By Bret Evans
The Royal Canadian Mint annual report is out, and once again the collector is king.
For years, I have always looked at the numbers in our favourite Crown corporation’s fiscal year end and pointed out the significant fact that sales to collectors has always been the most reliable, and generated the best profit margins, of anything the Mint does. This year it is official.
Forgive me for being the “I told you so” guy, but I’ve been wrong often enough to enjoy it when I am right.
Under a new set of rules, brought out by the previous government, the RCM is now mandated to make sure that Canadians have a good supply of money and that any and all profit goes right to the federal government. Under the old rules the RCM made a little profit, which was tacked on to the cost of production, and the rest, known as seigniorage, went to the feds. Now the Mint is expected to make zero profit on Canadian circulating coins. It puts a bit more money in the federal coffers, but the folks at the Mint are in a position where their largest customer is their most demanding, least profitable, and the only shareholder.
As unenviable as that position is, let’s look at the three areas where the RCM is expected to make a profit, the source of any bonuses.
Making coins for foreign customers, even really cool multi-colour circulating commemoratives, is a very competitive business. Over the years the RCM’s fortunes have gone up and down depending on variables such as the value of our dollar, the cost of transportation, and how badly their competitors are willing to cut their bids.
To get contracts, even just to supply blanks or planchets, you need a sharp pencil, and that almost always means a small profit margin.
Bullion and refinery is the same. The RCM has a great refinery, but not the only one in Canada, and while the maple leaf series are the top bullion coins in the world, there is plenty of competition. In the bullion market, purchasers are almost always investors, so they want the purchase price as close of the melt value as possible. In other words, you make a lot of maples, and use a lot of precious metal, but only get to keep a razor thin markup.
So we come to the collectors. Here is a market where buyers are often very loyal and are willing to buy gold and silver at multiples of their precious metal content, and even pay well above face value, because they like the design, or the theme, or just think the mintage is low enough for them to turn a profit.
We all know that modern non-circulating legal tender coins are sold to us for retail and bought from us at wholesale. We even know that often the retail value drops below issue price and may take a few years to catch up, but we’re collectors and are prepared to pay a price to get what we want.
The Mint itself has identified the collector market as the place where it expects to make the most profits.
Does this mean that we collectors can boss the Mint around? Not even close.
There is a difference between how the RCM and the numismatist view the market.
The Mint is happy if someone buys a coin because of nostalgia or because they really like a superhero. If the theme works, the Mint will simply expand on it to sell more coins. They don’t think about collecting goals, and as much as they try they just don’t grasp traditional date collecting. Not only is there no business incentive for them to encourage collecting old silver coins, but they don’t even make a profit on modern circulating coins, unless they can sell them for more than face value.
Even more fundamentally, the RCM doesn’t even expect a collector to collect. To us a collector is someone who has set a goal and probably studies coins, someone who has gone past being a simple accumulator or hoarder.
To the RCM, a person who only buys coins once in a while because it strikes his fancy is a customer to be cultivated. To the average collector, such a buyer isn’t worth consideration.
We should be embracing those people into the hobby, their numbers are growing, and they do collect, just differently.