Hey everyone. This interview was prompted by a user who was mentioning the lack of supply of silver bullion products last week. The user mentioned that $FR's bullion site was not taking new orders as they had no silver bullion to sell. $FR's bullion offering is minted by Scottsdale Mint as well as other bullion offerings like TD's bullion, so I thought who better to ask about the state of the silver bullion market then the CEO of Scottsdale Mint, Josh Phair.

I hope you enjoy it and let me know what you think in the comments below. Cheers all.

Audio recording found here: https://cdn-ceo-ca.s3.amazonaws.com/1g256no-Scottsdale+Mint+Interview+-+feb7+-+po.MP4 

FULL DISCLOSURE: I WAS NOT CONTRACTED BY SCOTTSDALE TO CONDUCT THE INTERVIEW AND NO THIRD PARTY HAS PAID ME TO DO IT EITHER.  Hope you enjoy it and let me know what you think in the comments below. Cheers all. 

@Vaughan: [00:00:00] Welcome back, everybody, and thanks for tuning in again today. I'm your friendly moderator, Vaughan. As per a discussion today on the index, I got a chance to reach out to Josh Phair, the CEO of Scottsdale Mint, to ask a bit about what's happening with the silver market right now.

@Vaughan: [00:00:19] One of one of the users on the site today was noting the lack of physical bullion for silver that he could find in the market, did post one site where they they apparently had a few coins, but the premiums were just to the moon and it almost doubled the price of silver. From your point of view, I know that you run a significant mint down down in Arizona.

@Vaughan: [00:00:47] How is the silver market right now in terms of physical supply?

Josh Phair: [00:00:52] So it is blazing hot demand and it is tight on product. What people are seeing out there is there is virtually nothing available to buy at the retail size. So Hunter bars, one ounce rounds, maybe silver Maple Leafs, Eagles, they don't exist. So we're starting to see premiums are rising for those that have it. And there's a disconnect between the paper price that the bankers are giving us and then what the if you actually own it and you have that physical prices going up.

Josh Phair: [00:01:28] We have an interesting kind of insight into the industry because we manufacture for so many people around the world. About half our business is overseas. We do an awful lot here in North America. For the Canadian listeners we make a lot of the products for TD Bank, for example. So if you were to walk into one of their bank branches and buy a TD Bank Silver Kilo Stacker bar that's made by us in Arizona. They also sell a lot of our gold products and also various coins and things.

Josh Phair: [00:01:58] We also work with First Majestic silver. A lot of people know those guys that are kind of the fan favorite on a lot of the message boards for those that are watching the heavy shore position, that's kind of starting to unravel a little bit. So Keith Neumeyer is a good, good friend of mine and they mine it out of the ground, once it's refined, a lot of that metal comes to us and then we make it look pretty. We give it back to actually I think it mostly goes to Vancouver and then they they ship the silver bars from there. We manufacture about just over 20 foreign countries now as well. So we're very, very active in the space.

Josh Phair: [00:02:32] Just to give an idea, because of the supply shock, the demand shock and the lack of supply we've got, we've got silver coming in right now from Europe and Asia because it's available over there and it's just not available here.

@Vaughan: [00:02:48] Right.

Josh Phair: [00:02:49] As a company, we have sold everything that we have sit on the shelf. There's nothing on the shelves. So everything we're selling has typically a one, two, three, four or five week estimate. And with a lot of suppliers, we make a lot of silver products for a couple of the Swiss refineries as well. So we make silver for them, for the North American market. So when the whole world kind of they all try to buy at once, it just it's all gone. It is it is very difficult to get.

Josh Phair: [00:03:17] The premium that I am paying right now, our company, we're outbidding the exchange to get metal. So this is where I think the disconnect coming. So when a refinery or a mine and typically when the mine, they send it to a refinery, they own it. If they if they haven't sold it to a bank, they have the right to sell it to whoever they want. They can either deliver it to the exchange minus some transaction fees, or you can sell it to a user such as Scottsdale Mint or an electronics company, Tiffany Jewellery Company. Right now we are paying a very significant premium to give an idea we're paying this week. We're paying eight to ten times the normal premium over the spot price of the normal premium, let's say, one year ago. So what that means is there's less silver that's available for the banks to deliver into the exchange.

Josh Phair: [00:04:12] It's it's kind of an exciting time. I know the silver price has gotten hit a few bucks here thanks to JP Morgan's downgrade on the silver sector Monday morning. Interesting timing. I mean, and I can get into it a little bit more, but that's a quick synopsis of what we see.

Josh Phair: [00:04:28] So there is a divergence. And it's not so much the dealers that are making fortunes on Eagles. I mean, I just heard the Royal Canadian Mint is putting out increases starting Monday for all their first line distributors. These these increases, while margins do expand a little bit, it's really just bumped all the way up. So the various levels, it's not like a coin dealer: They're selling it for ten dollars over, they're not making ten dollars. Instead of making fifty cents, maybe they're making a buck or two, but, you know, we've always known that they tell us there's lots of silver. But when we want to buy a lot of it, it's not always there, so where is it?

@Vaughan: [00:05:03] That's the question. You are a mint, so your bread and butter is making sure that you have the metals to be able to go out there and mint these coins. But you're fairly bullish on it in terms of getting ahead of the other buyers in the market to make sure that you have the the silver. Is there also a shortage on, for example, your Scottsdale products, your own round, your own stackers and so on?

Josh Phair: [00:05:29] It all vanished in like twenty four hours over the weekend. Now we're putting a lot of our dealers on allocations, how much they can order at once... We're trying to keep everyone happy, but we can only produce so much per day, per week, per month.

Josh Phair: [00:05:46] Our job right now, what we've been doing, we've been hustling since really Saturday and Saturday and Sunday when we saw this coming, working with our suppliers to arrange because we'll never sell a product that we haven't secured the metal for. So as long as I know, "hey, I've got the metal coming and it's going to be in one to two weeks, I already own it. I control it," then I can sell it to our dealers. We also offer it on the website.

Josh Phair: [00:06:11] I mean, a typical product, just to give idea the time we buy metal by time it actually arrives on a Brink's semi truck from whatever it let's say, it goes from New York to Arizona, for example. That takes a week and a half to two weeks on average. It's kind of a laborious thing to weigh these things out and load them. This is not Amazon fulfillment. Next day, next day, same day delivery. So by the time it comes in, it's about two weeks and then it's an average product is probably another three to six weeks to produce. So in actuality, we're always having to preplan, not only this month, but next month's production.

Josh Phair: [00:06:48] We probably produce in an average month more than four hundred different skewes. So we don't make every product every single day. There's a lot of like our stacker line, it's it's it's the most popular silver bar in the world. And we produce it for Apmex, we produce it for companies in Australia and I mentioned TD Bank. We produce so much of this product that those are kind of our core and we just keep that stuff cranking out.

Josh Phair: [00:07:12] But, you know, if we're trying to tell people, hey, where in that time zone, two or three, maybe four weeks, the reality is, is that we've already had a head start. So when a new market so let's say the US Mint, they have to place their order for metal that actually goes to sunshine, for example, they make the majority of the silver blanks for the Silver Eagles. Then sunshine has to make the Blanks, then sunshine has to deliver the US Mint, then the US Mint has to strike them, and then the US Mint has to deliver to the distributors. That doesn't happen over night. That's probably again, a two, three month cycle. So this is this is the difficulty that we have. And gold and silver is very expensive. So you can't just stock it's difficult. You can. But there's a price.

@Vaughan: [00:07:58] Sure. If you want to drop a couple of million...

Josh Phair: [00:08:00] Yeah. And even the banks are very cautious with their credit lines because there's a cost of carry on on metal. And if it's not moving, if you buy something at a premium when you can't sell it, well the premiums go lower?. So there's significant risk in precious metals and you can never have enough of it, but sometimes you have too much of it. It's a pain in the butt. So, you know, it just feel for us just keeping that flow going.

Josh Phair: [00:08:23] You know, coins, bars and getting it back out to that market is quite the feat to do it. People say "why can't you buy more equipment?" Well the average piece of equipment is eighteen months to get and it's really expensive.

Josh Phair: [00:08:37] And then it's like, oh, you go call a staffing firm. I need more employees when you can't just bring in Joe off the street to go work with gold and silver. So these are some of the burdens that are in kind of the back end that consumers don't see. But our job is we're not complaining. We're just working hard. We're thankful that we've got work during this crazy covid year. Plus, we're now in year two, not in months, but second calendar year. So, you know, our employees are happy, but then we still have to follow covid protocols keep people you know, if someone's not feeling well, they got to stay home. It's just the same things that everyone else is dealing with. We have to. But then our our company has broke every record in the book the last couple of days. It's just every every thing. It's just unbelievable.

Josh Phair: [00:09:28] I thought the week of covid shutdown, that was our previous record and this beat it and beat it by almost three times for us. So it's like everyone's waking up, you know, free elections, free markets and free speech. Everything has an asterisk. And I think the free markets piece is a lot of people on the Internet are realizing that the game it's not really fair. You know, they have different rules that apply to them versus us. And people are frustrated. I think this is this could be a red pill moment for possibly the next generation of silver and gold buyers.

Josh Phair: [00:10:04] We've talked in the past that a lot of the investors are aging out, they're retiring, they're not generating new income to put into this sector. I think we may have our moment where we're going to bring in millions and millions and millions of people that start to understand the value of owning physical gold, physical silver, investing in gold companies, mining silver companies. I think that's kind of the old man's fuddy duddy. It doesn't exist. Let's just chase technology and invest in Tesla. Well, guess what? Guess who needs silver? Tesla. Tesla needs silver for their cars. Apple needs it for their phones. I think they use like 22 million ounces last year for their iPhone. So those phones, do you think they're recycled? How many you think are recycled? Not not very many.

@Vaughan: [00:10:54] Not as many as there should be. Yeah.

Josh Phair: [00:10:56] This is this is silver. Silver. So stockpiles are they are coming down. We don't even know what they are. China doesn't report what they have or don't have. And a lot of people talk about the possibility that the stockpiles in the Comex are at multiple counts. So if you have a bar, how many people actually have title to it? It could be one. It could be ten. We don't know for sure.

@Vaughan: [00:11:21] On Sunday that just passed, I spoke with one of the moderators of WallStreetBets, you know, with all that madness going down. And so we kind of talked a little bit about the potential short silver short squeeze, which was at that point in time really starting to float around and so on and so forth. It looks like it came to pass and then fell apart, who knows? But the point that I found most interesting was a whole bunch of these younger people looking at Silver and the moderator.

@Vaughan: [00:11:49] He even mentioned that if you had asked me three months ago about Silver, he'd have said, "get away, go away. I don't want to hear about it". And now he's saying, OK, well, what's the deal? Right. So I found that interesting just from a silver investor point of view.

@Vaughan: [00:12:06] But to just to go back to the supply issue right now. The last time I actually bought Silver was right around the original covid lock down periods and actually got some from you guys as well. At that point in time, I think it was a 20 day delay for your products because of how crazy things got. But you guys certainly managed it. You managed it very well this time around. But its gone right now, you need to mint more.

Josh Phair: [00:12:30] It is gone. We have physical metal though. So that's the good thing.

@Vaughan: [00:12:36] Right. So you can mint them.

Josh Phair: [00:12:38] I've got it. I've got bars. I've got thousand bars. I'm sitting on a lot of silver grain, which by the way, there's no more silver grain in all North America. It's all gone, it's all been gobbled up. Grain is another form of silver that people use in manufacturing, think little balls for your shotgun shells.

Josh Phair: [00:12:59] Those are the two forms of silver that we bring in and we have it and we're making sure we keep getting it. But like I said, we're right now, I've got metal coming in from two different European countries, and we're trying to get a load coming out of Asia. But again, we have to be careful. You can't have Chinese origin. We only buy through non conflict, known refineries. Typically, it's all LBMA. So we have strict guidelines. We have to still follow, but we got to make sure it keeps coming in.

Josh Phair: [00:13:33] But again, I had this conversation with others. Mexico is the largest silver producer in the world and the United States and Canada are aren't too shabby either. You put all those together then, well, shouldn't we just have a ton of it here? And I realize that the US manufacturing is big in silver for a lot of the tech that we use. Some of the higher tech stuff gets produced here. But still, where where where is it all?

Josh Phair: [00:13:59] S we do know that we are consuming more silver then is being mined. The scientists say that the ratio of gold to silver is somewhere around 13:1, but we've been mining closer to an 8:1 ratio. Yet gold and silver are trading somewhere between 60, 70, 80, just over the last number of months. It was even worse during covid. So the ratio is kind of out of whack with silver, too.

Josh Phair: [00:14:30] So you mentioned that maybe the silver squeeze is off. I would say, well, the squeeze probably wasn't going to happen in one day anyway. And especially if you're working it from the physical market and if you're taking delivery, you're taking delivery a month or two out. You have to wait so that pressure doesn't come in one day. But the reality is, like I said, when we're bidding on metal from refineries and we're pulling it in, that's the same metal that would normally be going into the exchange. So I see the pressure, let's just say consumers continue to buy, there's going to be a great pressure on the exchanges, on the banks. And so I would say don't don't give up heart that that that that the squeeze won't happen. Because just like when you bought when we had that beautiful dip, not a beautiful was painful, but those that bought that knew when silver dipped into the low teens...

@Vaughan: [00:15:26] The ratio went complete the ratio and completely out of whack, I had to buy it. I was looking at both gold and silver, obviously, because I like both.

Josh Phair: [00:15:35] You had to buy. And I think, you know, if you look back, silver was just about doubled. It took time. It didn't happen overnight, but it started to climb and it's kind of found it's found its home here in the upper $20s right at the moment.

Josh Phair: [00:15:55] People in Germany buy gold and silver with every paycheck. It's the largest coin market in the world for those that don't know. And I do think it's because the people there, especially the elderly, have suffered in the past. They know what a currency collapse looks like. And so every paycheck they get, they buy gold and silver coins. That's what they that's what they do over there. And I think so you talk about ushering in a new generation. So perhaps those WallStreetBets guys, they're looking at the silver short pressure, they're looking at the mining ratios of what's coming out of the earth and they're looking at the new administration for the United States. The new administration wants to do what? Lots of solar and lots of electric cars. Well, hello, metal. Hello, Silver. This is where people start to go, OK, what's going to benefit? What's going to do very well? And for those you know, Goldman Sachs rolled out the that they're talking about the commodity supercycle that's about to start again. So the these are these are really exciting times for those that understand precious metals.

Josh Phair: [00:16:56] I think this is going to be great for Canada. A lot of the Canadian economy built off of the backs of of precious metals and or oil. Oil might not do that great, but maybe the metals and the metals markets will in the next few years. I think it's an exciting time. It's like anything, you don't have to buy it all at once. You diversify. You know, I'm even a big fan of some of the crypto as well. But, you know, I think we never know what the future is going to bring, but certain assets like precious metals are just not going to go away.

@Vaughan: [00:17:31] They will always hold value. That's the promise behind them. With all this Great Reset talk, you know, "own nothing and be happy", that just makes me think own more silver, own more gold.

Josh Phair: [00:17:47] That's funny, because I noticed here in the states probably leading up to Christmas, I noticed a lot of the financial Bloomberg and CNBC channels, a lot of people were saying "you know, now that the vaccine's rolling out, there's really no need to own gold". I kind of chuckled because they're telling us everyone's going into silver, and then they downgrade the silver sector. Its like, wait a minute: you guys upgrade Tesla every single time it hits a new target, you just keep going up and up. Silver, the moment any excitement comes in...

@Vaughan: [00:18:23] You're surprised!?

Josh Phair: [00:18:24] It's pretty obvious what's going on. I think they don't want the common person, they don't want the worker bees to basically own what they want and they want to control. So I think they poo poo gold, "It's a relic" they say. It doesn't have a place in the future. Well, why is it still on the central bank's balance sheets?

@Vaughan: [00:18:43] And growing in eastern economies?

Josh Phair: [00:18:46] Why is the IMF International Monetary Fund funded solely from gold? They don't tell us these things, but obviously it has a significance amongst the big, big players. I think it's brilliant for those that are awake and paying attention to buy metals. A lot of the people that were trading with Robin Hood, they found out that they were told they could buy more than what, two shares of SLV?

@Vaughan: [00:19:11] I think it was one.

Josh Phair: [00:19:11] Was it one? It's just absolutely crazy the control. So I go back to the free speech and all that, it's just there's an asterisk next to everything. But the beautiful thing about when physical metal is you can buy it, you can trade it, you can hand it to your neighbour.

@Vaughan: [00:19:29] And there's no counterparty.

Josh Phair: [00:19:31] Yes. And it's not on the balance sheets of these silly institutions that like to play games. And now we clearly have seen, I think RobinHood has had a few cash calls and so they're raising few billions because they're losing money. Do you want to own them, do you want to stake your portfolio on their balance sheets? This this is where I think I think a whole new generation are waking up to say, you know what? Maybe we should maybe we should have some allocation in precious metals.

Josh Phair: [00:20:00] I think it's the first time I've seen it and I've been our company is we're we're in our 13th year now. And then I spent I spent about seven, seven years or so in corporate mining finance. I did risk management for some of the biggest copper, gold and silver producers in the world. So I came I came from the metals side, worked with a lot of companies like Gold Corp., which is now Newmont, the old Glamis Gold I worked with with quite a few gold producers, BHP, what's now Freeport-McMoRan, Hecla, Cortilan Mines.

Josh Phair: [00:20:36] So I came from the metals side and so I've been in it for close to 20 years now. That's basically almost out of the womb! I'm only I'm only twenty two years old now... Just kidding. But yeah, I think it's a wake up for a lot of people about the future. And it's obviously you can hear my excitement. I just make it. Whether you buy it from me or buy it from your local dealer, I'm just excited that our industry is finally starting to get a little bit of interest in it for probably the first time in my lifetime. At this level. This is beyond this is beyond 2008-11 run that took metals to a pretty high price, but it didn't it didn't stay up because realistically that the consumption wasn't there. I think now you kind of start looking at where this is going. The consumption is going to be there for it for a lot of these metals. And I think these are good times.

@Vaughan: [00:21:34] So for those of my the users over at CNBC who are looking at getting their hands on some coins, whats the best way for them to do that through you guys?

Josh Phair: [00:21:43] We manufacture for almost every other Caribbean islands: the Cayman Islands, St. Kitts and Nevis and you can go to our website to see these products. There's some direct flights from Canada to some of those islands. They're beautiful coins and they do have the queen on them, just like the Canadian Maple Leafs. Maybe something like that, maybe some don't. But we have stuff that don't have the queen on it, too. We offer a pretty wide spectrum of products. We make all sorts of stuff that are on other dealers websites that people wouldn't even know that we make. So that's why I say I support everyone, whether you buy it from us or someone else, just just do what you feel most comfortable, and it's the product that you want at the right price.

Josh Phair: [00:22:31] All right. Perfect. Well, Josh won't take up any more of your time. Thanks for thanks for letting me get a hold you on such short notice there. And thanks for the insights.

Josh Phair: [00:22:43] Certainly and we appreciate everyone's interest in time listening. So thanks to Christopher for setting us up.