Silver ETF (SLV) Bar List Analysis

COMEX Deliverability

21 Jan 2011:

Please see below for our analysis of the bars removed from SLV, and why we think they are going to COMEX.

This week, 4.8Moz were removed from SLV, with 61% COMEX deliverable. We believe much of the COMEX deliverable silver is also headed for COMEX.

However, much of this was removed from the Brinks vault. So in our analysis below, employees of Brinks would have been notified which bars they needed to remove (although it is quite possible that JPM normally specifies this, as custodian of the trust).

14 Jan 2011:

This week there was a very interesting development in our SLV bar list analysis. This week, about 6Moz of silver was withdrawn from SLV, more than any week since we started analyzing the lists in early July.

What few people realize, though, is that there is a significant difference between the bars removed last week, versus other withdrawals since July. The 5.8Moz removed in December, that seemed like it was going to COMEX, most likely was not. This 6.3Moz, though, appears to be mostly headed to COMEX, probably withdrawn by JPM. Let me explain.

Most of the silver that has been added to SLV since the beginning of July has been from Chinese and Russian refineries (we suspect that one of the SLV AP's has contracts with those refiners). That works fine, since these refiners are LBMA Good Delivery approved. And most of the silver that has been removed from SLV since July has been from these refiners (which makes sense, as it would be awkward to remove silver from the back of vaults, that had been put in there long ago). The problem, though, is that the Chinese and Russian refiners are not on the COMEX list of approved refiners.

For the week ending 03 Dec 2010, when 5.8Moz was removed, roughly 90% of that silver was from those non-COMEX-approved refiners (674,010oz was from Nippon Mining Japan, which is COMEX approved; Nippon Mining Japan has been supplying SLV with silver recently as well). That makes perfect sense, as they were some of the bars most recently added to SLV. However, these bars cannot be used to satisfy COMEX short positions, as they are not from COMEX approved refiners. In order for them to become COMEX approved, they would have to be melted and re-made by an approved refiner, and shipped from London to the U.S. That's a lot of expense and time to get the bars into COMEX.

However, for the week ending 14 Jan 2011, when 6.3Moz was removed from SLV, about 95% of the silver came from COMEX-approved refiners -- and most of those bars were not added to SLV in the past 6 months. It came from 2 separate vaults (the 2 JPM vaults), so it isn't likely that there just happened to be some pallets of older silver sitting nearby in one of the vaults. It definitely looks like the AP that removed the 6.3Moz this past week cherry picked the bars, making sure to get ones from COMEX-approved refiners.

We believe the AP involved in this was JPM. As custodian, they would have an easy time cherry-picking bars without anyone noticing (as far as we know, there is nothing preventing them from doing so). And all the bars removed were from the 2 JPM vaults (there are 3 other vaults, 2 run by Brinks, and one run by Via Mat). And they could do this without having to ask anyone for permission (unlike the other APs, who would have to specifically request the bars, and convince JPM as custodian to let them have the bars they want).

So if we see about 6Moz added to COMEX warehouses very soon, we'll know why.

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