Vol. 141, No. 17 — April 28, 2007

Order Amending Part 2 of the Schedule to the Royal Canadian Mint Act

Statutory authority

Royal Canadian Mint Act

Sponsoring agency

Royal Canadian Mint

REGULATORY IMPACT
ANALYSIS STATEMENT

(This statement is not part of the Order.)

Description

Starting in 2007, the Royal Canadian Mint (RCM) wishes to produce one dollar circulation coins with an alloy-plated composition consisting of a nickel core with a layer of brass on the outside. The brass composition will be that of copper and zinc together. At present, the RCM is not authorized to produce one dollar coins with this composition. Pursuant to section 6.6 of the Royal Canadian Mint Act, the Governor-in-Council may, by order, amend Part 2 of the Schedule by amending any characteristic of a circulation coin. Thus, the purpose of this Order is to amend the Schedule with the addition of a new characteristic/composition for the one dollar coin, and to request Governor-in-Council approval to issue the coin using the new characteristic, pursuant to section 6.4 of the Act.

The composition of the current one dollar coin is that of bronze-plated nickel and it is produced by Jarden Zinc Products Incorporated (Jarden), a supplier based in the United States. Jarden is the largest North American producer of solid zinc strips and zinc-based products. Its products are used throughout the world in the production of coins and other items.

Jarden is currently one of the suppliers of one cent and one dollar blanks to the RCM and has been since 1997 and 2005 respectively. It will continue to supply the one cent blanks and will be retained as a secondary source of supply for the one dollar blanks. It will also serve as a source of supply for foreign coin contracts, that have been awarded to the RCM, when bronze-plated blanks are required.

On April 25, 2006, the RCM signed a licensing agreement with Jarden to produce multi-ply plated coin blanks for potential customers in the Americas. Multi-ply coin blanks are made through a patented technology process that has been used for Canadian coins since 2000 and has become more and more popular with other nations. The process, developed by the RCM, delivers higher quality coins with more durability at a much lower cost.

Jarden will manufacture up to one billion coin blanks annually for the RCM. The multi-year contract is valued up to CAN$27 million.

The RCM produces Canadian circulation coins, as well as coins and blanks for foreign countries. With coins and blanks produced for over 62 countries in the past 25 years, the RCM is an established leader in the currency marketplace. In 2005, sales of foreign circulation coins reached CAN$43.8 million, up from $24.3 million in 2004 and $5.6 million in 2003, thanks to a more aggressive and targeted sales approach.

Demand for Canadian circulation coins increased by 24% in 2005. The RCM has recently more than doubled its plating facility in Winnipeg, Manitoba, to help meet this increasing demand in both the Canadian and foreign markets. Increased multi-ply capacity has been made available since the fall of 2006 through this agreement.

The proposed alloy-plated composition is a new multi-ply process that has been developed by the RCM and will be unique in that it will be produced using an acid-plating process rather than the cyanide process currently being used by Jarden. The new one dollar coins will be produced at the RCM's Winnipeg plating facility.

Presently, the composition of brass-plated nickel for the one dollar coin is not included in the characteristics of circulation coins that the RCM is authorized to produce. Consequently, in order that the RCM may produce this coin as mentioned above, the RCM recommends that Part 2 of the Schedule to the Royal Canadian Mint Act be amended to include this new characteristic or composition. This Order also requests Governor-in-Council approval to issue the one dollar coins using the new characteristic.

Criteria for the one dollar coins

The one dollar coin has been in circulation since 1987. It not only serves the public in the daily retail cash transactions but is also one of the most used coins in automatic coin acceptor transactions (vending machines).

The following are the criteria for the one dollar coin. These criteria will be maintained with the proposed new material:

• the coin will be yellow in colour and will be 11 sided in design so that it can be readily recognized by visually-impaired individuals; and
• for the purposes of vending machines, the coin must meet a property called the electromagnetic signal (EMS). This special signal prevents fraud and discourages the manufacture of slugs that may have similar characteristics to the one dollar coin.

In order not to interfere with the recognition of the one dollar coin by the vending machines, it is essential that the EMS of the newly proposed brass-plated coins are identical to the EMS of the bronze-plated coins. The new one dollar coins have been tested and confirmed that they have identical signals and will continue to meet the established EMS requirements of the vending industry.

Alternatives

Option 1 — Status quo

The status quo represents retaining Jarden as the sole source of supply for the one dollar blanks. Having a sole source of supply for the one dollar blanks would pose a significant risk to the Canadian Government due to the fact that should Jarden cease to operate for any reason, either temporarily or permanently, there would not be an alternate source of supply to meet the demand for the one dollar coin.

Option 2 — Canadian supplier only

This option would represent having the RCM as the sole source of supply for the one dollar blanks. This is similar to the status quo in that having only one source of supply, be it the RCM or Jarden, will represent a significant risk if ever either manufacturer is not able to supply the one dollar blanks.

Option 3 — Two sources of supply for the one dollar blanks (preferred option)

Having two sources of supply for the one dollar blanks potentially eliminates any risk associated with not having a continuous supply of blanks for the one dollar coin. Although the process of producing the blanks by both manufacturers will be different, the coin criteria will be maintained by both. Other than Jarden and the RCM, no other supplier exists with a plating facility that can produce one dollar blanks based on the established criteria.

Benefits and costs

It is beneficial to have more than one source of supply for the one dollar blanks to mitigate any potential risk that may come as a result of having only one supplier. The cost to produce the new one dollar coins will be the same as the current cost.

The new coins meet the criteria outlined in this document; therefore, the change will not be noticeable to the general public and will not impact the vending industry.

Environmental impacts

The current bronze plating process being used by Jarden employs the use of cyanide, as there is no known technology that exists whereby bronze can be plated without cyanide. The acid plating process was developed by the RCM for two reasons: 1) RCM wanted to start producing one dollar blanks but could not use the same process as Jarden, as it is that company's patented process; 2) RCM wanted to find an environmentally friendly plating process.

The benefit of the acid plating process is that it is easier to neutralize by using chemicals commonly employed worldwide. As a result of the neutralization process, acid becomes environmentally safe when disposed of.

Consultation

Jarden was aware that the RCM was in the process of developing a plating process for the one dollar blanks that was different from theirs. The RCM's acid plating process is unique and the RCM will be applying for a patent for this process as was done for the multi-ply plating process.

The RCM's new plating process will not have an effect on Jarden's business, as Jarden will continue to use their plating process in the making of bronze-plated coin blanks. As well, Jarden will also be producing up to one billion coin blanks annually for the RCM as a result of the recently signed multi-ply plated coin blank licensing agreement.

Contact

Marguerite F. Nadeau, Q.C., Vice-President, General Counsel and Corporate Secretary, Corporate and Legal Affairs, Royal Canadian Mint, 320 Sussex Drive, Ottawa, Ontario K1A 0G8, 613-993-1732 (telephone), 613-990-4665 (fax), nadeau@mint.ca (email).

PROPOSED REGULATORY TEXT

Notice is hereby given that the Governor in Council, pursuant to section 6.6 (see footnote a) of the Royal Canadian Mint Act, proposes to make the annexed Order Amending Part 2 of the Schedule to the Royal Canadian Mint Act.

Interested persons may make representations concerning the proposed Order within 30 days after the date of publication of this notice. All such representations must cite the Canada Gazette, Part I, and the date of publication of this notice, and be addressed to Marguerite F. Nadeau, Q.C., Vice-president, General Counsel and Corporate Secretary, Corporate and Legal Affairs, Royal Canadian Mint, 320 Sussex Drive, Ottawa, Ontario K1A 0G8, Tel: 613-993-1732, Fax: 613-990-4665 and e-mail: nadeau@mint.ca.

Ottawa, April 19, 2007

MARY O'NEILL
Assistant Clerk of the Privy Council

ORDER AMENDING PART 2 OF THE SCHEDULE
TO THE ROYAL CANADIAN MINT ACT

AMENDMENT

1. Part 2 of the schedule to the Royal Canadian Mint Act (see footnote 1) is amended by adding the following after item 2:

2.1 A one dollar coin of which

(a) the composition is brass plated nickel;

(b) the standard weight is 7.0 grams; and

(c) the margin of tolerance with respect to weight is ± 21.38 grams per kilogram of 143 pieces.

COMING INTO FORCE

2. This Order comes into force on the day on which it is registered.

[17-1-o]

Footnote a

S.C. 1999, c. 4, s. 3

Footnote 1

R.S., c. R-9

NOTICE:
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