Somebody asked me that the other day commenting "surely their shop is expected to show a profit".
Simple answer, in just one word...."Seigniorage (https://en.wikipedia.org/wiki/Seigniorage)".
These are the same as circulation coins but have not gone through the distribution process so no Seigniorage. But, never fear, guess who owns the mint and collects the profit anyway?
My God....correct answer! How did you work that out?
And never mind the profit on the Mint your Own and various counterstamp coins from shows and exhibitions.
P.S. Theoretically the mint is owned by us (Australian citizens) but don't hold your breath waiting for your dividend.
RAM is a business they have to be profitable and I think they do quite well selling collector coins
Better it make a profit than us (taxpayers) subsidising its losses.
Eric
Also employs a lot of people and earns international revenue through producing coins for other countries. One of Australia's few large manufacturing concerns left in the country and one that doesn't export jobs. More power to them, I say.
Good point Greg.
They do make a profit from the coin swaps, but in a very sneaky way that most people don't notice. In order to get the bags, you have to create an online account with RAM, and this allows them to send you advertising via email. Thus, the profit from the coin swaps comes from all the extra sales they make through advertising directly to your inbox, instead of waiting for you to go and browse their website.
You are right Hercules,
That's called "lost leader" advertising. Supermarkets often sell bread and milk under cost just to get you in the door. They are hoping you pick up a few - or a trolly full - of items you didn't know you needed.
It's a very effective way of marketing as you know you are preaching to the converted. That's the problem with something like Yellow Pages where you pay big money for saturating coverage that might actually interest less than 1% of people who use it.
The Mint cannot and does not have the authority to simply sell whatever coins it makes. Each legal tender coin has to go through the proper legal process.
- Treasury is the only organization allowed to "buy" coins direct from the Mint. Treasury "buys" them all, at production cost, and "sells" them at full face value by declaring them to be legal tender for the stated value. Treasury then pockets the profit, called "seigniorage".
- For NCLT, Treasury then sells back the coins to the Mint's collector business, for face value. Treasury gets to keep the seigniorage profits, even though for many NCLT coins, this "seigniorage" is negative (a once ounce silver coin with $1 face value has a large negative seigniorage, as it costs a heck of a lot more than $1 to make it).
- The Mint can then sell the NCLT for whatever price the Mint's marketeers wish to place on them. This profit usually far exceeds the seigniorage profits, and far exceeds the negative seigniorage for coins where that applies, so the government as a whole still wins in the end. But there's nothing stopping the Mint from selling those now-legal-tender coins on to collectors, or to businesses (as it sells the coloured $2 coins to Woolworths) at a loss.
Quote from: 'Sapyx' pid='115265' dateline='1525957057'The Mint cannot and does not have the authority to simply sell whatever coins it makes. Each legal tender coin has to go through the proper legal process.
- Treasury is the only organization allowed to "buy" coins direct from the Mint. Treasury "buys" them all, at production cost, and "sells" them at full face value by declaring them to be legal tender for the stated value. Treasury then pockets the profit, called "seigniorage".
- For NCLT, Treasury then sells back the coins to the Mint's collector business, for face value. Treasury gets to keep the seigniorage profits, even though for many NCLT coins, this "seigniorage" is negative (a once ounce silver coin with $1 face value has a large negative seigniorage, as it costs a heck of a lot more than $1 to make it).
- The Mint can then sell the NCLT for whatever price the Mint's marketeers wish to place on them. This profit usually far exceeds the seigniorage profits, and far exceeds the negative seigniorage for coins where that applies, so the government as a whole still wins in the end. But there's nothing stopping the Mint from selling those now-legal-tender coins on to collectors, or to businesses (as it sells the coloured $2 coins to Woolworths) at a loss.
Good explanation Sap. Starts getting a bit complex when looking at circulation and NCLT issues. One think I think we can all agree on is the quality of our NCLT coins - compare with USA proof sets!
What happens if the seigniorage is negative? Does that mean that the Treasury makes a loss when buying those coins from RAM?
Sap's explanation makes more sense than my simplistic assumption.
Does the mint sell circulation coins to the Treasury at production cost then buy some back at face value for coin swap baggies? I assume in such a transaction the coins never actually leave the mint. That would mean the baggies at face value are not a money earner for the mint.
Quote from: 'JeffH' pid='115270' dateline='1526013501'Sap's explanation makes more sense than my simplistic assumption.
Does the mint sell circulation coins to the Treasury at production cost then buy some back at face value for coin swap baggies? I assume in such a transaction the coins never actually leave the mint. That would mean the baggies at face value are not a money earner for the mint.
Yes and after this year no more baggies for anyone ... dealers had their say :@
No more for sale after June 30, only swaps at pop up stalls.
https://www.ramint.gov.au/news-media/news/change-circulating-coin-sachet-availability
Hopefully they do a sufficient number of these events then - I think it's been a couple of years since once came to south east Queensland (it was for one of the coloured $2 coins I think).
Quote from: 'Hercules' pid='115269' dateline='1526011742'What happens if the seigniorage is negative? Does that mean that the Treasury makes a loss when buying those coins from RAM?
Technically, yes. Suppose silver is $22 per ounce, and the Mint Shop sells one ounce silver coins with a face value of $1 for $100 each. The government as a whole makes about $78 profit, because it's selling a $22 piece of silver for $100. But on the books, that coin has negative $21 seigniorage. So Treasury makes a $21 loss, while the Mint (which buys that $1 coin from the Treasury for $1) makes a $99 profit.
However you look at it, the government makes $78 net profit from selling that piece of silver to a coin collector - assuming the coin actually sells.
If the coin doesn't sell, then ownership of the coin is returned to the Treasury - Treasury in effect buys that piece of silver back for $1, then sells it back to the Mint (as raw metal, the same as it does for worn, damaged or otherwise no-longer-legal-tender coins) for whatever the silver price is at that time, so the mint can destroy it and reform the metal into a new, hopefully more salable coin; if the price of silver has gone up, then Treasury can record a small overall profit on the coin. But the Mint always makes a loss on an unsold-and-destroyed NCLT coin, as it's put in all the cost of design, die-making, blank preparation, striking, advertising etc, all for nothing.
Quote from: 'Mister T' pid='115414' dateline='1527068861'Hopefully they do a sufficient number of these events then - I think it's been a couple of years since once came to south east Queensland (it was for one of the coloured $2 coins I think).
From memory, they were in Toowoomba in 2016 and Brisbane in 2017. Both times, I went there to get a counterstamped coin with the map of Australia on it. I'm pretty sure they also sell the bags at the Ekka. If you don't go to the Ekka, you can always ask someone to pick them up for you. :)
Quote from: 'Sapyx' pid='115419' dateline='1527079356'But the Mint always makes a loss on an unsold-and-destroyed NCLT coin, as it's put in all the cost of design, die-making, blank preparation, striking, advertising etc, all for nothing.
Thanks for the clarification, Sapyx. I guess that's why most collector coins have low mintages – to reduce losses. :winkextra: