Economic volatility keeps Mint on its toes

Every once in a while, there is talk of selling off the Mint, since the Crown corporation has become pretty good at turning a profit.

The talk started back in the mid-’90s, shortly after the federal government sold off the Canadian National Railway Company. The last time the idea was looked at seriously, it was determined that the Mint was better off being government-owned. The logic was, and it made a lot of sense, that much of the Crown corporation’s business is a direct or indirect result of being owned by the Government of Canada. Being a national mint gives the RCM sustainability, and many foreign governments would prefer to deal with a mint that answers ultimately to a federal cabinet minister than one driven purely by the winds of profit.

In more recent years, my take has been that the feds have been raking in some significant profits, and selling off a lucrative cash cow hasn’t been an option. Of course, if we look at the most recent report, for the third quarter of the year, things aren’t exactly going to measure up to the stellar performances of recent years. This isn’t the result of mint master Ian Bennett leaving – the Mint is carrying on pretty much as before – it is the result of a cooling in the bullion market.

Canada’s gold maple leaf is easily one of the most popular gold bullion coins in the world. Personally I would say it is the market leader. The Mint sells a lot of bullion, but it makes only a tiny profit because bullion is sold at close to melt value, so it is low margin work. However, with that huge volume, and the fact that gold is not cheap, that slim margin adds up to big bucks. I’m talking millions in profits.

When the dust settles, revenue is down more than 26 per cent compared with the same period last year, and profits are down even more, about 30 per cent. That’s mostly because bullion and refinery revenue dropped 37 per cent. However, thanks to increased numismatic and collector coins sales and higher foreign coin and blank sales, overall the Mint is up 13.7 per cent over last year.

That means that up until this fall, when the bullion market cooled down, things were going great. Now bullion picked up a bit just recently, so that may help, but a second bad quarter won’t hurt the picture.

I’m sure that we are going to see black ink, probably well above $30 million.

That’s nothing to sneeze at, but it points out that even when you run a mint, making a profit can be a challenge.

In the third quarter of this year, the Mint saw revenue drop in bullion, Canadian circulation, and foreign sales, three of its four revenue streams. Numismatics is the bright light, and the one area where the Mint has the greatest ability to control its own destiny. Bullion markets go up and down, circulation coins are a factor of demand and economic vigour, and foreign business is both volatile and subject to fierce competition.

I don’t think any private concern would want to drop the dollars necessary to take over the Mint. It’s just a risky business.

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