August 1, 2014

US Mint Bullion Revenue Falls 29%, American Silver Eagle Generates Loss of $4.4 Million

Following four consecutive years of record breaking results, United States Mint bullion program revenue and net income declined for the fiscal year ended September 30, 2012. Bullion coin revenue was $2.46 billion compared to $3.47 billion in the prior year, representing a decline of 29.11%. Net income for the segment was $28.4 million compared to $65.8 million in the prior year representing a decline of 56.8%. Most surprisingly, the US Mint’s most popular bullion coin offering by unit volume generated a loss for the fiscal year.

This article continues coverage of the US Mint’s 2012 financial results.

The United States Mint manufactures and issues bullion coins through a network of authorized purchasers in bulk quantities based on the market price of the metal plus a premium. The authorized purchasers distribute the coins more broadly to the public and facilitate a two way market. Current US Mint bullion products include the American Gold Eagle, American Silver Eagle, American Gold Buffalo, and America the Beautiful Silver Coins. The weight, content, and purity of all bullion coins are  guaranteed by the United States government.

United States Mint Bullion Program Revenue

(in millions) 2012 2011 Change
American Gold Eagle $1,105.4 $1,689.5 (34.57%)
American Silver Eagle $1,100.6 $1,464.0 (24.82%)
American Gold Buffalo $240.6 $207.9 15.73%
ATB Silver $14.3 $110.0 (87.00%)
Total $2,460.9 $3,471.4 (29.11%)

For the 2012 fiscal year, revenue fell for three out of the US Mint’s four bullion products.  Despite an increase of 11.3% for the average spot price of gold, American Gold Eagle revenue fell by 34.57% due to lower sales volumes. Revenue generated from the sale of American Silver Eagles fell by 24.82% due to an 8.3% decrease in the average spot price of silver as well as lower sales volumes. Revenue from the America the Beautiful 5 oz. Silver Bullion Coins dropped by 87% due to lower silver prices and sharply lower sales volumes.

The single product which showed an increase in revenue was the 24 karat American Gold Buffalo, up by 15.73% from the prior year. The gain was attributed to the availability of the coins throughout the fiscal year. In the prior year, the coins only became available in March.

Bullion Coin Revenue, Cost, and Net Income

(in millions) American Gold Eagle American Silver Eagle American Gold Buffalo ATB Silver Total
Sales Revenue $1,105.4 $1,100.6 $240.6 $14.3 $2,460.9
Gross Cost ($1,077.4) ($1,105.0) ($235.3) ($14.8) ($2,432.5)
Net Income $28.0 ($4.4) $5.3 ($0.5) $28.4
Net Margin 2.53% (0.40%) 2.20% (3.50%) 1.15%

Both the American Silver Eagle and America the Beautiful 5 oz. Silver Bullion Coins yielded operating losses during for the fiscal year. The two gold bullion programs did manage to generate net income which more than offset these losses.

Silver Eagle bullion coins generated a loss of $4.4 million on revenue of more than $1.1 billion. The loss was related to the production which took place at the San Francisco Mint. During periods of low numismatic sales, the Silver Eagles carried a large portion of the San Francisco facility overhead costs. The impact was magnified by the lower bullion sales volumes, which meant spreading the additional costs over fewer units sold.

In the 2011 fiscal year, the American Silver Eagle had generated net income of $13.6 million on revenue of $1.46 billion. In 2010, net income was $13.5 million on revenue of $660 million.

America the Beautiful 5 oz. Silver Bullion Coins generated a loss of $0.5 million on sales of $14.3 million. After demand for the coins exceeded production quantities for the 2010 inaugural year, the US Mint significantly increased production for the 2011 releases. The first two designs for this year sold out, however orders for the final three designs received substantially fewer orders. During the 2012 fiscal year, the US Mint recorded a one time expense to write down approximately 842,000 ounces worth of inventory which were deemed “unsellable.” Production quantities were scaled back for the 2012 releases.

In the previous fiscal year, the ATB Silver Bullion Coins had generated net income of $3.0 million on revenue of $110.0 million.

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Comments

  1. Wow, that’s a really surprising result. I wonder if this means we’re going to see the Mint increasing the premiums it charges to the primary dealers (which means costs passed on to us)?

  2. Steve says:

    As with any companies earnings report, their is always a lot more going on than these basic numbers that are provided….like one time extraordinary expenses, etc.

    I mean really, when gross revenue is down 29.11%, yet net income is down almost double @ 56.8%…well these numbers don’t begin to tell the whole story.

    It’s like when you see two headlines…one says “Intel net income up 100%”..the other says “Microsoft net income down 10%”…based on that, which company would you want to invest in?

    Upon learning more you see that Intel’s net income increased from $5 to $10….wow, but it is 100%.
    And you see Microsoft’s net income fell from 10 Billion to 9 Billion…yep, down 10%.
    Now, which company would you want to invest in?…of course, I am over-simplyfing things, but the point I’m trying to make is you really have to see the complete financial statements in order to really see what’s going on.

  3. MarkInFlorida says:

    So if they wrote down 842,000 ounces of 2011 ATB bullion, that’s 168,400 5 oz. coins unsold. They must have made about the same 126,700 of the last three as they sold of the Gettysburg and Glacier, and then the sales plummeted to 85,900, 39,500 and 29,700. No wonder they made so few in 2012.

    But it seems they expect to make up for these losses by overpricing the numismatic version. I’ll stick with the bullion.

  4. rpw says:

    in relation to a post on Mint News Blog….
    It’s no wonder revenue was down.
    The mint keeps screwing with prices. People are tired of it – thus they are losing business.
    They are already making a pretty reasonable profit on their products. When a company begins to get greedy and gouge the public, people turn elsewhere.
    Get the point US Mint?

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