Silver Short Squeeze, page-811

100X,
Bullion banks “borrow” silver by buying loco London unallocated, and selling futures. When the futures contract nears maturity they buy that contract and sell the next contract.
They lend unallocated silver to customers who need to finance their inventory, using a liability in the same “currency” as their asset, ie silver, so that there is no price exposure.
in the case of a miner like SVL, they could borrow, say, 1.2 million ounces of unallocated silver, sell that for c. $30 million, build a mine, dig up thousands of tone of ore at c.300 g/t grade, have that refined and the silver output credited to their unallocated account at the refinery, which they then transfer through the London clearing system to the bullion bank from whom they borrowed in the first place, thus repaying the loan.
Silver is currency, just like dollars, pounds and euros.

So, as I said, these banks are not running mega naked short positions.
what they do have to worry about is margin calls, although with money costing them so very very little, that is not the concern it once was. And anyway, they can hedge that cost using a “tail”.

If SVL had borrowed silver as above they would not have needed to have a diluting CR. And how much silver do they reckon they have in their mines? Tens of millions of ounces?

I hope this explains how silver, and gold, lending works.

Mikey