An Interview with Tony Circelli
Inside Dental Technology (IDT): In recent years, the precious metals market has skyrocketed. What factors do you believe have contributed to that upsurge?
Tony Circelli (TC): The precious metals market is a complex one to analyze. It is apparent that the volatility we are seeing can be tied to geopolitical tensions, natural disasters such as that in Japan in March, as well as the economic health of the US dollar. Gold is a limited resource, and therefore, the market for gold does not consist solely of gold mined in the past year but also includes the existing stockpiles of gold as a single market. Gold is viewed by many investors as a safe haven to preserve one’s wealth and as a hedge against inflation. Unlike other commodities, the metric tons of gold in existence are not "consumed" but rather held by developed countries, banks, emerging nations, and even by individuals in the form of gold bars, coins, or jewelry. Currently, the largest producer and consumer of gold is China.
IDT: What advice do you have for laboratory owners who may be hedging the market in an attempt to get the highest return on their scrap?
TC: Don’t do it. The only way you will know if you are getting a fair market value for your scrap is to keep track of all your alloy purchases, break those purchases down to each of the four precious metals, and then track your scrap return. At the end of the year, match up the amount of precious metals you are buying against the percentage of precious metals you are getting back in your scrap return. If your return on investment is 15% to 18%, you know you are doing a good job collecting your scrap, and your refiner is doing a good job recovering it and paying you for it.
IDT: If precious metal yields are less than calculated, what qualities in a refining partner should you be looking for to maximize yields?
TC: Finding a reputable refining partner requires research. Don’t be misled into thinking that lower fees equate to higher returns, or that an alloy manufacturer that also refines will give you a higher return on your scrap. Go to the company website, and read about the history of the company and the refining process used. Most important is finding a company that processes scrap from start to finish under one roof and does not outsource any of the production processes, which can increase the refining charge. Ask about the company’s accountability charges, which represent the percentage of metal recovery that the refiner keeps as one of its fees. What are the shipping fees? Is there a minimum lot charge, or do they charge by weight? Do they charge for the assays? Ask to tour the facility, and watch scrap being processed from start to finish. Ask the company for references from other laboratory owners. Do your homework. Beware of outrageous turnaround times or on-the-spot deals. Typically it takes five to 10 working days to fully process and assay a lot of scrap to determine an exact settlement figure.
IDT: What is the best practice method of assaying a lot of scrap to determine its precious metal content?
TC: Every refiner is burning or melting scrap material to retrieve the precious metals. However, the burning or melting process being used makes a difference in the assay outcome, especially with more non-precious metals being used in the industry today. It is vitally important that the process results in a homogeneous melt. You want to make sure that when a sample is drawn, it truly represents the entire lot.
Once the sample is drawn, the industry standard for analyzing precious metal content is through the use of an Inductively Coupled Plasma Emission Spectrometer or ICP. The ICP uses an infusion process that is weighted in order to determine the exact amount of precious metals in the sample. The assay sample material is first immersed in a mixture of hydrochloric and nitric acid and totally dissolved. The ICP samples the acid with the dissolved metals and prints out a reading on the amount of gold, platinum, palladium, and silver the sample contains. Next, that data is entered into the computer, and the computer multiplies those percentages by the fixed price of each metal on that day and by the net weight of the shipment to calculate the dollar value.
IDT: So where do you see the price of gold and other precious metals heading for the short and long term?
TC: Some experts predict that the price of gold will hit $2,000, while still others believe the current price of gold is a bubble waiting to burst. If you look at the last 10 years, the cumulative price of gold has steadily risen from $270.04 an ounce in 2001 to its current price of $1400+ in 2011. I’m not sure any expert can accurately predict where the market is headed.
But gold is not the only precious metal that is experiencing a pricing surge. Palladium, platinum, and silver are all expected to outperform gold in 2011. Granted, these metals comprise a small monetary proposition in comparison to gold, but shrinking inventories are increasing demand, and increase in demand is driving the price up. The dental industry also is experiencing a shift upward in the use of palladium, primarily in direct reaction to the price of gold. In the past 5 years, we have been refining twice as much palladium, as laboratory owners switch to lower-cost alloy solutions. Today, our industry uses a little more than 12% of the palladium mined in the world for alloy production.
Tony Circelli is the Precious Metal Refining Manager at Heraeus Kulzer, North America. He began his long career in the refining industry in 1978 as an assayer.