U.S. Mint releases Fiscal 2013 Annual Report

Production costs for 1¢, 5¢ coins still above face
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Published : 02/01/14
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For the eighth consecutive fiscal year, the costs for the United States Mint to produce and distribute Lincoln cents and Jefferson 5-cent coins for circulation have exceeded their face value.

The United States Mint 2013 Annual Report notes that production and distribution costs for the Lincoln cent during Fiscal Year 2013 (ending Sept. 30, 2013) was 1.83 cents, compared with 2 cents in fiscal 2012, and 2.41 cents per coin in fiscal 2011.

Production and circulating distribution costs for the Jefferson 5-cent coin during fiscal 2013 dropped to 9.41 cents, compared with 10.09 cents in fiscal 2011 and 11.18 cents per 5-cent coin in fiscal 2011.

The U.S. Mint is in its fourth year of research, prompted by a 2010 congressional mandate to research alternative compositions for the two denominations with a goal of reining in production and distribution costs. Most of the coins’ costs are attributed to the cost of the base metals each coin contains.

Since 1983, all Lincoln cents struck for circulation have been composed of 97.5 percent zinc and 2.5 percent copper (a 99.2 percent zinc and 0.8 percent copper planchet plated with pure copper). The new composition was introduced in 1982, when cents were also struck in the old 95 percent copper, 5 percent zinc alloy.

The 5-cent piece has the composition introduced for it in 1866: a homogenous alloy of 75 percent copper and 25 percent nickel. This has been its composition except for the World War II period of 1942 through 1945, when the 5-cent coin alloy was 56 percent copper, 35 percent silver and 9 percent manganese.

Coin shipments to the Federal Reserve for circulation distribution increased 17.6 percent in fiscal 2013, to 10.7 billion coins. The increase was bolstered by higher demand for quarter dollars, the highest denomination the U.S. Mint strikes for circulation. Demand for quarter dollars increased 118.5 percent over fiscal 2012, with quarter dollar shipments reaching 1.062 billion coins in fiscal 2013.

Bullion demand

Sales by the U.S. Mint of silver bullion coins reached 44,644,000 ounces during the latest fiscal year, breaking the fiscal 2011 record of 44,048,000 million ounces.

The fiscal 2013 totals represent 43,559,000 ounces of American Eagle 1-ounce silver coins and 1,085,000 ounces in America the Beautiful 5-ounce silver bullion coins. Fiscal 2011 totals were 41,309,000 ounces in silver American Eagles and 2,739,000 ounces in America the Beautiful 5-ounce silver bullion coins.

The U.S. Mint sold 51.9 percent more ounces of gold bullion coins total in fiscal 2013 and 66.7 percent more gold American Buffalo coins than in the previous fiscal year. Gold American Eagle sales totaled 983,000 ounces in fiscal 2013 and American Buffalo sales totaled 235,000 ounces.

Numismatic product results

While the number of units of numismatic products sold during fiscal 2013 dropped less than 1 percent, to 5.5 million units, total revenue generated increased 6.5 percent, to $512.4 million.

The Proof 2013-W American Eagle 1-ounce silver dollar and 2013-S Proof set were the top sellers in terms of units sold. The most revenue was generated from sales of the Reverse Proof 2013-W American Buffalo 1-ounce gold $50 coin, the Proof 2013-W American Eagle 1-ounce silver dollar and the 2013 American Eagle Silver Two-Coin West Point Set.

Innovative technology

Among the new technology implemented during fiscal 2013 is the Press Die Vision System, or PDVS. The PDVS is designed to prevent the presses from operating until the system approves the dies installed. The system employs computer-controlled servo motors, infrared lights, special mirrors and a camera to inspect the installed dies.

If the dies are not the appropriate matched pair, the striking mechanism will lock and not be released until the proper die combination is installed on the coinage press.

The PDVS is designed to prevent production of mule error coins — coins struck with a set of dies not intended to be matched together — for all denominations.

In another technological achievement described in the annual report, the U.S. Mint’s Research and Development Team has pioneered unique Proof polishing and laser frosting techniques.

“The process begins with selective horsehair and Proof polishing to achieve varying degrees of reflectivity and brightness,” according to the 2013 Annual Report. “Aspects of the artwork and field are selectively masked or left exposed to control levels of polish.

“Degrees of laser intensity are applied to accentuate specific parts of the design and then laser-generated textures are strategically applied for the final artistic touch.”

Office of Coin Studies

In July 2013, the U.S. Mint established the Office of Coin Studies primarily to investigate what other countries are doing with coins and the emerging trends in payment systems.

The Office of Coin Studies is being directed by Jon Cameron, a former executive with the Federal Reserve and the Bureau of Engraving and Printing.

Cameron joined the Mint’s Office of Coin Studies as its director after seven years as the associate director of the BEP’s Eastern Currency Facility in Washington, D.C.

Prior to his role at the Bureau of Engraving and Printing, Cameron served for 34 years at the Federal Reserve, primarily in cash payments. Cameron retired from the Federal Reserve in 2006.

Cameron’s expertise is in payment systems including cash, credit cards, checks and electronic transactions, according to the Mint.

Going green

The Treasury Department established goals for the U.S. Mint to reduce its direct greenhouse gas emissions by 33 percent and indirect gas emission by 11 percent between 2008 and 2020. The U.S. Mint has already eclipsed those goals, with 47 percent and 32 percent reductions, respectively.

As part of meeting the Treasury goals, the Philadelphia and Denver Mints have been undergoing continual retro-commissioning to improve energy costs.

The Denver Mint “purchases all electricity from renewable sources,” according to the Mint. “Wind turbines supply 100 percent of the energy needs of the Mint at Denver.”

The San Francisco Mint now recycles all of its trash, measured at 133,251 pounds, rather than sending it to a landfill.

According to the report, during 2013, the Mint eliminated the use of hexavalent chrome, a known carcinogen, and lead, a toxic waste by-product, by switching to physical vapor deposition for the steel dies used to strike Proof coins.

Plating operations at the San Francisco and Philadelphia Mints were demolished and decontaminated. The physical vapor deposition equipment was installed at the San Francisco, Philadelphia and West Point Mints.

To access the 66-page 2013 Annual Report in PDF format, available for download and printing, visit www.treasury.gov/about/organizational-structure/ig/Audit%20Reports%20and%20Testimonies/OIG14015.pdf. ■

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