Bullion coin sales boost Mints' revenues - Inside BullionStar
The world’s major precious metals mints are currently riding high on the back of extremely strong global bullion coin demand and relatively buoyant gold and silver prices. These mints are predominantly run as commercial enterprises. The sheer scale of revenues that the US Mint, Royal Canadian Mint (RCM), Perth Mint and Austrian Mint have been generating over the last number of years is eye-opening. Not surprisingly, due to their high value nature, revenues from bullion coin sales account for the lion’s share of total revenues for each institution and have been a core driver of their overall profitability.
Official Bullion Coin Programs
Each of these four mints has an official bullion coin program. The US Mint’s program consists of the production and sales of American Eagle Silver bullion coins, American Eagle gold bullion coins, American Buffalo gold bullion coins, America the Beautiful silver coins, and American Eagle Platinum coins. RCM’s bullion coin program comprises gold, silver, platinum and palladium Maple Leaf bullion coins, as well as the recently added MapleGrams.
The Perth Mint bullion program is slightly more extensive and briefly consists of the following: Australian Kangaroo gold and silver coin series, Australian Kookaburra silver coin series, Australian Koala silver coin series, Australian Platypus platinum coin series, Australian Lunar gold and Australian Lunar silver coin series. The flagship of the Austrian Mint’s bullion program is the Vienna Philharmonic gold bullion coin series, but the mint also produces the Vienna Philharmonic as a silver and platinum bullion coin, as well as historical re-strikes of original Austrian circulation gold ducats, gold guilders and gold crowns.
Bullion Coin Sales Drive Revenues
In fiscal 2015 (to September 30), the US Mint generated revenues of US$2.12 billion on its bullion coin sales. This represented 57.6% of the Mint’s total 2015 revenues of US$ 3.69 billion. Revenues from gold Eagles totalled $979.6 million, silver Eagle sales added $785.4 million, and gold American Buffalos contributed another $252.2 million in revenues.
In 2015, the RCM’s Gold Maple Leaf coin sales generated revenues of CA$1.41 billion while the Silver Maple Leaf coins added a further CA$687 million, giving a combined revenue of CA$2.1 billion. This represented over 80% of RCM’s total bullion revenues in 2015, and nearly 71% of RCM’s total 2015 group revenues.
The Austrian Mint’s annual report for 2015 is not out yet but will be published in early July. For calendar 2014, the Austrian Mint generated revenues of €1.14 billion. The biggest revenue contributors were gold bullion coin sales of €464.2 million and gold bar sales of €391.7 million. Together the Austrian’s Mint’s gold coin and bar sales represented a combined 75% of total mint revenues.
However, profit margins on the mints’ bullion coin sales are relatively small. For example, in fiscal year 2015, the US Mint only generated bullion income of $61.1 million on bullion revenue of $2.126 billion, so this was a margin of 2.87%. Nevertheless, it’s important to remember that the bullion sales of these mints, both in coins and bars, supply a global distribution network of precious metals wholesalers, bullion dealers and banks on the downstream side, as well as a chain of precious metals suppliers, refineries and gold miners upstream. Not to forget the ultimate beneficiaries of bullion sales, the investors and collectors. There is therefore an entire virtuous ecosystem built around the bullion coin output of these giant precious metals mints.
Furthermore, an often overlooked point is that with all four of these mints, profits from operations can and often do go to the mints’ owners in the form of either transfers or dividends. For three of the mints, their owners are governments. For the Austrian Mint it is owned by a government-owned central bank, which is essentially the same thing.
Government Ownership and Dividends
The US Mint is part of the US Department of the Treasury, and reports to the Office of the Treasurer. The Mint is structured as a Public Enterprise Fund (PEF) under 31 U.S.C. § 5136 and generates its own revenues without the need for Federal appropriations. Any revenue that the US Mint deems to be excess to it’s needs is transferred to the Treasury General Fund.
For fiscal year 2015 (to September 30), the US Mint transferred $561 million to the Treasury General Fund, however $11 million of this was income from numismatic / bullion products, as the rest was a seigniorage transfer from the sale of circulating coins to the Federal Reserve Banks. But interesting, this $11 million can actually be used to reduce the US Treasury’s budget deficit.
The Royal Canadian Mint (RCM), a federal Crown corporation of the Government of Canada, is 100% owned by the Canadian Government and reports to the Canadian Department of Finance. Like the US Mint, the RCM is not funded by the Government and is predominantly run as a commercial organization except for the Canadian circulation coin program which since 2014 has been operated on a non-profit basis. Although the RCM made a small loss in fiscal 2015 (its year-end is December 31) due to a one-off impairment, it still paid dividends of CA$53 million to the Government of Canada which was a lot higher than previous years due to strong Maple Leaf coin sales.
The Perth Mint, through a holding company called Gold Corporation, is 100% owned by the Government of Western Australia. Western Australia is a state within the Commonwealth of Australia. The Perth Mint group operates on a fully commercial basis and is self-funding. In its fiscal 2015 results to June 30, the Mint made a profit after tax of AU$14 million and also paid a dividend of AU$10.54 million to the Government of Western Australia.
The Austrian Mint (Münze Österreich) is fully owned by Austria’s central bank, the Oesterreichische Nationalbank (OeNB). The OeNB’s capital is itself fully owned by the Austrian government. Although the Austrian Mint 2015 annual report is not yet published, the Austrian central bank has already reported that for 2015, it received a regular dividend of a cool €89 million from the Austrian Mint. In 2014, the Austrian Mint paid the central bank an even bigger dividend of €184.8 million out of its net profit.
Silver – Gold Production Ratio
The relative importance of gold and silver bullion coin sales varies across each mint and between years since each Mint’s bullion program differs, and demand patterns ebb and flow.
In 2015, the US Mint sold 801,500 ounces (24.93 tonnes) of gold American Eagles and 220,500 ounces (6.86 tonnes) of gold American Buffalos, for total gold bullion coin sales of 1,022,000 ounces (31.79 tonnes). Silver American Eagle sales reached 47 million ounces (1,461.85 tonnes) in 2015, with another 1,060,000 ounces (32.97 tonnes) of America the Beautiful 5 oz coins sold, bringing total US Mint silver bullion coin sales to 48.06 million ounces (1,494.82 tonnes).
Using a metric of silver ounces sold compared to gold ounces sold, this gives a silver to gold coin sales ratio of 47:1 for the US Mint. In 2015, the RCM sold 953,000 ounces of gold Maple Leaf bullion coins (29.6 tonnes), and 34.3 million ounces (1067 tonnes) of silver Maple Leaf bullion coins, giving a silver to gold coin sales ratio of 36 for the RCM. Therefore applied to 2015, it is justifiable for the US Mint to say that it was the world’s largest seller of gold bullion coins and silver bullion coins.
Although the Austrian Mint hasn’t published its full 2015 bullion sales statistics yet, it did reveal to Bloomberg earlier this year that its combined gold coin and gold bars sales for 2015 totalled 1.32 million ounces (41 tonnes), and its combined silver sales in 2015 totalled 7.3 million ounces (227 tonnes). This would give a general silver to gold ratio for the Austrian Mint of only 5.53, which highlights the Austrian Mint’s relative concentration on gold bullion over silver bullion.
In 2014, the Austrian Mint sold 483,700 ounces (15 tonnes) of gold coins, mainly Vienna Philharmonics, and 410,364 ounces of gold bars (12.75 tonnes). Total gold sold was therefore 894,000 ounces (27.75 tonnes). The Mint’s silver coin sales approximated 144.4 tonnes of silver in 2014. This would give a silver to gold coin ratio of 9.63 and a silver coin to total gold (coins and bars) ratio of 5.2.
Overall, the world’s largest mints are a useful source of income for their government owners. More importantly though, these Mints actually make the valuable and high quality investment gold and silver coins and bars that are in such high demand right now, and that also provide tangible economic benefits such as employing large numbers of people around the world in highly skilled jobs.
To learn more about the world’s top Mints, please see full profiles of these Mints which have now been published on BullionStar’s Gold University pages:
United States Mint: https://www.bullionstar.com/gold-university/united-states-mint
Royal Canadian Mint: https://www.bullionstar.com/gold-university/royal-canadian-mint