Precious Metals Roundtable Report

Silver, gold, and platinum prices may be rising, but speakers at this recent conference warned attendees that legislation and regulations could threaten precious metals’ future in recycling.

Despite generally positive markets for gold, silver, and the platinum-based group of metals (PGMs) and what some called a rejuvenation of the precious metal sector in 1990, roundtable speakers expressed concerns over key environmental issues affecting refiners, mining companies, and exporters of precious-metal-containing scrap. In fact, some wondered whether the role of the domestic precious metal refiner would diminish under the weight of current and proposed legislation.

Ronald D. Castellano, an industry consultant from Tomkins Cove, New York, opened the roundtable with a brief summary of political changes occurring in Eastern Europe and their potential effect on the metal industry. With the newfound freedoms in the region, Castellano believes, will come new demand for durable goods. As these so-called new world buyers compete for goods, inflation will likely follow, he predicted, increasing the cost of all raw materials-including precious metals. Castellano concluded that this, combined with several other factors, will force precious metal prices higher. Precious metal burs, he said, are "not yet dead, only in hibernation."

Castellano's chief concern, however, was whether the United States would be able to participate in the forecast growth. He termed "horrifying" the environmental requirements of regulations such as the Clean Air Act, the Clean Water Act, and Superfund, and expressed concern over what he termed a reluctance by financial institutions to finance improvements m the domestic metal industry. Taking these factors into consideration, he asked, will the United States be in a position to participate in the "phenomenal demand era" ahead?

Primary Silver Predictions

The outlook for primary silver was examined by Dennis E. Wheeler, president and chief executive officer, Coeur d'Alene Mines Corporation, an integrated silver and gold mining company in Coeur d'Alene, Idaho. Reviewing the recent fortunes of the silver market, Wheeler noted that although silver values have trended lower for the past three years, the United States emerged as 1989's top silver producer in the world at 66 million troy ounces, surpassing both Mexico and Peru. Wheeler credited mine reactivations and higher by-product credits for base metals and gold as silver output stimulants.

Industrial demand for silver also has been positive, he said. Nevertheless, cited Wheeler, "it's investment demand that drives silver's price." Should the United States experience a recession, Wheeler believes, the immediate reaction might be a bearish market, due to lower industrial demand. However, expansionary monetary policy would, in his view, "send an inflationary signal to the markets," boosting precious metal values.

Looking further ahead, Wheeler reasoned that new advances in processing technology, increased marketing by the silver industry, and increased environmentalism--especially with respect to the Clean Air Act, Superfund, and access to public lands--may affect the ability of the united States to compete in the world silver arena. He concluded his talk by reminding listeners that silver users and producers are best served by a stable market and reliable suppliers.

Smelting Situation Examined

A look at the low grades of precious-metal-containing scrap was offered by James Gardner, director of commercial development, Boliden Metech, Inc., Providence, Rhode Island. Gardner noted at the outset that there are only a limited number of smelters in the world capable of processing low grades of precious-metal-bearing scrap. As a result of economization and miniaturization, he observed, the precious metal content of such scrap is too low to justify recovery by commercial gold and silver refineries. Therefore, the scrap is handled by base metal smelters. This trend likely will continue, Gardner noted, since advances in the electronic industries and possible slower economic growth mean that the "quality of circuit boards and related scrap will not increase and the quantity could decrease."

Compounding these relatively poor scrap fundamentals is government regulation of defining and exporting metallic scrap, which Gardner believes will be the "biggest single factor affecting our business." The trend, according to Gardner, is toward more industry regulation, not less, with compliance burdens being placed on individual states. Consequently, he concluded, states will attempt to monitor and "probably regulate all recycling"

In addition, he noted, regulations governing export of precious-metal-containing material have the potential to create even greater problems for industry. According to Gardner, certain precious-metal-containing residues with reclaimable value may not be recycled if exports are banned.

Gold Investment Demand

Recapping gold investment activity over the past two years, Joseph Rosta, a research analyst with the CPM Group, New York City, noted that although world investment demand tumbled sharply in 1988, this was generally not the case for Asian investors.

Demand there, he said, has been "quite strong." He explained that North American and European investors distanced themselves from gold during the past two years, basing their activities instead on equities, the U.S. dollar, and other dollar-related instruments.

As for the 1990s, Rosta believes that the climate is right for "a couple of good bouts" of investment demand for gold--especially for the first half of 1990. He carefully examined several basic reasons investors choose gold. Just how enthusiastic investors are about gold, he observed, depends on the state of the economy, and perceptions of where the economy is going In determining the level of investment demand for 1990, Rosta provided world gold supply/demand statistics, which show approximately 13.3 million troy ounces of gold available for investment purposes in 1990. He reminded roundtable attendees that investment offtake was 13.6 million troy ounces in 1989 and, in his view, "it's hard to imagine that investors will want less gold this year."

Platinum Recovery to Increase

Recycling platinum in automotive catalytic converters was examined by Charles Cunningham, an associate with A-1 Specialized Services and Supplies, Inc., South River, New Jersey. In 1980, he observed, only a "few thousand ounces" of platinum and palladium were recovered. In 1990, however, he expects that 25,000 troy ounces of platinum, 60,000 troy ounces of palladium, and 13,000 troy ounces of rhodium will be recycled. Cunningham credited these increases to efficiencies in the supply and extraction segments of the industry.

Projections on total world platinum and rhodium supply and autocatalyst consumption and recovery rates also were offered. By 1990, Cunningham's world recovery predictions showed, platinum recovered from autocatalysts will provide about 15 percent of the automotive demand, while recovered rhodium will provide only about 5 percent. By 2000, he forecast, platinum and rhodium recovery will increase to about 20 percent and 8 percent, respectively. According to Cunningham, this estimated platinum and rhodium recovery during the decade will replace some imports from South Africa, but will not reduce the amount of metal needed from stocks and/or from other nations. Exactly where the rhodium will come from Cunningham did not make clear, but he believes demand will be met "at a price." He reminded listeners that the price of rhodium recently jumped from $1,200 to $2,200 per troy ounce as a result of a slowdown of rhodium output from South Africa.

Silver, gold, and platinum prices may be rising, but speakers at this recent conference warned attendees that legislation and regulations could threaten precious metals’ future in recycling.

Despite generally positive markets for gold, silver, and the platinum-based group of metals (PGMs) and what some called a rejuvenation of the precious metal sector in 1990, roundtable speakers expressed concerns over key environmental issues affecting refiners, mining companies, and exporters of precious-metal-containing scrap. In fact, some wondered whether the role of the domestic precious metal refiner would diminish under the weight of current and proposed legislation.

Ronald D. Castellano, an industry consultant from Tomkins Cove, New York, opened the roundtable with a brief summary of political changes occurring in Eastern Europe and their potential effect on the metal industry. With the newfound freedoms in the region, Castellano believes, will come new demand for durable goods. As these so-called new world buyers compete for goods, inflation will likely follow, he predicted, increasing the cost of all raw materials-including precious metals. Castellano concluded that this, combined with several other factors, will force precious metal prices higher. Precious metal burs, he said, are "not yet dead, only in hibernation."

Castellano's chief concern, however, was whether the United States would be able to participate in the forecast growth. He termed "horrifying" the environmental requirements of regulations such as the Clean Air Act, the Clean Water Act, and Superfund, and expressed concern over what he termed a reluctance by financial institutions to finance improvements m the domestic metal industry. Taking these factors into consideration, he asked, will the United States be in a position to participate in the "phenomenal demand era" ahead?

Primary Silver Predictions

The outlook for primary silver was examined by Dennis E. Wheeler, president and chief executive officer, Coeur d'Alene Mines Corporation, an integrated silver and gold mining company in Coeur d'Alene, Idaho. Reviewing the recent fortunes of the silver market, Wheeler noted that although silver values have trended lower for the past three years, the United States emerged as 1989's top silver producer in the world at 66 million troy ounces, surpassing both Mexico and Peru. Wheeler credited mine reactivations and higher by-product credits for base metals and gold as silver output stimulants.

Industrial demand for silver also has been positive, he said. Nevertheless, cited Wheeler, "it's investment demand that drives silver's price." Should the United States experience a recession, Wheeler believes, the immediate reaction might be a bearish market, due to lower industrial demand. However, expansionary monetary policy would, in his view, "send an inflationary signal to the markets," boosting precious metal values.

Looking further ahead, Wheeler reasoned that new advances in processing technology, increased marketing by the silver industry, and increased environmentalism--especially with respect to the Clean Air Act, Superfund, and access to public lands--may affect the ability of the united States to compete in the world silver arena. He concluded his talk by reminding listeners that silver users and producers are best served by a stable market and reliable suppliers.

Smelting Situation Examined

A look at the low grades of precious-metal-containing scrap was offered by James Gardner, director of commercial development, Boliden Metech, Inc., Providence, Rhode Island. Gardner noted at the outset that there are only a limited number of smelters in the world capable of processing low grades of precious-metal-bearing scrap. As a result of economization and miniaturization, he observed, the precious metal content of such scrap is too low to justify recovery by commercial gold and silver refineries. Therefore, the scrap is handled by base metal smelters. This trend likely will continue, Gardner noted, since advances in the electronic industries and possible slower economic growth mean that the "quality of circuit boards and related scrap will not increase and the quantity could decrease."

Compounding these relatively poor scrap fundamentals is government regulation of defining and exporting metallic scrap, which Gardner believes will be the "biggest single factor affecting our business." The trend, according to Gardner, is toward more industry regulation, not less, with compliance burdens being placed on individual states. Consequently, he concluded, states will attempt to monitor and "probably regulate all recycling"

In addition, he noted, regulations governing export of precious-metal-containing material have the potential to create even greater problems for industry. According to Gardner, certain precious-metal-containing residues with reclaimable value may not be recycled if exports are banned.

Gold Investment Demand

Recapping gold investment activity over the past two years, Joseph Rosta, a research analyst with the CPM Group, New York City, noted that although world investment demand tumbled sharply in 1988, this was generally not the case for Asian investors.

Demand there, he said, has been "quite strong." He explained that North American and European investors distanced themselves from gold during the past two years, basing their activities instead on equities, the U.S. dollar, and other dollar-related instruments.

As for the 1990s, Rosta believes that the climate is right for "a couple of good bouts" of investment demand for gold--especially for the first half of 1990. He carefully examined several basic reasons investors choose gold. Just how enthusiastic investors are about gold, he observed, depends on the state of the economy, and perceptions of where the economy is going In determining the level of investment demand for 1990, Rosta provided world gold supply/demand statistics, which show approximately 13.3 million troy ounces of gold available for investment purposes in 1990. He reminded roundtable attendees that investment offtake was 13.6 million troy ounces in 1989 and, in his view, "it's hard to imagine that investors will want less gold this year."

Platinum Recovery to Increase

Recycling platinum in automotive catalytic converters was examined by Charles Cunningham, an associate with A-1 Specialized Services and Supplies, Inc., South River, New Jersey. In 1980, he observed, only a "few thousand ounces" of platinum and palladium were recovered. In 1990, however, he expects that 25,000 troy ounces of platinum, 60,000 troy ounces of palladium, and 13,000 troy ounces of rhodium will be recycled. Cunningham credited these increases to efficiencies in the supply and extraction segments of the industry.

Projections on total world platinum and rhodium supply and autocatalyst consumption and recovery rates also were offered. By 1990, Cunningham's world recovery predictions showed, platinum recovered from autocatalysts will provide about 15 percent of the automotive demand, while recovered rhodium will provide only about 5 percent. By 2000, he forecast, platinum and rhodium recovery will increase to about 20 percent and 8 percent, respectively. According to Cunningham, this estimated platinum and rhodium recovery during the decade will replace some imports from South Africa, but will not reduce the amount of metal needed from stocks and/or from other nations. Exactly where the rhodium will come from Cunningham did not make clear, but he believes demand will be met "at a price." He reminded listeners that the price of rhodium recently jumped from $1,200 to $2,200 per troy ounce as a result of a slowdown of rhodium output from South Africa.