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    $20 for $20 Series from Royal Canadian Mint Sinks Overall Revenue

    Posted on June 07, 2017

    In 2011, the Royal Canadian Mint developed a new silver coin series that was designed to increase the popularity of collectible silver coinage by making it more attractive for newcomers in the precious metals industry to purchase gold and silver. In particular, its $20 for $20 series of coins gave numismatists the opportunity to purchase silver collectible coins with a face value of $20 (CAD) for just $20, tax free.

    The series of silver coins from the mint proved immensely popular at first, with designs ranging from Superman and Bugs Bunny to the starship Enterprise drawing in collectors from all walks of life. Initially, the series brought the Royal Canadian Mint a swell of revenue.

    What the Series Included

    The $20 for $20 series was part of a larger Face Value Series of gold and silver coins from the mint. In total, some 4.3 million coins were struck by the Royal Canadian Mint in various denominations. The goal was to introduce Canadians (in particular) not only to coin collection, but also the range of Royal Canadian Mint products.

    The silver coins in question all featured .9999 pure silver content and were sold at their face value. The program was considered a “low risk” way for new collectors to enter the market, due in large part to the fact that silver prices were booming in 2011.

    Comparatively speaking, the RCM’s current series of silver and gold coins celebrating Canada’s 150th have pushed the mint to an $11.1 million profit through the first quarter of 2017.  These coins, however, have face values such as $1 that go for $59.95 at retail.

    Unfortunately for the Royal Canadian Mint, and its bottom line, the bottom has fallen out on silver prices in the past five to six years. Normally this wouldn’t be an issue for the mint’s revenue stream, except for the fact that the mint must pay back upon request the $20 face value of these coins. When silver dropped, buyers came back in droves to recoup their losses at the mint’s expense.

    What Happened?

    The demise of the Face Value Series, which the Royal Canadian Mint has pulled from production, was multi-fold. One of the original problems the mint faced was the fact that many Canadians believed they could take the coins to stores and spend them, or at least return them for the face value in circulating currency at a bank. However, neither stores nor banks accepted the coins.

    More devastating for the series however was the drop in silver prices. In 2011 when the series launched, silver was surging toward its all-time record high. An article on CNN from April 25, 2011 notes that silver was at $49.82 per ounce and heading toward an all-time record high closing price at or above $50 per ounce.

    Fast forward to 2016, and silver was down by two-thirds the value it held in 2011. Although the Royal Canadian Mint had sold the coins at face value, and many believed they were convertible/redeemable currency, the reality was that the mint had issued them as non-circulating legal tender. The coins couldn’t be used for purchases, and banks wouldn’t take them for conversion to circulating legal tender.

    Due to the status of the coins, buyers are protected by the drop in silver’s value and allowed to return them to the mint, which must repay the consumer based upon the face value of the coin. Despite the fact that the quarter-ounce of silver in many of these $20 coins was now worth less than $6 (CAD), the mint had to pay up. What was the result?

    The mint was forced to apply the loss as a result of the buybacks to its 2016 revenue report. Rather than posting a $41.3 million profit, the mint had to readjust its profit down to $24.5 million based upon the buybacks, erasing $17 million (CAD) in profits from its reports and costing Royal Canadian Mint employees annual bonuses because the mint had no longer hit its target of 60% of target profit levels.

    As of now, the Royal Canadian Mint is no longer offering any of its Face Value coins. The $20 for $20 Series is gone from its site and the mint is moving on, refocusing on its Canada 150 commemorative collection of coins.

    All Market Updates are provided as a third party analysis and do not necessarily reflect the explicit views of JM Bullion Inc. and should not be construed as financial advice.