Mining’s old guard needs strong medicine
A new report details subpar investor returns in the mining industry over the last decade, particularly big cap diversified companies which have not adapted to new realities.
Amid investigations of manipulation and price-fixing, Deutsche Bank, became the first to resign from both the London Gold Fixing and Silver Fixing panels in May.
The lawsuits piling up and the ongoing probe by the UK financial regulator – and the first of what could be a slew of fines – meant that the German banking giant could not find any buyers for the seats.
Talks on how to overhaul the London Gold fix which has been used as a benchmark for the global physical trade in the precious metal for the past 95 years is still under discussion.
But the body responsible for administering the silver benchmark are ceasing operations on August 14 and the industry under the direction of the London Bullion Market Association (LBMA) is now scrambling to find a new price discovery and benchmarking system which traces its roots back 117 years.
Deutsche Bank, HSBC Holdings Plc and Bank of Nova Scotia conduct the silver fixing each day at noon. A new system is supposed to go from being an obscure process conducted via conference call between a handful of banks to a “robust transaction-based electronic system” to set the daily spot price.
There has been no shortage of parties interested in taking over the silver spot pricing mechanism, including the news and financial data provider Reuters, the LME and the Chicago Mercantile Exchange.
Market information provider Platts has confirmed its interest and now London-based institutional adviser and fund manager ETF Securities has thrown its hat in the ring reports Nasdaq.com:
“ETF Securities has been in talks with the London Bullion Market Association about hosting a silver benchmark for several weeks, said founder and chairman, Graham Tuckwell.
ETF Securities’ proposal is based on the company’s silver fund, which trades on the London Stock Exchange and is physically-settled through the LBMA’s clearing system.
“The banks that are involved in the metal markets would put their bids and offers into the option,” said Mr. Tuckwell. “It’s open, it’s transparent, every bid and offer that goes into the option can be audited and supervised.”
Silver futures in New York were last trading at $19.07 an ounce, down 2% from 2014 opening levels, after an uncharacteristically quiet trading year to date.
The contract hit a high of just over $48 an ounce in April 2011, in nominal terms still below the spike to $48.70 in 1979 when US oil billionaire scions cornered the market and increased the price 8-fold over less than a year. The Hunt saga ended on Silver Thursday in March 1980 when the price halved during a single trading session and the brothers could not cover a margin call.
