A-Mark Financial Corporation

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A-Mark Financial Corporation

100 Wilshire Boulevard
Third Floor
Santa Monica, California 90401
U.S.A.
Telephone: (310) 260-0315
Toll Free: (800) 827-4653
Fax: (310) 319-0310
Web site: http://www.amark.com

Private Company
Incorporated: 1965 as A-Mark Coin Company
Employees: 112
Sales: $2.8 billion (2004)
NAIC: 523130 Commodity Contracts Dealing; 423940 Jewelry, Watch, Precious Stone, and Precious Metal Merchant Wholesalers

A-Mark Financial Corporation operates in the realm of precious metals, offering gold, silver, platinum, and palladium products and a range of supporting services. The four-decade-old operation serves clients, including government mints, across the globe. Privately held, A-Mark traditionally has revealed few in-depth details about its business.

Golden Opportunities: 1965 to the Mid-1980s

Steven C. Markoff laid the groundwork for A-Mark Financial Corporation when he was yet a teenager, according to the Los Angeles Business Journal. A coin collector, Markoff established A-Mark Coin Company in 1965 and entered the rare coins and precious metals trading business. In 1972, the U.S. Treasury granted A-Mark a special license for dealing in gold. When gold ownership was extended as a right to all U.S. citizens in 1974, the company seized the opportunity to expand its business.

The company reached an industry high watermark in 1976, purchasing the LaVere Redfield silver dollar collection. The 11-ton, $7.3 million cash purchase consisted of 411,000 coins.

Four years later came another boon: The price of silver skyrocketed. The metal became very precious at $50 an ounce. Family heirlooms and coin collections were melted down to take advantage of the 1980 price surge, the Houston Chronicle recounted. During the year A-Mark traded millions of ounces of silver. In 1981, the company minted its first proprietary one-ounce silver bar.

A-Mark Precious Metals, Inc. sales topped $1 billion for 1983. The following year, the company began encapsulating and certifying gold coins through its Guaranteed U.S. Gold program. Also in 1984, A-Mark received designation as exclusive distributor for the Mexican one-ounce Silver Coin Libertads by Banco de Mexico, the Mexican central bank.

Another precious metal took center stage in the mid-1980s. The majority of the world's platinum supply came from South Africa. Fear of economic sanctions directed toward South Africa in response to their apartheid policies had driven up the price on the metal during the summer of 1986. No large supplies of platinum were in existence nor were there substitutes for its use in products such as the catalytic converter, an air pollution device. Moreover, investors had taken a shine to the metal.

"Growing investor demand for the metal comes at the same time as supplies are threatened, says Bruce Kaplan, senior vice president of A-Mark Precious Metals Inc. of Beverly Hills, Calif. Until about two years ago, platinum was considered strictly an industrial metal, Kaplan says," David Flaum reported for the Houston Chronicle.

Gold had no such supply shortage problems. But prices were rising, in response to fears related to the mounting federal deficit and the potential for defaults among debtor nations, such as Mexico. A-Mark continued to build its connections in the market, receiving rights as Exclusive Western Hemisphere Distributor of Australian Gold Coin Nugget Proof sets by Australia's Gold Corporation during 1986.

Silver, on the other hand, was in a slump caused by the oversupply created as the decade began. Kaplan told the Houston Chronicle the traditional gold-to-silver price ratio of 35:1 had shot up to 70:1. "That is 'causing speculators to salivate,'" he said. Compounding oversupply problems was several years of downturn in industrial use, although the metal had begun seeing an upswing during 1985. Silver was found in medical, photographic, and electrical component applications.

Mercurial Precious Metals Market: Late 1980s

A policy change early in 1987 opened the door for more firms to become authorized distributors of the American Eagle gold and silver bullion coins. The U.S. Mint altered its net worth requirements to allow companies to use letters of credit to reach the minimum standards—a stipulation that fell away after a six-month period of solid performance. A-Mark, already an authorized distributor of silver bullion coins, had protested the policy that excluded it from the network of distributors, according to the American Metal Market. The resulting out-of-court settlement with the firm prompted the new rules. Once authorized as a dealer of the Gold Eagle coins, A-Mark quickly became one of the U.S. Mint's largest customers.

Gold, by June 1987, was trading at about $455 per ounce, up from less than $290 per ounce in early 1985. Mining stocks and gold mutual funds thrived. "Gold has become downright respectable. No longer is the typical gold buyer an oddball preparing for imminent financial catastrophe. 'Mr. and Mrs. Main Street are buying now,'" A-Mark's Kaplan told U.S. News & World Report.

Coins were accessible to everyday investors, affording the advantages of variable purchase size, ease of transport, aesthetic qualities, and ready resale when compared with an investment such as gold bars. When the American Eagle was first introduced demand outstripped production, driving up the premium, or markup price, for a time. Other gold coins included the Canadian Maple Leaf, the Chinese Panda, and the South African Krugerrand.

Mass-produced bullion coins were judged for their value based on metal content. Numismatic coins—valued for rarity, condition and beauty, in addition to metal content—presented more of a challenge for investors. "You can't just pick up the paper and see what a coin is worth," A-Mark's Kaplan told the Journal Record. "You have to really know your stuff."

Platinum was the precious metal leader around mid-1988, trading above $600 per ounce. Kaplan told the Wall Street Journal the metals market had been bullish for about the past two years. By 1988, large brokerage houses, such as Merrill Lynch, Prudential-Bache, and Shearson Lehman Hutton, had entered into coin marketing.

The Gold Corporation, wholly owned and guaranteed by the state of Western Australia, issued a platinum coin in 1988. The only other non-special issue platinum had been offered in 1983 by the Isle of Man—located between England and Ireland. Kaplan told the Los Angeles Times that it "looks like it's going to be blockbuster. It's not just because it's the first platinum bullion from a major, popular country, but because (people) love the koalas [featured on the coins]. It's like the (Chinese) panda. It's a wonderful design concept."

As platinum made inroads in investment metal, word of a technological development drove down its price. Ford Motor Co. announced that it had come up with a catalytic converter made without the use of platinum. The automotive application accounted for the leading use of platinum, followed by jewelry. Kaplan told the Wall Street Journal that downturn for the metal was "sheer overreaction," given the Ford program was perhaps years in the making.

During the spring of 1989 another precious metal created a stir with revelations regarding scientific experiments. Palladium prices climbed in response to news that it played a key role in a cold fusion. But in terms of portfolio potential, little palladium was available for trade.

Gold, meanwhile, had been pulled out of the ground in record levels during 1988, increasing supply. Concurrently, rising interest rates drew investors to other markets. Moreover, relative peace in the Middle East created a political climate less than conducive to gold buying. But jewelry and industrial demand continued to be strong.

Although the top-selling Canadian Maple Leaf retained much of its strength and the South African Krugerrand remained popular in the resale market due to its lack of premium over gold price, other gold coin sales suffered. Kaplan told the Jewelers Circular Keystone that gold coin sales were a "disaster area."

Solidly Established: 1990s

By 1990, A-Mark was one of the largest wholesalers of precious metals, with banks, brokerage houses, refiners, jewelers, investment advisors, coin dealers, and government mints its main clients. The company had evolved along with the industry, growing as the market grew. "Since I've gotten into it, it's gone from a cottage industry to a fairly established market with very large players," Markoff told the Los Angeles Business Journal.

David Tobenkin wrote: "A-Mark was one of the first major dealing houses to supply gold coins and bars to mutual funds holding physical gold. The same services are extended to banks, brokerage and coin dealers." In addition, A-Mark aided in its own success through endeavors such as advertising support for dealers and inventory storage and financial programs for industrial users of precious metal.

A-Mark acquired Deak International Goldline (U.S.A.) in 1991. The company sold retail precious metals and provided bulk storage services through bank depositories, according to the Wall Street Journal. A-Mark purchased the business from Thomas Cook Currency Services Inc., whose ultimate parent company was Midland Bank PLC.

Company Perspectives:

Honesty, Integrity, and Reliability: Our Corporate Culture reflects our founding principles and philosophy of placing honesty, integrity, and reliability at the forefront of our dealings.

In 1995, the privately held A-Mark still was revealing only that its revenues exceeded $1 billion. Sales figures aside, A-Mark's business was one of slim margins. Mark Albarian, a company director, told the Los Angeles Business Journal, "Wholesale mark-ups on precious metals can be 1 percent or less, and mark-ups for retail can be as little as 1 to 3 percent." Most of A-Mark's transactions took place in the wholesale market. Although the company made large-volume purchases, the majority of the metal was traded, not held. Any speculative buying was only a "very small" part of the company's business according to Albarian.

Among the company's wholly owned subsidiaries serving its customers were Precious Metals Finance Corp., offering help to finance precious metal purchases; Goldline International Inc., selling to the general public; Superior Stamp & Coin, a Beverly Hills auction company; and A.M. Handling Company, a melt/assay facility. All of the company's operations were based within Los Angeles County. But the company's transactions took place across the United States and around the globe. A-Mark employed just 89 people to run all of its operations.

In 1997 A-Mark arrived on the World Wide Web. The product line was expanded the next year to include platinum alloys, including ruthenium, iridium, and cobalt.

During 1999 Forbes listed A-Mark Financial Corporation as the 51st largest privately held company in the United States, and in 2000 it was recognized by the Los Angeles Business Journal as the second largest privately held company in Los Angeles.

Risky New Millennium

A-Mark had established a New Issues and Collectibles division in 2001 "to market established and proprietary collectibles products and expand international distribution of all its product." But events across the continent brought nearly all commerce to a halt for a time.

In September, New York's World Trade Center was attacked and destroyed. The Financial Times used the event to explain gold's enduring reputation as a safeguard of wealth. "In excess of 379,000 troy oz (almost 12 tonnes) of gold in Scotia Mocatta's underground depository, beneath 4 World Trade Center, lie buried under the mounds of rubble. Experts think that it remains intact."

The stock market took a beating following 9/11, helping precious metal prospects. Even though the stock market had rallied by the time the decade headed into its middle years, the precious metal market benefited from continuing global tension.

The Royal Canadian Mint introduced its 25th anniversary Maple Leaf gold coin in 2004. As an official distributor for the mint, A-Mark was on the bandwagon, promoting its virtues. In addition to coins, A-Mark continued to offer precious metals in bar, wafer, and grain form, as well as services such as leasing, consignment, hedging, and finance.

The company's fortunes would continue to rise and fall with that of precious metals, but A-Mark had the experience of four decades of continuous operation on its side.

Principal Subsidiaries

A-Mark Precious Metals, Inc.; A-M Handling Company; Goldline International Inc.

Principal Competitors

Chicago Mercantile Exchange Holdings Inc.; Anglo American PLC; Degussa AG; Signet Group PLC; Zale Corporation; DGSE Companies.

Key Dates:

1965:: A-Mark Coin Company is incorporated by Steven C. Markoff.
1972:: A-Mark is granted special license by the U.S. Treasury for dealing in gold.
1981:: A-Mark mints a proprietary one-ounce silver bar.
1983:: A-Mark Precious Metals, Inc. tops $1 billion in sales for the fiscal year.
1987:: The company fights to gain status as an authorized dealer of Gold Eagle coins by the U.S. Mint.
1997:: The company arrives on the World Wide Web.
1998:: The product line is expanded to include platinum alloys.
1999:: A-Mark Financial Corporation, now established as the parent company of A-Mark Precious Metals and other subsidiaries, is ranked 51st on the Forbes list of top privately held companies.
2000:: A-Mark is recognized by the Los Angeles Business Journal as the second largest privately held company in Los Angeles.
2001:: The New Issues and Collectibles division is established.