melting dimes?

Around a week ago I was at my favorite coin shop and I asked the owner about what was being sent to the smelter. He pulled out his bucket and said, take a look. All that was in there was some old foreign silver coins, including Panama Balboas and a bunch of %40 Kennedys. The owner told me that he seldom has US silver coins go to the smelter b/c there is always someone who sees good in a US coin even if it's in G or F grade and he pretty much keeps all US coins. Rest assured that anyone with half a brain, hangs onto US silver coins, unless they've been ruined by someone trying to tone or dip.

 

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Luv, the dime has a legal tender value of 10 cents. An equivalent lump of silver/copper does not.

Refine 1451 dimes down to a 100 oz silver bar and you lost $145.10. This is not even considering refining costs and a 100 oz bar is not as liquid as the dimes. It doesn't make economic sense.

 

That's not necessarily true. That $145.00 is an opportunity cost, and most often is not the same as an accounting cost. As far as I'm concerned, a single merc has the value of ten cents or the value of something like $1.70 (whatever it's melt is). If you had bought 100 mercs at face, then yes, you'd be out $10.00 face in exchange for 170-ish in metal value. The value of ten cents doesn't play a roll in most transactions though; you buy it at some price connected to its silver value, and you resell it for whatever the bullion price is when you decide to unload. In your example the $145 is an opportunity cost, but isn't really the same as "losing" 145 bucks.

It's like asking me to buy orange or apples. If I buy apples, my cost technically includes the loss of oranges (since I don't get to buy any). Opportunity costs aren't particularly applicable in this case.

 

So? The legal tender value isn't added to the bullion value! You can spend it, in which case you get face value, or you can sell it as silver, in which case you get bullion value.

Otherwise, you might as well say that a nickel is worth 11.5 cents (face value plus metal value), or that a modern $50 gold eagle is worth spot plus $50, while a Liberty double eagle is only worth spot plus $20.

If you're treating a coin as currency, spot value is irrelevant. If you're treating it as bullion, face value is irrelevant. The only thing face value provides is a floor in case the metal value collapses -- and a guarantee that my investment won't lose any more than 95% of its value seems kind of weak.

 

I don't see how you have lost anything. They simply are not worth 10 cents each over melt. Their value is determined by what you can buy them or sell them for. Mixed bags of silver can be bought under melt. Halves can be bought under melt. Walking Liberties can be bought at melt. And halves are always more expensive than mixed bags.

 

Your analogy is a strawman. Without stating the reason you are purchasing the fruit, then there is no opportunity cost.

My point is that anyone selling Mercury dimes a pure melt value is losing money. These coins will always be worth more than that if for anything else the legal tender value adds to it. While on a single dime this is a moot point, if you get into the business of melting down coins to produce silver bullion on this scale it become a very real part of doing business. Given that the end product can't be sold to cover the production cost + the loss of face value, it makes absolutely no economic sense to do so.

People like to make statements that silver coins are being melted down and hence their rarity goes up. I guess it gives them some comfort, but there is not economic basis for it.

 

Fatima, I'm sorry but you are just blatantly wrong. You do not need a justification for choosing apples in that case, I'm not sure I know what you are even talking about? As was mentioned earlier, you are adding together two values that are independent of another. When you sell the coin, it's either at face value, or melt value. Sure there are implicit "costs," but in the way these are traded, they never really matter. What about the following doesn't make economic sense?

Buy 10,000 mercs for 90% of spot value == -$18,180
Smelting/Refining/Silver Loss === -$1,000???
Sell 723.4 oz. at $28.00 per oz == 20,255

In that case I assumed the costs of refining/loss of silver to be 1,000 (I have absolutely no idea what they would be for such a quantity). If that's realistic the person made 1,000 bucks by melting them. Of course it makes economic sense, it's just one would have to do it on a massive scale (and isn't it illegal? I've heard opinions saying it is.... I thought it was?). Either way there should be no questioning of "economic sense" if one buys mercuries for less than melt and the refining cost and resells them for melt (obviously above the costs incurred... hence a profit and therefore economic viability).

edit: I do see what you are getting at, but the opportunity cost is still not enough to make the practice unprofitable.

 

It's only illegal to melt copper cents and nickels right now, the ban on melting silver coinage was lifted long ago.

 

That's right, the ban on melting silver coins was lifted long ago, on May 12, 1969 to be exact.

 

Wow, didn't know it was that long ago.

If they were able to produce enough circulating coinage in a mere 5 years to account for the future loss of most of the silver coinage, why is there a ban on melting copper cents today? I figure they've probably minted more zinc memorials than copper memorials in the 28+ years since they switched the composition. Peculiar...

 

Jello, I really like the Rossie and Barber dimes. The first one, Liberty, is lovely too.

 

My guess is regarding the pennies, the new zinc ones look like the old copper ones, and there are a lot of folks who still think the penny is made out of copper, so the rationale for a ban might be that if these people heard that the copper cents can be melted legally at a profit, they might take as many pennies out of circulation as they could, regardless of whether they were copper or zinc. Sounds silly, but I think that's the rationale.

With nickels, they all have the same composition (with the exception of war nickels), and the theory holds that John and Jane Q. Public would take a huge amount of nickels out of circulation if they knew (or believed) the nickels could be melted at a profit. My calculations for nickels indicate that their total intrinsic value is a little more than their face value--

$11.22 per pound (current nickel metal price) divided by 454 (number of grams in a pound) = 2.47 cents per gram. The nickel 5-cent coins weigh 5 grams each and are 25% nickel metal, so the nickel metal weight is 1.25 grams each. Multiply that by 2.47 cents and you have a nickel coin containing 3 cents worth of nickel metal.

However, 3/4 of the weight of the nickel (that is, 3.75 grams) is copper, and copper is currently $4.36 per pound, or about 0.9 cents per gram. Multiply that by 3.75 grams and you get roughly 3.4 cents worth of copper per nickel.

So the intrinsic value of the nickel metal (3 cents) plus the copper metal (3.4 cents) exceeds the face value of the 5-cent piece, at today's prices.

 

Refining costs make melting nickels unprofitable, but that's a good point regarding copper vs. zinc cents.

 

A lot of has to do with perception, I think.

I think the rationale is that if people hear that the metal value of a nickel is 6.4 cents, or about 28% higher than face value, there would be incentive to hoard nickels if it were legal to melt them, regardless of the actual refining costs.

 

Certainly refinning cost are too high to make refinning nickels unprofitable - but what if you owned a mill that produced copper-nickel alloy? Then you could just dump nickels as is into the melt - add additional refined material to correct the mix and save approx 22% in raw material cost. 6.4 cents of raw material for every 5 cent nickel added to the melt.

 

So if you are suggesting that it would be profitable for a refiner to call up a bank(s), order up several truck loads of nickels, have them delivered to the refinery, and dumped into the refining process because this would be cheaper? I don't think this idea intersects with reality. These are the reasons.

• Refiners operate in quantities that fill trains. Visit a metal refiner and you will always find a railroad spur. How do you fill a train with nickels
• Nobody has explained how sufficient quantities of nickel coins could be delivered to a refiner to make refining the copper and other metals out of it profitable. We are talking about multiple tons of metal being handled at each pass. (this isn't like melting silver and gold)
• Refiners operate on the business of taking unusable material and making it into the usable. This is their value add. Nickels are already a refined product so there is no profit in attempting to refine it into another product.
• Refiners profits are based on scrap costs. This normally far less than "melt value".

I continue to maintain that the "concept" of coin hording because coins are worth more than the metal is just that, a "concept". There is no economic case for doing it. Arguments that people will horde items because they think there is profit in it, is an opinion, but it doesn't change the realities that it isn't happening.

 

In 1968, the silver in the pre-1965 dimes and quarters was worth slightly more than face value, but it was becoming increasing rare to come across a silver coin in circulation. The silver in the 40% halves was worth a little more than a quarter, but people were saving them anyway because they contained silver. By 1969, there was almost no silver at all left in circulation.

In the early '70s, there was talk at the Mint that the price of copper was rising to the point where it would cost more than 1 cent to mint a penny. The Mint experimented with various alloys, and in 1974 distributed aluminum cent patterns to members of Congress. Even though billions of cents (including billions of Memorial cents) had been produced up to that time, there were still various penny shortages which were created, in large part, by people hoarding pennies on the expectation that the copper value would rise to the point where ordinary pennies could be sold for more than their face value.