The one cent coin will start disappearing from circulation
commencing February
4, 2013 when the Royal
Canadian Mint (RCM) stops distributing one cent coins to financial institutions
and starts its large scale melting and recycling activities. However, the
RCM could have some competition in this endeavor from individuals and possibly
companies.
That being said,
will it be legal for others to melt and recycle one cent coins? Subsection 11.
(1) of the Currency Act (R.S.C., 1985, c. C-52) states that, " No person shall, except in
accordance with a licence granted by the Minister, melt down, break up or use
otherwise than as currency any coin that is current and legal tender in
Canada.", the Currency Act (Act) goes on to state that anyone who
contravenes this law will face a $250 fine and-or a maximum of one-year in jail. The
general public for the most part is not familiar with the Act and may think it
will become legal for them to melt and recycle one cent coins. Many people may
be in for a surprise.
Two areas of the
wording of this Subsection of the Act are worth exploring;
First “any coin
that is current and legal tender” indicates that as long as the one cent is
legal tender individuals will not be permitted to melt their one cent coins. In Chapter 5 of its Economic Action Plan 2012 the Government announced that it will eliminate
one cent coins but the penny will retain its value (remain legal tender) indefinitely.
Secondly,
"except in accordance with a licence granted by the minister" indicates
that it is possible to get a licence to melt or do otherwise with coins. If
individuals want to have their one cent coins melted down, they would either
have to get a licence, which is unlikely, or bring them to a party who is
licenced to do so. The Finance Minister has previously granted licences to
metal recyclers and refineries to melt down silver coins; however, to date the
Minister has not indicated whether or not any licences have been granted to
melt one cent coins. However, that could change; on December 19, 2012 the government announced that a new
analysis shows that the government would actually lose $38.3 million over the
next six years redeeming 6 billion one cent coins. In my opinion, if the
government thinks it could reduce its losses by allowing 3rd parties to melt
and recycle one cent coins, the government should consider granting melt
licences. It makes economic sense for them to do so.
Although it is not
known if it will be legal for individuals to have their one cent coins melted
and recycled for financial gain, many individuals have been storing them and
await their extinction so they can cash in and start melting
them. Since the melt value of one cent coins is greater than their
face value due to the base metal content which is predominantly copper for one
cent coins to the end of 1996; there is incentive to melt and recycle one cent
coins. Canadian one cent coins from 1920 to 1941 contain 95.5% copper and from
1943 to 1996 contain 98.0% copper.
The one cent coin
melt value per coin for years from 1920 through to 1979 is about 2 1/2 cents
per one cent coin, and for years from 1980 to 1996 is about 2 cents per one
cent coin due to the high copper content. However, melt values for one cent
copper plated zinc coins for years from 1997 to 2012 is only about 1/2 cent per
one cent coin, and for one cent copper plated steel coins for years from 2000
to 2012 is even less at about 1/4 cent per one cent coin. So it would be
financially beneficial to melt one cent coins up to 1996, but not so for one
cent coins after 1996. The chart below, Appendix A - Canada One Cent Coin Melt
Values, provides how the melt values have been determined.
Although there is
a financial incentive to melt one cent coins, from a business perspective the
effort to accumulate and sort them for melting generally outweighs the costs.
It does for the government as was recently affirmed, and it’s doubtful that it
would be cost justifiable for businesses to sort and accumulate one cent coins
for melting. It may be that one cent coins will be accumulated for melt by
individuals having the time to do so, or businesses that have come up with efficient
and innovative ways to do so. Rest assured, there are many individuals that
would be willing to do so if it was legal.
The high melt
values will not help perpetuate the one cent coin as it’s phased out of
circulation by the Canadian Government; however, as numismatists and hoarders
collect and retain one cent coins in volume this will enable the continued
collectability of small cents up to 2012 for many years to come. The same as
what has happened with many coins of the past, like the large cent, silver
circulation coinage, and the nickel fifty cent and one dollar coins. However,
numismatists will continue to actively collect these coins and will
indefinitely. Although, it’s unfortunate to see the elimination of Canada’s
lowest denomination circulation coin, it doesn’t make economic sense for the
government to continue to keep one cent coins in circulation. And yes, there
will be other coins in the future that will be eliminated as well as their
values become too small to make a difference when conducting business
transactions. So the key for numismatists to keep coin collecting alive is to
collect in bulk, as has been done in the past for other extinct coins. I for
one have plenty of $25.00 boxes of rolls of one cent coins that I plan on
retaining because I believe the numismatic value will far outweigh the melt
value of the one cent coin, how about you?
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