As I write this, we are into the second week of April. That means the weather is improving, and collectors are starting to stir. One of my signs of spring is the Royal Canadian Mint’s annual report, which for me is a whole lot more exciting than the first robin of the year. In fact, it is probably, after the opening of patios, the best part of the season. That’s because the annual report is the best chance to get a good look at what happened numismatically over the past year. Granted, the Mint does its best to portray itself in a good light, but that is to be expected.
However, the report contains pages and pages of tables and production figures that can be judged on their own merit. When the report does get issued, and this time of year I start asking about it at least once a week, it will show us how 2012 went. In some cases, we already know. During the course of last year the big news was that the collector coin division was the top performer of the Mint’s corporate segments. Just to refresh you, those segments consist of Canadian circulating coins, foreign orders, bullion and refinery, and what the Mint calls “numismatic,” the non-circulating legal tender and gift coin market.
I use the quotes because it always amuses me that the Crown corporation charged with making our money limits the use of numismatic to NCLT, while collectors much prefer to collect business strikes. But getting back to the Mint’s business. Of those segments, the bullion and refinery section has been a star performer for a number of years. It makes sense when the bullion market is so intense. The downside is that there is little the Mint can do to influence the world bullion market, and because bullion issues are bought and sold at very near the value of the metal they contain, the profit margin is very small. Circulating coins are another area where, thanks to an agreement with the federal government, the Mint is guaranteed a profit, but not a particularly large one.
Here, the Mint has been able to create an initiative that helps the bottom line: the Alloy Recovery Program, which sees older coins culled out of circulation and melted. It is a classic win-win. The Mint gets the value of the alloy contained in the coins, and gets the work of making new coins. The program was a big hit when it was first introduced, because our huge stock of nickel coins was being replaced with plated coins, but it had started to run out of steam by 2012. Fortunately, the Mint was able to roll out the “new and improved” $1 and $2 coins. Not only are these coins slightly different in content, but they are just far enough off in weight to justify another program of culling out the old coins and restriking new $1 and $2 coins. Even so, the profit per coin is not that great.
Foreign contracts are a much more difficult area. Many countries don’t have their own mint, so they hire out the production of their coins. Believe it or not, the minting business is cutthroat. There are a handful of mints that compete for contracts. Some of them, being government-owned, are actually permitted to bid below cost, just to avoid the government paying for unused capacity. In that market, the Royal Canadian Mint, being mandated to make money rather than just keep the staff busy, is at a disadvantage. That leaves the collector market.
The advantages for the Royal Canadian Mint are obvious: these coins are sold for way more than the cost of production, and the Mint controls the program. That means that it can make a really good profit on each coin, and it means that the Mint gets to decide what coins to produce, how many to make, and can even market them. That’s why we have crystal snowflakes, glass bugs and crystal raindrops festooning a coin program that also includes limited-edition bullion, coloured base metal coins and gold and silver kilogram monsters. None of those are needed to serve the Canadian economy, but the Mint has been able to sell them at a profit. Note I wrote, “has been able to sell them”; that’s a key point.
While collectors all have a natural inclination to aim for completeness, we have all accepted that it is almost impossible to keep up with current new issues while building a traditional collection. These coins are not being force-fed on unwilling consumers, but are often among the first to sell out, the result of innovation, artistry, well-selected mintage limits, and demand from both inside and outside the numismatic community. These products all have developed a group of followers over the past few years that qualifies them, as far away from a Vicky half as you can get, as successful numismatic products. What’s more, these are all items being sold by Canadian coin dealers. I have seen every one of these items offered for purchase either at a coin store or on a bourse. They may not be traditional collectibles, but if we don’t like them, we should stop buying them. Besides, they do have a positive effect on the Mint’s bottom line, and we all own stock.