War Nickel Inquiry

Discussion in 'Coin Chat' started by StevenHarden, Apr 30, 2016.

  1. StevenHarden

    StevenHarden Well-Known Member

    Hello Everyone.

    I was discussing something with a very seasoned coin dealer (60+ years in the business) last week. He said that he had a customer come in to sell him a large batch of wartime silver nickels (the 35% silver type from 1942-1946). According to the Red Book, each wartime silver nickel has 0.05626 troy ounces of actual silver weight in them. The dealer I was speaking with explained to me that his customer was confused at the way he was calculating his buy price for the wartime silver nickels. The dealer explained to the customer that this is the way him and every other dealer he has dealt with has figured it over the past 60+ years. He explained to the customer that his buy price formula was SPOT x 195 x 90% / 4000 to get the per piece price. The customer, who immediately went to the red book reference, stated that the dealer should not be using 195, but rather 225 in his formulation. The customer quickly stated that if each wartime nickel has 0.05626 troy ounces of silver, then a full bag would have 4000 x 0.05626 = 225 troy ounces total. The dealer was a bit perplexed, but continued to use his formula.

    So my question.......

    When, and by what means, did the formula using 195 instead of 225 develop in the course of buying wartime silver nickels?

    I have my own ideas on this, but before putting them in the thread I would like to see what other people have to say.

    Any information is helpful.

    Thank You,
    Steven
     
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  3. jtlee321

    jtlee321 Well-Known Member

    I think it's because a lot of those nickels are heavily circulated which results in a loss of metal. Add to that the fact that recovering the silver from War Nickels is a very difficult and expensive process. Because of that the smelter will buy the War Nickels at a discount due to recovery costs. Another factor to add is War Nickels are not easy to resell and most buyers will not buy them at full melt value.

    So taking into consideration of wear + smelting/recovery costs + difficulty in reselling they came up with 195 as a fair average. That would be my guess as to where the 195 came in.
     
    Paul M. likes this.
  4. harris498

    harris498 Accumulator

    I was thinking along these lines as well, but I don't think anyone is actually refining war nickels anymore; they just get traded in bags, like US90%.
     
  5. Paddy54

    Paddy54 Well-Known Member

    First of all you can't by law melt down any U.S. coin for its content . Next if you go to coinflation .com you can see the correct format for determining the correct price on these as well as other US and Canadian coins.
     
  6. -jeffB

    -jeffB Greshams LEO Supporter

    Yup. Dealers won't pay as much for war nickels because people won't pay as much for war nickels, and that's the way it is.

    90% generally trades above melt value.

    .999 generally trades at or above melt value.

    .925 (sterling), 40% and 35% generally trade below melt value, sometimes well below.
     
  7. Burton Strauss III

    Burton Strauss III Brother can you spare a trime? Supporter

    Sure, because if you WERE going to refine it...

    90% refines nicely to 90% to sell back to the people making planchets for the mint.

    .999 refines nicely to .999 to sell back to the bullion people. This already happens - the big refiners melt everything they buy so they can bring it back to standard for sale.

    But refining anything else to .999 for resale takes work (work = time & money).

    Interesting thought: If the mint carries through with it's authority under the new law and starts making everything it can as .999 (vs. 90% for the commems), then there's no market for refining 90%. Which is the (almost) circular argument the mint made that there are more supplies for .999 than .900
     
    Paul M. likes this.
  8. -jeffB

    -jeffB Greshams LEO Supporter

    I'm too lazy to try to look up numbers now, but I have to imagine that the Mint's demand for 90% is a tiny fraction of the total demand for silver, and probably not a very big fraction of the 90% going off to the melting pots.

    It's quite easy to get .999 out of 90% silver/10% copper, but it's a lot harder to get it out of the war-nickel composition, and also harder to get it out of sterling (because that other 7.5% of sterling can include all kinds of stuff).

    If only for quality control, I'd expect that all the 90% coming into the pots gets refined back to .999 and then reformulated to 90%. But I don't even know who's supplying 90% to the Mint, so I certainly haven't actually asked them about it.
     
    Paul M. likes this.
  9. Paul M.

    Paul M. Well-Known Member

    I don't believe this is true. AFAIK, the only coins that are illegal to melt down are cents and nickels.
     
    Kentucky likes this.
  10. Kentucky

    Kentucky Supporter! Supporter

    Does anyone really know (I'm too lazy to look it up).
     
  11. Burton Strauss III

    Burton Strauss III Brother can you spare a trime? Supporter

    http://www.usmint.gov/pressroom/?action=press_release&ID=771

    April 17, 2007


    United States Mint Limits Exportation & Melting of Coins
    Final Rule Maintains Policy Established in December
    WASHINGTON - The United States Mint today announced a final rule to limit the exportation, melting, or treatment of one-cent (penny) and 5-cent (nickel) United States coins, to safeguard against a potential shortage of these coins in circulation.
     
    Paul M. and Kentucky like this.
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