How expensive would it be for a refiner to add another refinery "booth?"
DisneyFan
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I understand there are only so many hours in a day to refiner silver. I also wonder if silver miners could also buy discounted silver and refine it into bars..
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I doubt there are many refineries with any spare capacity right now. There's a lot of money that can be made refining silver today.
I'm asking why they don't increase their capacity? By adding another refining team?
and when the surge goes down, they have idle cap equip and employees to deal with
I doubt that is going to happen in the near future. Might be years....
I'm not sure what the exact cost is. I'm also not sure that they aren't increasing capacity. It is not something that can be done in a week. They might well be adding capacity but waiting for parts and construction to take place.
I'm also not sure that there is automatically "a lot of money that can be made". Yes, there is demand. Yes, you could refine more. But the margins on refining silver aren't that high. It's not like you can buy 999 silver for $50 and refine it and sell the 1000 oz bars for $100 per oz. At most, you are looking at maybe a 10% spread between your buy/sell price and have to fit the cost of refining into it, including the cost of added capacity.
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Sounds like you could have fun setting up your own if you think it is profitable enough and can get the necessary resources/people?
If not...then maybe that's why already existing refiners aren't doing more either...
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Refineries scale up by using more of their capacity. Longer hours, larger heats, shorter idle times. Then they identify choke points and address those with capital improvements on a real time basis. I believe most are already well into this process already.
Another factor people may not be considering is that a great deal of the backlog at refineries was actually purchased at far lower prices. While some of this has been hedged or pre-sold they aren't just making the profit of refining metal but also enjoying at least some of the benefits of buying low and selling high. They're still converting silver they bought at $60/ Ot into good delivery bars for which they receive more than $100,000
Silver can't turn lower as long as the demand for these bars continues. Watch the discounts. When they get large on 999 rounds you can be sure the refineries think good times are nearing an end. There are very interesting things going on in these markets which tell stories about silver and coins.
It might hurt them to pay so much for our coins but without them they can't refine metal. It's highly profitable now but before too many years they'll have converted everything to 1000 Oz bars.
Aquaregia is a time consuming process in refinement . Just wait and see. I get why refiners shut off (temporarily ) buying any alloyed silver. Is there a faster solution ? It goes deeper than a booth.
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"Booth?" Refining ain't like setting up at the county fair or the art festival. Additional digesters, precipitators, electrolytic refining cells, melting and casting. Even if if they had the physical space in buildings, the cost would be millions to tens of millions. With refiners paying 85 to 95% for silver content, they actually make most of their profit on the Cu.
The margin in the copper is 100%. But the profit in dollars has to be higher on the silver.
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Then there is permitting.
And herein is the problem. The status quo is reflective of the old economy, not the new one. We are transitioning quickly but our processes, procedures, infrastructure, thinking etc, are stuck in the 20th century.
Once the bubble pops refineries will be right back to business as usual. Trying to add for the current surge would be dead $$$$ a year from now (perhaps even sooner). RGDS!
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The other problem is location. In December, physical delivery to Hong Kong was 68m ounces.
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People are cheap, equipment is expensive. When I ran manufacturing lines, it was easier to add people, rather than equipment. Another shift, or add to an existing shift to speed things up.
When the demand went down, staffing was reduced.
Our model also had 1/3 of staffing from agencies. If we liked that person, we would convert them to a regular employee. If we had a problem with a person, we just told the agency not to send them anymore. We could keep them in agency for 2 years, so work / discipline issues shook out normally well within that period. Also, when it came time to reduce staffing, the agency people just went to a different company, and it did not hit our unemployment records.
Now, how many refineries have the wherewithall to add a shift or staffing?
Why would you need to refine .999 silver? Just melt and cast it into bars since it's already good enough for ASEs [and many other applications] as is. I would guess that most 99.9 coins aren't going to the smelter.
I meant casting. I used "refine" rather loosely. But the hold up at the refiners is not "refining" it's the casting of 1000 oz bars. That's why it's so hard to move 925 and 900 at the moment. It's all about the 1000 oz bars that went to London and Hong Kong. It's created a very weird situation with silver.
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