Gold & Silver Forum - 100-kilo gold coin?

When is a gold piece no longer a coin?

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POSTED ON 22/02/07

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MONEY
The Mint's peddling a 100-kilo gold coin? Now that's rich

PAUL WALDIE

For years the Royal Canadian Mint has dominated the world market for gold coins, thanks largely to its popular Maple Leaf series that have been renowned for flawless quality and 99.99 per cent purity.
But with the gold market stronger than ever, the Mint is facing tough competition from Austria, Australia, the U.S. and China, which have jumped into the fray with coins that match Canadian quality.
To help win back attention and gain some bragging rights, the Royal Canadian Mint plans to launch the world's largest coin in April, a 100-kilogram piece that will carry a face value of $1-million. The coin will feature a new Maple Leaf design and it will be one notch purer than any other bullion coin -- 99.999 per cent.
The Canadian product will be three times larger than the current world champion, a 31-kilogram coin made by the Austrian Mint. Dubbed "Big Phil" after its namesake the Vienna Philharmonic Orchestra, the Austrian coin carries a face value of 100,000 euros ($152,500 Canadian).
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At 100 kilograms, the metal in the new Maple Leaf coin will be worth more than twice its face value, based on gold's current price of $684 (U.S.) an ounce.
Mints typically keep the face value low to ensure that these coins are not actually used as legal tender. They don't want consumers showing up at banks and demanding cash for the coins, which has happened in the past and caused much confusion.
The Mint acknowledged yesterday in a regulatory filing that it won't sell many of the coins and that the venture is a marketing ploy.
"The Royal Canadian Mint has recently lost some of its competitive edge in the industry with the introduction by other competitor Mints of 99.99-per-cent gold bullion coins," the filing said. The new coin "would create market visibility and excitement for the Royal Canadian Mint as it would be the world's largest, purest and highest denomination gold coin."
The Mint added that the coin will be mainly used "for advertising and promotional purposes at national and international events related to the bullion and investment industry."
Alex Reeves, a spokesman, said the Mint has received a few orders for the new piece, but he added that production "will be small in numbers and for a limited period."
There is more than just bragging rights at stake for the Mint. Sales of gold coins and bullion accounted for almost half of its $435-million (Canadian) revenue in 2005, the most recent available figure. While sales increased over 2004, operating costs jumped 35 per cent. The result was a 17-per-cent drop in profit to $8.7-million.
The global coin trade is estimated at about $3-billion (U.S.) in total and it's concentrated in much smaller pieces. More than half of the market is dominated by one-ounce gold coins. The Canadian Maple Leaf has been the undisputed top seller in that category since 1979, when it supplanted the krugerrand as the coin of choice.
But in recent years competition has emerged from a variety of new products including the Panda series from China, Kangaroo Nuggets from Australia and the American Buffalo launched last year by U.S. Mint.
"This market is cutthroat, you have no idea," said Bret Evans, editor of Canadian Coin News.
"This is a stunt, pure and simple," Mr. Evans added, referring to the Canadian mega-coin. "They believe it will help them sell more coins."
Others are more skeptical.
"Who is going to buy it and where are you going to put it?" said Don Carlson, a coin dealer in Calgary. "And how would you store it?"
Mr. Carlson said the largest gold product he sells is a one-kilogram bar. "And we don't sell them very often."
Brian Jenner, a coin dealer in Washington State, hadn't heard of the new coin but he said Canada is losing some ground to products from the United States and Australia.
"There is more from the Australians, they are getting aggressive in some areas," he said.
Over all, Mr. Jenner said he has never seen the coin market so strong for so long.
"I've been in this business for 40 years," he said.
"This is the longest sustained rally I've seen."

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