Record £150m shipwrecked silver find on SS Gairsoppa is front page news

Back in May of this year we wrotean article about a chap named Alf who has single handedly been panning for gold in the Lake District of England for 40 years. We mentioned it at the time because the interesting bit was that Alf had seen more and more people join him in the quest to find “the big one”.

We went on in that article to highlight that as the gold price rises (then £930) we would start to see more innovative ways of mining precious metals come to the fore as they become profitable at those higher prices. We noted:

So rising gold prices will not only increase the amount of people following in the footsteps of Alf, but it will also spur new industries. At the moment the gold recovered from shipwrecks is modest, but over the next 5 years as the price continues to rise, it will become profitable to ‘mine’ for gold lost at sea on a much larger scale. Look for the ‘gold sea-treasure’ business to explode in the next few years. Just remember where you heard it first…

…But before you decide to go out and buy a boat and some diving gear, you should be warned that the governments of the world, through the UN, have already made sure there is a way to get some/all of that precious bounty you’ve hauled up from the bottom of the seabed.

[emphasis ours]

We only had to wait 4 months after writing that for the biggest ‘salvaged’ precious metals find in history to make it onto the front page of the BBC News site. From the article:

A shipwreck containing 200 tonnes of silver worth about £150m has been found in the Atlantic – the largest haul of precious metal ever discovered at sea.

The SS Gairsoppa, a UK cargo ship sunk by a German U-boat in 1941, was found by US exploration firm Odyssey Marine.

The firm will retain 80% of the cargo’s value under the terms of a contract with the Department for Transport.

[emphasis ours]

Yes, that’s right, it wasn’t just a private firm of treasure hunters looking for gold and silver – rather the UK Department for Transport ran a competitive tender for private companies to recover the silver (and some gold). The article continues:

The seven million ounces of silver on the ship is a mixture of privately owned bullion insured by the UK government and state-owned coins and ingots.

Odyssey president Mark Gordon said one set of documents suggested the silver bars may contain 2.5% gold as well, which he described as “an added bonus”…

…Odyssey said it had taken on the risk and expense of the complicated search, cargo recovery, documentation, and marketing of the cargo….

A Department for Transport spokeswoman said: “The contract for the salvage of the SS Gairsoppa was awarded by competitive tender in accordance with government and departmental procedures.

“While we do not comment on the specifics of such commercial arrangements, Odyssey Marine Exploration were awarded the contract as they offered the best rate of return to HMG [Her Majesty's Government].”

[emphasis ours]

So lets get this straight, the government is actively hiring US companies to recover precious metals that were lost over 70 years ago in a ‘commercial’ venture (is there anything the government feels it can’t do?) and is only asking for 20% of the booty?

This seems a little low, because presumably the only reason the UK government is involved at all is because the treasure is in her waters and not international waters. Meaning that any company wishing to treasure-hunt in UK waters can only be done with a license from the UK government. Which surly puts the UK government in a strong bargaining position.

Perhaps the UK government is less concerned about its cut and more concerned with just getting as many precious metals in to the market as possible to hold the price in check?

After-all the 217 metric tons, just from this wreck alone, is over 1% of all the silver mined globally each year. It would only take 5 similar finds around the world – entirely possible when Odyssey Marine Exploration alone has other wreck sites it’s interested in – and who knows what else as their company policy is not to disclose wreck information during the search phase – never mind the other companies that are out there look for treasure as well.

Back in May we predicted that the “[PM]-sea-treasure business will explode in the next 5 years”. We are already starting to see the beginnings of that as the biggest haul of precious metals ever has been located and will be ‘rescued’ from the bottom of the Ocean next year.

We now also make another prediction, that the ownership of these wrecks will become a real bone-of-contention between countries in the coming years – with the possibility for these arguments to get quite serious when the gold price is really starting to rise. Sadly the universally accepted and millennia lasting law of “finders keepers” probably won’t cut it with the heads of the indebted nations around the world.

It would seem that Odyssey are taking steps to counter this risk – this is from their latest company report:

Odyssey’s strategy to focus on partnership projects with governments that provide straightforward legal ownership arrangements

Should Oddyssee be right and there is 7m ounces of silver in the wreck and it can safely get it back to dry land, they will walk away with £120m in silver after the government get’s its cut – which works out at more than £3m for each of its 42 full-time staff members. £120m is also about the current market-cap of the entire company – look for that to be pushed much higher next year should they bring that bounty home.

Related posts:

1. Silver sizzles, sets another new record high; gold retreats
2. UK Largest Gold Bullion Find
3. Gold or Silver?
4. Gold news: Return to work sees gold in demand
5. Online Campaign Crash JP Morgan, Buy Silver

Link to this article: : http://www.goldmadesimplenews.com/mining/record-150m-shipwrecked-silver-find-on-ss-gairsoppa-is-front-page-news-5290/

Posted by Kate Gerbich on Sep 27 2011. Filed under Mining. You can follow any responses to this entry through the RSS 2.0. You can skip to the end and leave a response. Pinging is currently not allowed.