the Company's decision in the afternoon of June 21, 2013.  In February 2013 the Company anticipated the Velardena operations would achieve operating cash neutrality during the third quarter 2013, assuming gold and silver prices of $1,600 per ounce and $30 per ounce, respectively. In May 2013 the Company projected a $5 million negative margin from the operations for the remaining three quarters of 2013 at prices of $1,500 gold and $25 silver.  Metals prices have continued to decline and remain below these levels. 

(Logo:  http://photos.prnewswire.com/prnh/20120803/LA52082LOGO)

The Company is placing the mine and processing plants on a care and maintenance program to enable a re-start when operating plans and metals prices support a cash positive outlook for the property.  Approximately 470 positions at the Velardena operations are being eliminated as a result of the suspension.  The Company is presently negotiating the specific terms of a severance package with its labor unions.  The Company plans to retain a core group of approximately 50 to 60 employees to facilitate a re-start of operations and to maintain and safeguard the longer term value of the asset. 

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