Mint has lucrative business model

eading over the Royal Canadian Mint’s (RCM) 2013 report reminded me of just how much the business of making coins has changed in just a few years.
There was a time when the idea of the RCM making a profit of $48 million, or ever being able to generate $3 billion in revenue, was inconceivable.
Step back in time just four or five years, and the business then was very different. For one thing, coloured circulating coins were a novelty; today we take them for granted. The idea of low mintage, big ticket items was relatively new. Kilogram gold and silver coins with tiny mintages seemed to be a bit of a novelty, now there are several a year.
To those of us who are interested in coins, the report lists 200 collector coins issued in 2013, of which 70, or 35 per cent, were sold out at the Mint.
It wasn’t that long ago that 100 collector coins in a year seemed extraordinary. I can recall when the number was much lower, less than 20 back in the 1990s.
That means that more coin issues sold out in 2013 than were issued 15 years before.

Perhaps the biggest change is in the bullion and refinery department. For years this was an area of the Mint where traditionally the business was around either refining gold and silver, or selling metal at very close to melt value. Today, a huge part of the business is exchange traded receipts, or ETR’s for gold and silver.

ETR’s are a new development in the world of minting. Essentially it is a way to own precious metal without actually taking possession. Investors buy ETR’s and the Mint gets the money which it then uses to buy physical gold. Owners of ETR’s can redeem the receipt for real gold any time they want, but since these things are bought and sold on the Toronto Stock Exchange, I doubt many people are going to show up in Ottawa asking for their metal.

Since the gold the RCM buys is generally stuff sitting in its vaults which it has refined for customers it is a good deal for the Mint. An even better deal since the RCM needs to maintain an inventory of physical gold just to keep on doing business.

The offering was initially for gold, and then was extended to silver. The RCM has already confirmed that there are more ETR offerings in the future.
It means that the RCM now administers a substantial volume of gold and silver for ETR purchasers. Last year alone, more than $90 million in revenue came from the ETR program.

None of this takes anything away from the fact that bullion was popular, with the volume of gold and silver sold up by about 50 per cent over 2012.

Part of that may be the creation of limited edition bullion products. Every product launch, and it is pretty well a monthly event, has included specialized maple leaf products, and some bullion issues. For instance the $5 gold and silver Devil’s Brigade commemoratives are classified as collector coins, and this was also a second issue of the same design values at $2 from the bullion department. I scoured the annual report and couldn’t find the mintage. It isn’t that they don’t exist, the numbers are buried in the bullion section. That means that in addition to the recognized offering of 200 coins specifically for the collector market, there are a whole pile of other items, many of which are sitting in the hands of collectors not investors.

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