If you have watched any of my videos then you know its wise to collect pre-1982 pennies and even nickels for their value in copper. I should not even mention silver. Let that be your preface. As we know coin currency in the United States of America is changing. The Silver of our yesteryear’s generation is long gone. The copper penny left in 1982 and our last bits of copper in the Nickel are on their way out the door. For the first time in over 47 (think Silver) years, the U.S. Mint has researched into the possibility of using an alternate metal to compose our coins out of. Their reason being to reduce production cost. Yeah. I bet.
I would like to think this is a pretty big deal. The nickel contains enough of the metal copper to make it worth saving. And once they debase the coins currency such as they did with silver coins in the 60’s our current generation instantly becomes that much poorer. Here is a snippet from the US Mint Presidential Budget. It mentions the Coinage Materials Modernization Act (CMMA)and how its purpose is to research to find the best option available to mint our coins out of.
Coinage Materials Modernization Act (CMMA)
The recently passed Coin Modernization, Oversight and Continuity Act provides the Secretary R&D authority; it does not give the Secretary the flexibility and agility to approve coinage materials that would result in significant long- and short-term savings to the taxpayers. Requiring legislation for each change in coin composition will greatly slow the process. As metal prices are extremely volatile, the delay incurred by proposing and passing legislation could result in the new compositions being outdated by the time of their enactment.
Increasing metal prices have driven production costs to exceed the face value of one-cent coins (pennies) and 5-cent coins (nickels) since FY 2006, and have deteriorated the returns realized from other circulating coinage. Should the total cost of producing coins ever exceed their face value (thereby reducing seigniorage) the United States Mint has reserved $248.8 million in its PEF to pay for capital expenditures and unplanned expenses. Although unlikely, if results are worse than expected and the United States Mint is required to exhaust the $248.8 million in its PEF, the United States Mint could eventually require an appropriation or borrowing authority to fund circulating operations.
The Mint is proposing legislative changes that would modernize the nation’s coinage materials for the first time since 1965. Specifically, these changes would grant the Secretary the same authority he presently possesses with respect to the $1 coin—that is, the authority to prescribe the weights and compositions of all circulating coins, and to provide the Secretary flexibility to change the composition of coins to more cost-effective materials.
The proposed amendments would allow the Secretary to explore, analyze, and approve new, less expensive materials for all circulating coins based on factors that he determines to be appropriate. Such factors may include physical, chemical, metallurgical and technical characteristics; material, fabrication, minting, and distribution costs; material availability and sources of raw materials; coinability; durability; effects on sorting, handling, packaging and vending machines; risks to the environment and public safety; appearance; resistance to counterfeiting; and commercial and public acceptance.
What they are basically saying is that the Nickel is worth more than a nickel due to its metal content and they are not happy with it… and that they want to take it away from us. Flash forward a few years to December 2012. The moment we have been waiting for. The United States Mint biennial report to congress. The burning question. What is going to happen to our currency. More importantly the Nickel. So what exactly did the Mint have to say?
In December of 2012 the mint issued this statement in their biennial report to congress.
As in 1965, when the United States last conducted significant research into alternative coin compositions, the Mint retained a third party metallurgical consultant to assist in the R&D and produce a study of many of the issues specified in the Act. Factors considered in assessing alternatives include the potential new coin’s color, wear resistance and lifespan, ability to be shaped and to hold an imprint, and acceptability to the vending industry and other stakeholders. Although the consultant’s study and additional R&D conducted to date has been thorough and meaningful, additional work is required before the Mint can make detailed recommendations for any specific changes in coin composition or methods of coin production.
The full report is quite interesting. It breaks down an analysis of the production cost for each coin in circulation, its findings for alternate metals to be used as well as its recommendations for said metal composition. But as you have read… after two years of research and development with an outside consultant the US Mint has stated that additional work is required before any concrete recommendations can be made towards changing of coin composition and methods of its production. There you have it. You are safe for a little while longer. Start stacking those nickels while you can because at a moments notice it might be too late. Copper continues to rise in value and the Mint will not take a loss much longer.
The U.S. Mint’s Director of Public Affairs, Tom Jurkowsky stated: “In undertaking the effort, the Mint contracted the services of Concurrent Technologies Corporation (CTC)―an independent, nonprofit, applied scientific R&D professional services organization―to commence R&D on metallic materials for circulating coins and to prepare the background information, analysis, and supporting data necessary for the bureau’s report to Congress.”
“Additionally, the Mint constructed a dedicated R&D laboratory within its Philadelphia facility. During testing at the laboratory, Mint personnel produced hundreds of test strike pieces composed of 29 different formulations. Factors considered in assessing alternatives included the potential new coins’ color; wear resistance and lifespan; ability to be shaped and hold an imprint; and ease of acceptance to the vending industry and other stakeholders.”
He also added that “After a nearly two-year R&D effort that was significant, meaningful and thorough, the Mint found that additional R&D is required before it can make detailed recommendations for any appropriate changes in coin composition or methods of production. Accordingly, the second round will allow the Mint to (1) conduct production-scale tests with multiple lots of proposed coin materials to verify the potential supply chains and the results from the preliminary tests described in the CTC study and (2) conduct further research regarding estimated costs to stakeholders associated with a change in the electro-magnetic signature of circulating coins.”
One really interesting point the study mentioned is that the cost of producing pennies and nickels have declined since 2011 but they are still over twice the face value of the coin. As we have mentioned pennies are made of copper-plated zinc, and nickels are made of cupronickel. Which is Copper and Nickel. In 2012 it cost 2 cents to make a penny and ten cents to create a nickel. This cost is a cumulative of the metal, production cost to the mint, the cost for the Federal Reserve to distribute the coin as well as administrative cost. As it cost more to make the coin than its face value the government does not earn any seigniorage on the coins.
Seigniorage is the difference between the coins face value and what the Feds pay for the coin. Dimes and quarters are not really an issue here as the copper in them is below the face value of the coin. Meaning a dime really is not worth ten cents yet as a quarter is not yet worth a quarter. I say yet because with the price of copper rising that could change some day as well.
During this two year study the Mint conducted evaluations and trial strikes on 29 different metallic formulations. The tests were to check for various aspects of the base such as hardiness, weight, color, ductility, coinability, surface finish, corrosion, wear resistance, cost, electromagnetic signature and supply chain availability.
Some of the materials evaluated for the cent were aluminum, aluminized steel, copper-plated steel as well as stainless steel. The nickel and quarter included zinc, ply-plated steel, stainless steel, nickel plated steel as well as copper based alloys. Because aluminum, zinc, iron and lead cost less than the metals currently used to create current coins, we are not guaranteed the coins will be now based out of one or a combination of the metals above.
As we know the Feds need more time so let this be a lesson. Get what you can while you can because at any moment it will be too late. When times get tough they may act as the only currency worth holding on to, or a way to get out of a tight spot. If nothing else, your investment never loses a cent. What are you waiting for?