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Cent, Nickel Production Costs Drop
By David C. Harper, Numismatic News
January 24, 2014

This article was originally printed in Numismatic News.
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Falling costs for circulating coins and rising bullion coin sales are recorded in the Mint’s annual report for Fiscal Year 2013 which ended Sept. 30.

The Mint was able to reduce the cost of production of the cent and nickel in the fiscal year ending Sept. 30, 2013, though both denominations still cost more than face value to produce.

The cent presently costs 1.83 cents and the nickel costs 9.41 cents. Comparatively, these figures are lower than the 2.0 cents the cent cost in fiscal 2012 and 2.41 cents in FY 2011.

For the nickel, the cost of each coin in FY 2012 was 10.09 cents and in FY 2011 it was 11.18 cents.

Noted in the report was that costs of producing cents and nickels have exceeded their face value for eight consecutive fiscal years.

Because of the downtrend in costs, the Mint said its overall loss on cent and nickel production has declined to $104.5 million compared to $109.2 million in FY 2012.

The cost of metals was lower and there was a three percent cut in overhead expenses at the Philadelphia and Denver Mints for circulation coin production.

The value of gold and silver bullion coins sold rose 31.8 percent to $3.2446 billion from $2.4609 billion. This doubled the Mint’s profits on the program (actually up 108.8 percent) to $59.3 million from $28.4 million in the prior fiscal year.

Perhaps not surprisingly the figures for FY 2013 were still below those from FY 2011, during which the highest prices for gold and silver were recorded in the present up-cycle. Then the Mint sold $3.4714 billion in bullion coins and had a profit of $65.8 million.

The Mint’s profit on collector purchases is much larger than on its bullion coin sales. Collectors kicked in $95.8 million in the fiscal year, almost double the profit of bullion coins.

Overall numismatic sales were $512.4 million, up from $481.2 million in 2012.

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The Mint’s profit margin on collector sales is also getting wider. It was 18.7 percent compared to 15.4 percent in FY 2012. The current profit margin is also double what it was in fiscal year 2009, which points to an interesting trend.

The Mint records units sold to collectors year by year. That number decreased in FY 2013 from 2012 to 5,509,000 from 5,559,000.

Units sold to collectors in FY 2009, which is as far back as the report offers data, totaled 7,642,000. That means collectors annually purchased 27.3 percent fewer items in the current fiscal year than in FY 2009.

Remember the sudden drop in the price of gold in April 2013? That episode also earns the attention of the Mint’s annual report, which states: “The gold spot price posted its biggest one-day percentage drop in 30 years on April 15, 2013, (falling 9.2 percent from $1,535.50 to $1,395.00). This resulted in significant volume changes in gold bullion coin orders. In the three days following the historic price drop, bullion purchasers ordered 107,500 ounces of gold coins compared to 60,000 ounces in the two weeks preceding the price change.”

For silver, in FY 2013, the Mint says it sold 44.7 million one-ounce bullion coins, which passed the FY 2011 record of 44 million.

Keep in mind that the fiscal year overlaps two calendar years and that the coins sold during that time were dated both 2012 and 2013, so fiscal year sales figures and annual mintage figures do not match.

The Mint gave the federal Treasury $350 million in seigniorage profits, the first such financial transfer made in three years. This occurred even though the most profitable item, dollar coins, are no longer made for circulation.

Mint Deputy Director Richard A. Peterson cites rising quarter production and cost reductions in Denver and Philadelphia as making this financial transfer possible.

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On January 24, 2014 Joseph Murro said
The article is dry and boring.  I thought Numismatic News was for numismatists, not accountants.  While the profit margins, gains and losses and quantitative sales figures are important, it is my opinion that it would be much more of an interesting and richer article to coin collectors if some of the "how's and why's" and inside information is included within the results of the figures.  Like, how did they reduce overhead costs at the mints? and what metals and why were the metals used reduced in cost?  Who made what decisions that garnered the results? etc..
Just my 2 cents.

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