Even a License to Mint Money Can’t Stave Off Hard Times

In a small wood on Winnipeg’s prairie outskirts, one of the world’s biggest moneymakers is struggling to turn a profit. The reason isn’t its lonesome location, thousands of miles from many of its customers.

The Royal Canadian Mint’s Winnipeg plant has produced coins for more than 60 countries. Its machines keen and hum in a pyramid-like building that angles above thin stands of spruce and endless expanses of farmland. This time of year the wheat fields are blanketed in snow, the ground hard as a new penny.

As a global industry, coin stamping has also gone cold. The Canadian mint lost about $1.1 million (U.S.) in 2001 and expects to report grimmer results for 2002 this month. It already has purged its executive team and laid off 40% of its workforce.

Other mints that hire themselves out to foreign governments, an arcane enterprise that is equal parts marketing and metallurgy, have suffered similar setbacks.

“It’s a very cyclical business, and 2002 was probably the lowest year we’ve had,” said Beverley Lepine, the Canadian mint’s vice president for manufacturing.

The advent of the euro, the economic aftershocks of Sept. 11, the recession and the increasing popularity of coin-free electronic transactions have combined to reduce the demand for fresh issues of metal currency.

And even as sales soften, competition among international mints is stiffening. Canada’s dozen rivals range from Great Britain and Germany to Austria and Australia. Up for grabs are contracts to churn out billions of dollars in change: piastres for Jordan, the ngwee for Zambia, pisos for the Philippines, and so on.

Mints pitch their merchandise in the language of luxury autos, trading boasts of unparalleled styling (coins with exquisite details), performance (coins resistant to counterfeiting) and durability (coins that hold their shape for decades).

“Our sales directors travel the world to countries that don’t have mints,” said Eddy Periz, director of the Winnipeg plant. Four floors below his office, yellow-sided presses attended by blue-uniformed workers were cutting 750 coins a minute. “It’s quite expensive to operate a mint.”

The U.S. Mint abandoned its offshore sideline in the 1980s, after more than a century of crafting coins for countries such as Argentina, Brazil and China. It opted instead to strike commemorative coins for collectors and bullion pieces for investors. The latter are noncirculation gold, silver and platinum coins.

“We’ve chosen not to produce foreign circulation coins,” said Michael White, a spokesman for the U.S. Mint. “It was a bottom-line decision.”

Exporting mints depend on a rapid “velocity of money” -- the rate at which coins are used and abused to the point where they must be replaced. When consumer spending retracts, the shelf life of coins lengthens. Coins remain in bank vaults and pockets, sheltered from the wear and tear of cash registers and parking meters. The same is true for bank notes.

Which means a license to mint or print money is no guarantee of job security. Last year’s red ink led to the ouster of Canadian mint President Danielle Wetherup and three of her top managers. Since 2001, the mint has slashed its Winnipeg staff from 270 workers to 157.

“It was a great job while I was there,” said Kellie Severin, who was laid off after three years on the production line. “I pretty much made the coins in all the steps.”

The steps start with giant coils of steel that are unrolled like a carpet and “blanked,” or punched, into coin-sized discs. The blanks are then plated with layers of nickel and copper, washed in acid solutions and scanned by sensors for the slightest smudge or nick.

Next, hopper belts ferry them to the presses. Dye stamps squeeze “effigies” -- the head and tail images -- into the blanks, rendering them coins.

“I love this,” said Danny Lepage, a plating operator. He was outside the cavernous plating room, where conveyors funneled rivers of chinking blanks to the chemical baths.

“It’s amazing to see the amount of coins you put out,” Lepage said. “We’re putting out 30 million pennies a week.”

Canada’s heavyweight status in coin commerce is rooted in its historic ties to the United Kingdom. In 1908, when an independent Canada was still buying its coins from London, the British Royal Mint established an Ottawa branch. Britain was the planet’s leading coin contractor then, as it is today.

The Canadian government took over the Ottawa mint in the 1930s. The Winnipeg factory opened in 1976, closer to the metal mines of the country’s midsection. In addition to serving foreign clients, it provides Canada with all its domestic coins. The Ottawa headquarters specializes in commemoratives and bullion.

As a crown corporation, the Canadian mint is required by law to post a profit. Circulation-coin exports can yield earnings of 4% to 7%, but they are acutely vulnerable to economic downturns. Bullion is hardier because the precious metals often are bought as a hedge against dips on Wall Street and overseas stock exchanges.

With the recent run of dips, mints-for-hire can’t spare a dime.

“There’s a malaise in the world minting environment that’s all-encompassing,” said Michael Sedgwick, a U.S. representative for the British Royal Mint, which lost about $28 million in 2002.

The 1999 debut of the euro as the European Union’s common currency created a glut in metals in countries that no longer had to cast national coins. The surplus depressed prices for exporting mints. Coin orders -- “tenders” -- declined.

Then came Sept. 11 and its immediate hit on tourism. Tenders soon slipped. As the recession deepened, they fell further. Making matters worse is the proliferation of ATMs, online stores and phone cards.

“There is just less need for change,” said Arthur Friedberg, president of the International Assn. of Professional Numismatists.

The paper-money business is also feeling pinched. Most large countries press their own bills (dollars come from the U.S. Bureau of Engraving and Printing), while others engage private firms to fill their cash drawers. The Ottawa-based Canadian Bank Note Co. Ltd. has supplied as many nations as the mint has.

“The worldwide market is extremely competitive,” said Stephen Dopp, Canadian Bank Note’s vice president for government and commercial services. He said the company’s earnings have climbed the last three years, but tender prices have tanked as more countries set up printing operations.

“In 1989, we were getting $40 per $1,000 in orders,” Dopp said. “Now we’re getting $25.”

Printers and minters have a new worry with the fighting in Iraq. If the war damages the Middle Eastern economy, they say, their interests there will be threatened. The Canadian mint has contracts with Israel, Morocco, Lebanon and Jordan.

Periz said the loss of just one customer could spell another bad year for the mint.

“You know the expression, ‘Every penny counts’ ”? he said. “Well, it really does.”