OPINION — Canada should consider issuing silver coinage

Canada should follow Mexico’s lead and issue a general circulation silver coin. Up until the early 1960s, the Royal Canadian Mint struck its dimes, quarters and dollars in silver, but stopped when the intrinsic value of the coin rose above its face value.

Currently, Mexico is the only country that produces a general circulation silver coin. Mexico’s decision to issue the coin in 1993 makes it the first country to use silver in general circulation coinage since the early 1970s. The Mexican coin is bi-metallic with silver in the centre and an aluminum brass alloy forming the outside ring. The coin has a face value of 10 pesos (about US$3) and contains about 0.16 troy oz. of silver, giving it an intrinsic value of about US60 cents.

According to The Silver Institute of Washington, D.C., the Mexican national mint expects to use seven million ounces silver annually in pressing the coin. Although the Canadian government appears to view its gold reserves as a poor investment — as evidenced by a continuing stream of sales — perhaps the administration could at least offer moral support to our Canadian mines which produced about 41 million troy oz. of silver in 1991.

Silver would not, of course, be feasible for use in dimes or quarters because of the weight involved.

One coinage possibility for Canada is a loony-sized $5 coin weighing in the order of 0.25 oz. and, based on the silver content of the pre-1965 dollars at 80%, it would contain about 0.2 oz. silver.

An intrinsic value of about $1 based on silver content, plus a production cost measured in cents (a loony costs about 16 cents to make, including material cost), leaves a healthy margin.

The “margin” refers to the likelihood that once issued, the coin would remain in sock drawers across the country, never to see daylight again. A prime example of the average person’s propensity to hoard can be seen in last year’s issue of special quarters commemorating Canada’s 125th anniversary.

The Mint circulated 130-140 million of the special quarters, compared with normal annual circulation of about 80 million ordinary “caribou” quarters. As a result of hoarding, it is rare to come across a 1992 quarter in the course of a day’s transactions.

Granted, the issuance of a few million $5 silver coins per year would have little effect on demand or silver prices, but it would be an inexpensive form of moral support for an industry the government appears to take for granted. According to The Silver Institute, global demand for the precious metal outstripped supply in 1990 and 1991, and was projected (final figures are awaited) to do so again in 1992. New silver supply had been in a downward trend prior to 1992 and less silver was being recovered from secondary sources.

Fabrication demand for silver comes from a variety of fields, including photography, jewelry and silverware, and electronics and batteries. Industrial applications include electroplating, brazing alloys and solders. Silver has been trading in London below US$4 per oz. since mid-1992. The world’s top producers of the metal are Mexico, the U.S., Peru and Canada. In a world of out-of-control government deficits, it would no doubt represent a breath of fresh air to see a coin that actually has an intrinsic value. And who knows, maybe the idea will catch on in other countries.