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ISSUE NO 21 Publish Date 12th
June 2006 |
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A run on the
2p? “Look after the pennies and the pounds will look after
themselves” may never have been truer due to the soaring base metal
prices over the last year. In 1992 the Royal Mint changed the composition of the Penny and TwoPence
to be a mild steel core with an electroplated copper coating (which makes
them slightly magnetic). The reason
for this change was that it was becoming uneconomic to produce the coins
using the bronze alloy (97% copper) used since 1971. The copper price has shot up from trading at less than $2000 a ton just
3 years ago to in excess of $7000 per ton and the market has reached as high
as $8000 per ton in the last few months. What this means for the humble 2p is that
there is currently 3p worth of copper in every 2p made prior to 1992. Theoretically, someone could amass 145,000 old 2p coins with a face
value of £2,900 and melt the lot down into 1 ton of copper worth £4,400.
However there are a couple of practical points that need to be mentioned. Firstly - it is illegal to do this, so
don’t do it! Secondly - it would
take time (and thus money) to sift through the coins ensuring that only the
‘valuable’ old coins are to be melted. However, the Royal Mint has unwittingly made
this process somewhat easier as a strong magnet could speed this process up
considerably. Finally, there would be
the cost of melting and separating large volumes of base metals. All said it seems unlikely that anyone would actually do this as the
scale of the operation would have to be so huge to be economically viable,
quite apart from being illegal. However, what if the price of copper continues to increase? If the copper price doubled, then the 2p
would be worth 6p in copper. Hence a
doubling of the base metal price will cause a quadrupling effect upon the
potential profit made on melting 2p coins from 1p to 4p per coin. There are an estimated 2.5 billion old 2p
coins or, put another way, 17,000 tons of undervalued copper in circulation. If the price of copper were to double again
then as unlikely as it may sound, there really may be a run on the 2p. ** As an historical aside, the melting of mainly gold coins because the
intrinsic value outstrips the monetary value has been common throughout the
ages and explains why some gold coins are so rare today. A new addition
to the OnlineCoins team! As some of you will already know, we have a new member on the team in
the form of our new baby boy Arun Bruce who was born on April 9th.
There were a number of complications
with his birth together with a hectic first few weeks however I am more than
pleased to say that both Neelam and Arun are doing fine. Arun has yet to show any interest in coins or even the World Cup
despite the Whilst Arun has been a most welcome addition to the team we were unable
to provide a full service to our customers during April/May so please forgive
any slow service you may have received.
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