If the paper silver market responds to supply and demand pressures, then holding some silver production off the market should such prices higher.
The paper silver market has some serious problems. It looks as if Sprott is trying to get the silver producers to be more active in the actual price discovery of silver, rather than just accepting whatever comes out of the paper silver market as the actual price.
We have all seen this kind of thing before but not on the scale that Sprott is attempting. One good example was that a couple of years ago the paper price of silver dropped from the high teens down to around $9 per ounce. Problem was, nobody would actually sell any at that price. Anyone who actually had physical silver was holding on to it and not selling at such a ridiculously low price. So, the price was low but it was also pretty much irrelevant.
Actually, I am surprised that we have not seen the rise of a physical gold and silver cartel that sets the prices for these metals in a way that is similar to OPEC and their oil pricing / production model. Could this be the very first step in that direction? Perhaps.