ROYAL CANADIAN MINT MILLION DOLLAR COIN and things you should know about coin collecting...

FLASH MILLIONS OF DOLLARS STOLEN FROM ROYAL CANADIAN MINT RCMP CALLED IN TO INVESTIGATE!!! $15,000,000 in GOLD OR APPROXIMATELY A TON OF THE STUFF IS "MISSING" AND THE PEOPLE AT THE MINT HAVE NO IDEA WHERE IT IS!!!

Some will say that there is nothing funny about money. But Money is funny! Bull and Bullion-the first four letters are the same! Enter the Royal Canadian Mint! Here we take a close look at the hijinks at the Royal Canadian Mint and bring you information you probably didn't know about. 

Lets start with ridiculous projects to warm up. They have minted a gold coin with a million dollar face value that actually contains about 2.2 million dollars of amazingly pure .99999 gold and is sold for approx 2.7 million dollars (US). It is 21 inches in diameter and contains 100kg of gold.  Where to start? Why are we doing this? What on earth is the point? Anyway it doesn't impress me much!

We uncovered some facts about gold and other coin collecting that we think you should know. This website takes a closer look and discovers several facts which are not generally known about gold coins, currency and collecting. This is the only website in the world that has done this. Unfortunately, the facts here can not be dumbed down to the level of a CNN report or to a few lines in a newspaper article. But at the end of it you will have a much better understanding of what is going on. Now back to the million dollar coin. 

Apparently it takes six weeks to make one and they have already sold three! While its wonderful to note that Canada has this "niche market" sewn up one must wonder what flights of fancy or what the staff at the mint were smoking when they implemented this idea. And if they get away with this one -what's next! How about a 500 pound penny! A one ton dime? So I started to research this coin and one thing led to another and several very interesting facts were revealed which I will share here.

Some of the facts may challenge what we all thought to be true about the Mint and the products they produce and their business formula. Other facts relate to countries around the world and best practices followed by their mints. On this website the "bullshit alarm" goes off when we find something that isn't what it seems and sure enough it went off when we looked into the Royal Canadian Mint.

The Royal Canadian mint has for many years been selling mint sets of coins. Canadians and others have invested many millions of dollars in them. They are very attractive sets and very nicely packaged. Good investments eh? I'm afraid not. Go and look up the selling prices of Canadian mint coins on eBay and In most cases they are less than the original selling price and in nearly all cases while pretty -they have been a bad investment.  

People who sell you coins are happy people...frankly the only reason we put this here was to spruce up the page a bit because talking about money transactions can sometimes be a little boring... anyway back to the story!

OK OK I have been mean to the mint. Lets look at penny production then. How much does it cost to mint a penny? The Royal Canadian Mint claims it costs about 0.8 cents to make a penny. Others claim that the mint costs are about 4 cents per penny. Approx 816 million pennies are minted each year. Lets take a closer look at the penny.

Up until 1982 copper was the main element in the penny at 98%. Consider the folly of this in today's economy where copper is worth a fortune. In fact each pre 1983 penny was worth over 2 cents US for copper value!!! It takes 146 pre 1982 pennies to make one pound.  In theory you could sell a pound of copper pennies at a profit of $2.20+. Yes there would be some expenses and yes scrap dealers need to make a profit too but at those sorts of prices and if you scaled it up to tons of pennies clearly there is a potential profit in selling these pennies as scrap metal.  And its not just the modest penny that can be melted down for scrap. The Canadian nickel which was once made of nearly pure nickel is another good choice. And some quarters were once made of silver and are worth over $2 each just for the metal content.

Keeping with the penny - What can you buy with the penny these days? A big box of nothing is the answer. Should the Royal Canadian mint still be pumping them when it is costing over 130 million dollars a year to keep the penny in circulation? These people aren't stupid so why are they doing it? As an ex-auditor I learned that if you follow the money you can usually find out what is going on. 

But first it gets more complicated. 

Forget about making money on the penny for scrap value. Smarter people have been there first. They made the money. I emptied my pockets and looked at the penny collection. Only 1 penny in 20 was pre 1982. That's 5%. That would seem to indicate that if this random check was extrapolated to all the pennies in Canada that 95% of them would have no scrap value exceeding their currency value. So that 130 million you hard working taxpayers pay each year to keep the pennies in circulation was also paid so that certain smarter people pillaged the currency for scrap value. I contacted the Bank of Canada for an answer on who is recycling Canadian coins and here is what I was told. 

"..I suggest you contact the Royal Canadian Mint in this regard at 1-900-267-1871 or you may visit their website at the following address: www.rcmint.ca, as they are the institution responsible for the issuance of coinage in Canada..."

The response was pretty impressive as I got it just a few minutes after sending in the question. Wow!  

So I forwarded the question to the Royal Canadian mint: (still waiting for their response).

(update Sept 17/07 still waiting for the response from the Royal Canadian Mint) 

update Nov 11/07 still no response from the Royal Canadian Mint....

update Jan  14, 2008 finally received an answer from the Royal Canadian Mint to my September 20/07 question. That is about 86 days. (the yellow highlighting is mine and and I have removed the name of the mint employee writing the email). I could be wrong but I suspect several people looked at this request before deciding the safest way of answering it. 

I acknowledge your email of September 20, 2007, regarding pre-1982 circulation coins. I apologize for the undue delay in responding to your query.

The Royal Canadian Mint does have a program in place that helps offset the pressure from metal prices; it is called the Alloy Recovery Program. It draws in truckloads of 'white' coins (25-cent pieces mainly, and 10-cent and five-cent coins) through coin-processing partners in key Canadian cities. The Mint has the coins melted, recovers the valuable nickel content, produces plated-steel replacement coins at a lesser cost and puts them back into circulation.

As for the melting of these coins by individuals, the Currency Act of Canada prohibits anyone, except in accordance with a licence granted by the Minister of Finance, to melt down, break up or use otherwise than as currency any coin that is current and legal tender in Canada. Failing to abide by this statute is a criminal offence.

I hope you find this information helpful. Thank you for your interest in the Royal Canadian Mint.

As a matter of fact I do find this information helpful! So what the mint is doing is a criminal offence if you or I do it. And who are the coin processing partners? And how much do they make? And how big is the truck?  So off I went googling and found a good article on the CBC's Realty Check by Robert Sheppard. A link to it is here. When that article was done in 2006 it indicates that the Alloy Recovery Program was just for pre 1960 silver coins and that the partners were banks and transit authorities. An interesting calculation in Mr. Sheppard's article was that a tonne of copper represented 408,163 pre-1997 pennies or in legal tender $4,081.63 but melted down would represent US$7,230 on the LME futures market. Since 2006 the price of copper has gone up again.

 

I continued to dig and found this article by Bret Evans at Canadian Coin News. Bret points out that the Alloy Recovery program now includes older coins made out of copper and nickel.  Brett notes that the pretax profit of the mint was approx 16 million dollars in O7 and makes the following comment:

..."Seigniorage is the difference between the cost of producing a coin and its face value.

The Royal Canadian Mint does not receive seigniorage, as it goes directly to the federal government when the coin enters circulation. Under a white-paper agreement between the Royal Canadian Mint and the federal government, the Mint receives slightly more than the cost of production for each coin it makes..."

This is interesting stuff. My research on seignorage indicated that the mint hands over about $100,000,000 a year to the government just for that. It makes you wonder just what the business of the mint is. By far the major contribution to the treasury is seignorage which the average taxpayer doesn't have even the faintest clue about. 

There is a good story there -all the elements are there - multi-millions of dollars, a public that is unaware of what is going on, the consumer that is buying products and really paying a form of indirect taxation hidden from them, gold, copper, zinc, the metals exchange. The bullshit sniffer went off but not wanting to make a career of this one lets press on! And besides, possibly the good folks at the mint are...innocent and just good workers! It could happen! 

By this time some of you will be fuming and basically angry that I am apparently attacking what is considered by many to be a dear, trusted Canadian institution and in fact it is listed as one of the best 100 employers in Canada. I am not attacking the mint or its hard working employees I am merely looking at and reporting what appear to be the facts. Lets look at the holy grail the Gold Canadian maple leaf coin containing one once of pure gold. Here are the facts.

The mint saw all the money being made by the South African Krugerrand and decided to compete with a Canadian product. The mint makes its money based on the difference between the actual cost of production of the coin and its selling value to the customer which is called a premium. They entered the market. Thinking that more gold was better they entered the market in 1979 with a coin which was .999 pure gold. Then in 1983 they upped the percentage of gold to .9999.  The krugerrand was 22 karat gold mixed with copper. The math geniuses out there will realize that the actual gold content between a .999 and .9999 coin are infinitesimal. But the marketing types will understand that the coin collectors immediately and stupidly went for the .9999 coins thus making it necessary to handle and re-sell the coins in separate streams and for different amounts. In a word it was silly. Stop you say!  No there is more. 

The gold maple leaf had so much gold in it that it was soft and easy to mark. AND the design was such ( high ridges and wide plain areas on the face of the coin next to the Queen's image) that the act of merely taking the coins out of their packages marked them. Now dealers had to decide what to do with the gold maple leaf coins which could be of two different gold contents and two or more different conditions. The best use of some was simply to be melted down and refined. Consequently the secondary market for Canadian gold maple leaf coins is not good. Instead of being worth more that Kruggerands they may end up being worth less because somebody at the mint didn't understand coin design and gold content. And while bullshit often baffles brains in this case the market has adjusted to the bullshit and devalued the value of Canadian gold coins. 

James Bond asks himself is she .999 or .9999 gold??

Please stop you say. Nope I say there is even more! You have made it this far.( I am impressed!) The best is yet to come!

The face value of the Gold Maple Leaf one ounce coin is $50. Some "moh-ron" dealers are using this as a reason for buying the coin because it is legal tender in Canada and Canada has a strong economy and ...wait for it...the Government of Canada guarantees the coin! Wow! . Knock Knock -anybody home! The problem is that one ounce of gold is approx $1000+ US and the premium for the gold maple leaf coin uncirculated is approx $35 to $85. So dress me up and call me stupid but the fact that you can buy $50 worth of beer with it using it as legal tender to quote a Shania Twain song "don't impress me much.." Furthermore many of the dealers are loath to admit the maple leaf's short comings and are simply lying about them concentrating instead on the high percentage of gold as a buying point. Liar Liar pants on fire! Bullshit! In fact this in incredibly funny but people don't get it! That makes it even funnier! Now I may not be the smartest person in the room but I am not the stupidest either!

At this point you might be starting to question what you thought you understood and guess who gets blamed? Me (the messenger). Should I stop now? 

 

Not yet folks -there is still the best bullshit of them all. Lets look at "seignorage" again. The Royal Canadian Mint pays approximately $100,000,000 a year to the Government of Canada for seignorage payments. Its a little difficult to explain. Basically its the difference between the cost of producing the coins and the value of the coins including the buy back when the worn out coins are sold back to the mint. They are sold at their full face value. 

When a coin leaves the mint and is subsequently taken out of circulation lets say by a collector something very magical happens. Its magical for the government. Wealth is created! For the government. It equals the cost of producing those coins vs the actual amount paid for them. With the use of much cheaper materials these days there is a huge difference between the cost of production and the much higher face value of a dime or quarter.  Somebody at the mint figured it out. They discovered a perfectly legal way of ripping off the citizens. Without them even realizing it. The started to market collector coins! 

It was brilliant. Not only did they hugely over charge for mint uncirculated coins in fancy packaging but they also struck millions of the coins knowing full well that a lot of trusting people would take them out of circulation and place them into their collections. The profit is called seignorage. (I prefer to call it bullshit.) And this is really hilarious - the mint charges GST on the coins they sell to the public so the government makes money again on the taxes. It just keeps on getting better and better -for the government.

When you look at it from a consumer perspective  some will say that it is completely and totally unethical and wrong. Normal people, naively trusting their government are being ripped off hundreds of millions of dollars and the sad fact is they don't even realize what is going on. Some will say its all going back to government coffers and so the people will get it back eventually in services and benefits but I see it as lost wealth and a strike against productivity in Canada. All those simple, trusting people spending their precious time sorting thru coins to collect the "good ones" all that time wasted. I see it as a rip off because the nice folks at the mint are not admitting what they are doing. Far from being transparent, the entire process is convoluted, complicated and hidden from the taxpayer and the collector is led to believe he or she is investing in items of value when in fact they are simply being ripped off. 

Now lets talk conspiracy theory. And lets consider the apparent design flaws in the gold maple leaf coin. You will remember they are that the high gold content mixed with the design ( high ridges and large open spaces) makes the coin too sensitive to damage and the two gold contents; .999 and .9999 makes one much more desirable to collectors. As a result of this a lot of maple leaf coins in the secondary market get melted down for their gold content rather than resold to collectors. Think about it. Now think about seignorage. Could those clever foxes over at the mint purposely designed the coin this way to increase seignorage revenues?  It does make one think. Just how smart are they? And why not? If anybody should understand money the folks that make it should. And apparently they sure do! This is truly impressive.

Who cares? I bet a hundred bucks that if you asked a random sample of Canucks what seignorage was- that less than 5% would know. If 1% could describe and spell it I would be genuinely surprised.  What if it was you or your family who had placed their hard earned dollars in this investment? In short they trusted the Royal Canadian Mint to provide them with a quality built Canadian product that would help protect their capital over time. And the mint is still pumping the suckers out. In fact they even upped the gold content again from .9999 to .99999 for the million dollar coin. Its mind boggling what a bullshit artist can do when they set their minds to it. 

Now because this website is also very popular in the USA and in other countries I better let you folks know we trusting Canadians are not the only ones being fleeced (and duped) by their governments when it comes to seignorage. In the 1990s the US Mint came out with a series of quarters called the 50 state series. Each one cost about a nickel to make. Trusting Americans promptly went out and placed their hard earned money ( and our American cousins work like beavers for their money) in this series and promptly put them in their collections as investments. The US government pocketed over 5 Billion dollars as a result of the seignorage very effectively taking this wealth out the the hands of their trusting citizens.  And it's not just North Americans that are being fleeced. Other countries do it too so welcome to the club! 

The next time you see a collector quarter or neat looking Canadian coin think of what you have learned. Stick it to the man. Go out and spend it as soon as you can!

I would like to end this topic on this note. Any good business person will tell you that when conducting a business deal you need to leave some profit in it for the next fellow so that everyone shares. Any person that has ever ordered a pizza to share will tell you that you don't eat the entire pie yourself. This concept of sharing seems lost on the Royal Canadian Mint. They take the entire pie themselves and don't leave anything for their investors -the people that buy their coins to build up their wealth. This is called stealing. Or cheating. Or at the very least its being pretty mean! 

Will any of this ever change? No. Because people do not understand that there is a problem and the problem is too complicated for them anyway! They will never, ever be able to pronounce or spell "seignorage". The chances of them understanding the concept are close to nil. The media will never be able to explain the problem to them at the simplistic level they traditionally use and the concept that coins are not valuable when made from cheap or plated materials is just something the public will likely never understand. They will also never understand that an attractive gold coin with a  high gold content becomes useless as a collectable because of its design and the fact it is simply too soft. And finally too many people are making too much money keeping everything as it is now. So the mint will continue on as before and nothing will change. But at least I can say "CanadianBullshit.com told you so!" Ha! Oh and if you read this and actually understand it -you will be in a much better position to make investment decisions. We started this topic talking about the million dollar coin. Is that a good deal? Lets finish on that point. But first the puppy. By the time you finish reading this article you will learn how to save enough money to buy this puppy. Or one like him. 

But back to the coins...

 

The million dollar coin is very soft and therefore must be continuously protected against physical damage. Providing that level of security will be expensive over time. There is a certain collectability factor -in that it is unique in the world although each time a new million dollar coin is minted that reduces the collectability value. I suspect the mint will make as many as they can sell thus over time reducing the value of the coin as a collectable. That leaves the gold content and since that would be the main value and since a gold bar would be more liquid and much cheaper to store, one must ask a simple question and that would be "Why?"

Why pay the premium for the coin which is directly attached to it's collectablity factor which over time will be reduced as more coins are sold? These are questions you might ask when determining if the million dollar gold coin is a "good investment" or not. It very well may be that in some circles that owning one of these big suckers will be considered as a sign of wealth and power and therefore worth the investment. That's fair! As far as the investment value of the smaller Canadian gold coins this page addresses that issue. 

These are the facts. You can dispute the conclusions if you wish. Also whenever considering financial matters its wise to independently verify anything that you use to make buying decisions. I am not saying that you should avoid Royal Canadian Mint products. I am not saying that you should not collect or invest in coins. All I am saying is that you should be a little less trusting and get all the facts before you spend your money. You should understand how the game is played and who derives the benefits.

Out of curiosity I checked out the Royal Canadian Mint's website. I reviewed the "4 sound reasons" they claim you should invest in bullion from the Royal Canadian Mint. Here they are: (and they are hilarious!)

1. Purity -they claim their coins, gold wafers, bars and grain are the purest with .9999 fine gold and silver. Ok -so what? Is there really a significant difference between .9999 and point .999 and point .99 gold? If gold is $900 an ounce then . Lets do the math. .9999 would have $899.91 gold in it, .999 would have $899.10 and .99 would have 899.0 in it for a difference of 81 cents or 91 cents on a $900.00 ounce of gold. Dress me up and call me stupid but that difference is not enough to buy a coffee and is not a reason to invest in the ultra high gold content. It ONLY makes sense if you are no good in math and don't understand decimal places. Next,

2. Guarantee -the mint claims that their coins are legal tender and guaranteed by the Government of Canada for weight and purity. This is bullshit. The coins legal tender is a small fraction of its retail value. I checked out one coin offered the 2008 $300 Newfoundland gold coin. First of all its only 14 kt NOT pure gold. Secondly the price is $1,541.95 PLUS TAX PLUS SHIPPING!!! And the " guarantee" is that its legal tender (so you can go out and buy $300 worth of beer with it.) This is NOT a sound reason to invest. 

3. Liquidity -The mint claims it's coins are instantly recognized at financial and bullion dealers worldwide and are always liquid. More bullshit. Liquidity does not refer to market value. Certainly they will give you something for it but how much of your purchase price will you get back? That's why people invest. To make money!

4. Quality- The mint claims their hallmark signifies quality and security and eliminates the need for assay at the time of sale. More bullshit - again there is absolutely no indication you will recover your money invested. 
   
   In summary the "4 sound reasons" appear to be bogus to me. You decide.

Here are four real sound reasons from Canadianbullshit.com to invest in anything.

1. the investment represents a product with quality and value

2. the purchase price is equal to the amount you could get if you had to sell the item and there is good liquidity i.e. low risk

3. there was a good potential that the item would increase in value over time and that increase would be greater than interest earned on a bank deposit

4 The  benefit of the investment would go to the investor

And the funniest thing about the Royal Canadian Mint is that they are making money hand over fist. And most of the people who own their products seem happy about it. And why wouldn't you be happy owning money? Clever eh? From a visual perspective their products are gorgeous. They are a world leader in terms of design and quality. You will note that my comments relate to value and who obtains the benefits. If I have introduced you to the cleverness of seignorage then you are one step ahead of where you were. Complex financial transactions often make a lot more sense when you follow the money and see who is deriving the benefit -money being one of the great motivators of life! And who better to understand how to chase the money than the clever people who make it! 

I hope that I have raised some questions about the investment value of products from the Royal Canadian Mint. Now we find out that there are also questions about millions of dollars of gold, silver and other precious metals that are apparently missing from the mint. But think about it - given an institution that operates like it does basically ripping people off in the normal course of business is it any surprise that someone there got a little too greedy and decided to take home some for themselves?  An investigation is now ongoing to find out how much and were it went. Here is an article on this little problem. Don't forget the managers of the mint have been getting paid good money and bonuses to manage their holdings. How will this fiasco effect this years bonus payments? And - how much money do these folks get paid? 

Final Statement: All I am saying here is buyer beware when it comes to the Royal Canadian Mint. I know there are good people, talented people who work there. The point of this article was to uncover the bullshit that occurs at the mint and in doing so suggest a better way. We think that an ethical review needs to be done on Mint operations to ensure that they are acting in a way that that supports the taxpayer not simply using them as an additional source of hidden taxes. There is no need for million dollar coins or pretend collectable coins or even fancy boxed sets. The mint needs to get back to basics. What do you think? 

About your Author 

What type of nut would write something like this and why? I am a fairly average retired fellow 61 with experience in banking, government and private business. I am not a coin collector or an expert in that field and I don't pretend to be one. Furthermore I don't even own one gold coin and I am sure several of the readers of this page own a pile of the suckers. The important point here is that I do not hold myself up as an expert but simply an observer.  More information on why I started this website can be found here.

The idea is basically to root out bullshit and where possible suggest a better way. And when I looked at coin collecting I certainly uncovered what to me looked like a lot of bullshit. You will notice that while certain facts are presented -I also include some opinions and my analysis. These are just my opinions. Agree with them or not my main objective here is to enlighten and entertain and to have some fun too. 

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