Government Operations Committee on Feb. 13th, 2007

[Ian E. Bennett]

The numbers show that about 42% of our revenues are from international sales.

If I could, in following up to your observation, I'd just make a point. It's one that I think we, as Canadians, should collectively be quite proud of.

A number of years ago, researchers at the Mint developed a new technology to make coins less expensively, as I explained earlier. We had no idea how that was going to pay off to the extent that it has paid off.

Right now, it costs the United States government, the United States Mint, 8.3¢ to make one nickel. It costs 3.3¢ more than the face value of the coin. The Royal Canadian Mint can make a nickel for under 2.5¢. There is still seigniorage available to the Canadian government and the Canadian taxpayer as a result of our capacity to make coins more cheaply.

We have a patent on that technology. We're quite prepared to talk to the U.S. Mint, should they ever get authority from the Congress to change the content of their coins and use our technology, although we would charge them a pretty nickel.

[Daryl Kramp, Conservative, Prince Edward—Hastings, ON]

Just following up, then, I see that you've quoted New Zealand, of course. Is that our technology? Is that a similar technology from someone else? Are we getting a royalty off the New Zealand coin if that's the case?

[Ian E. Bennett]

The New Zealand case is something we worked very carefully on.

New Zealand decided to change all of their coins. They had already gotten rid of the penny, and they decided to get rid of the nickel as well. With the remaining coins—the 20¢ piece, the dime, and the 50¢ piece—they decided to change not the design of the coins themselves, but the content, to make them lighter, because people were complaining about the heavy coins.

They don't have their own mint. The Royal Mint in England used to make all their coins. So New Zealand decided to go out and look internationally at all of the mints that might bid on this contract. Being good New Zealanders, they went around the world, looked at the facilities in Winnipeg and in other countries, like Austria's and the Royal Mint, and they concluded that our product, our multi-ply technology, was the best in the world, and they opted to go with it. That was before metal prices skyrocketed.

When I joined the Mint, one of my first jobs was to go to New Zealand in July—their winter, mind you—and assist the Governor of the Reserve Bank of New Zealand to launch these new coins. They're very pleased with them.

To answer your question, we make money on that contract. We made all of those coins in Winnipeg, and we launched them in New Zealand in July. They're pleased as punch with the product, and they've ordered more.

[Daryl Kramp, Conservative, Prince Edward—Hastings, ON]

Do you foresee possibly expanding this market? Are you aggressively searching for new options?

[Ian E. Bennett]

Absolutely, we are. We are very excited. I personally see much of the future of the Royal Canadian Mint and some of the profitable growth that we will have as being in our foreign circulation business.

Imagine a central banker who is faced with the prospect of having to pay 8¢ or 10¢ to make a nickel when we can make it for 2¢ or 3¢. It's that order of competitive advantage that I think we have with this technology. So, yes, I'm going around to all sorts of countries to try to sell this technology.

We want to make further inroads in the Caribbean. The British Mint is one of our main competitors in that region. They're down there making coins for Jamaica when we can make them much cheaper and we make them much better. So, yes, I plan to try to take as many customers away from the British as possible.

[Daryl Kramp, Conservative, Prince Edward—Hastings, ON]

I understand there has been a pretty significant increase in the domestic production of coins. Could you just give me a little bit more detail on that?

[Ian E. Bennett]

Yes. In Winnipeg in 2006, we produced a record number of coins, at 2.2 billion coins. When we started the year, we thought we would be producing about 1.4 billion. As the year wore on, the demand for Canadian circulation coinage kept increasing, to the point where we had to operate that Winnipeg plant flat out and even had to delay some of our foreign contracts so that we'd have the capacity to service the Canadian market.

Everyone is scratching their heads, wondering exactly why that is, as we move to more electronic payments and credit cards. You can pay for your parking and so on with credit cards now. So why did we experience this sudden demand increase for Canadian circulation coinage?

I think the best explanation is that if you look at the life of a coin, we make it, we put it in our inventories, and the banks demand it because retailers demand it. Retailers demand the coins to give change to customers, you people at this table.

What do you do with your coins? I don't know about you, but I have a big jar at home, and I put them there. Many Canadians are putting their coins in jars and not putting them back into circulation, because they don't use their coins any more to pay for parking meters or transit fares or you name it. So we have a large inventory of coins building up, but the retailers are still demanding, particularly in this hot economy, coins for commercial purposes. So we've seen that big run-up in demand for circulation coinage.

[Daryl Kramp, Conservative, Prince Edward—Hastings, ON]

I have one question.

With such a significant increase in demand, yet not a huge increase in staffing over that particular period, I've noticed here, should you wish to expand markets and/or dramatically change the capacity of the Mint to be able to meet market demands, how much of your fixed costs would stay the same? How much additional capitalization would be required? Are you labour-intensive? Where's the trade-off between capital equipment versus labour in the production of your equipment?

[Ian E. Bennett]

That's an excellent question. It's one we're struggling with now, and one the board is struggling with.

As was pointed out earlier, we have increased our capital spending, and we plan to continue at that higher level. A lot of the presses that we have in Winnipeg are really quite old. They produce—I'm going to get the numbers wrong, but someone will correct me—maybe 500 coins a minute. We have these new machines that can produce close to 1,000 coins per minute, so we are replacing some of those old presses with new capital equipment.

We have also gone out and sought out partners. I would mention one in particular. We had an agreement with Jarden, in the U.S., in Tennessee. They agreed to build a plating facility that uses our technology, and that will offer us a more diversified supply of plated material. When I go out to try to sell our product internationally, it will be very helpful for us and for the customer to know that there is now a broader capacity worldwide for plated material. They don't have to worry about relying on a single plant in Winnipeg. They can also draw on the plated output from Tennessee, in Jarden's facility.

We're going to have to look at all the different ways in which we can have this expansion that I think we will see in the foreign market, while keeping costs under control. This growth is not very helpful if it just increases costs at a greater rate.

[Daryl Kramp, Conservative, Prince Edward—Hastings, ON]

It doesn't matter what you make, it's what you spend.

[Ian E. Bennett]

That's right.

[The Chair, Liberal, Diane Marleau]

Thank you.

Madame Nash.

[Peggy Nash, NDP, Parkdale—High Park, ON]

Thank you.

First of all, welcome to all of you.

I'd like to pick up on your last comment, about the plant you're looking at in Tennessee and the production there.

First of all, congratulations on being named one of the top 100 employers in 2006 by Maclean's. What makes the Canadian operation such a great place to work? Is it just being surrounded by all that money? That would make me happy, I guess. What were the criteria?

[Ian E. Bennett]

That's a good question.

When I first joined the Mint on June 12, I met with the staff on June 12 in Ottawa. On June 13 I went out to Winnipeg to meet the staff, because they're always interested in who the new person is. It's funny, the flavour I had in Ottawa was the same flavour I had in Winnipeg. We came in there and asked people how long they'd been there. It was 10 years, 15 years, 20 years, as people who join the Mint tend to like the Mint. It has almost a family-like atmosphere. There's a real esprit de corps at the Mint.

People believe in the product. We have very good relations with the unions and the union leaders. We make a point of getting out of our offices on the executive floor and getting out to the plant. I have lunches--and I'm getting fat doing it--in my office with employees nine at a time just to hear from them directly, unfiltered by these people, on what their real concerns and issues are. I don't know how to fully explain why we make the top 100, but I think that's part of it. And with the Government of Canada as the employer, we do have good benefits, and there's no getting around that as well.

[Peggy Nash, NDP, Parkdale—High Park, ON]

That makes a big difference. There's no discount on your coin collections or anything?

[Ian E. Bennett]

Actually, we have a discount in the boutique for Mint employees, but not on collector or circulation coins.

[Peggy Nash, NDP, Parkdale—High Park, ON]

What's the average age in seniority? Is this an older workforce or a real mix?

[Ian E. Bennett]

I think the average age at the Mint is 37 to 42. That's a bit lower than I thought it was going to be. It looks younger and younger to me every day. I think one of the reasons is that we had a fairly significant expansion in Winnipeg. That tended to lower the average age of the workforce generally.

When I say the average is that low, it doesn't mean we don't have a demographic problem and a challenge in replacing employees. There are older employees as well who are master engravers and highly skilled people. We do have a problem, especially in Winnipeg out west, of retaining skilled trades people--mechanics, electricians, and so on. The heat from the oil industry is felt in Winnipeg that way, and it's a challenge.

[Peggy Nash, NDP, Parkdale—High Park, ON]

Is there an apprenticeship program in the Mint, or do you hire people with their trades tickets?

[Ian E. Bennett]

We do both. In particular, for engravers we have a very intensive apprenticeship program because there isn't that much demand for engravers. Even in the trades in Winnipeg, yes, we have an apprenticeship program. But we're at the point where we have to engage search firms to hire electricians in Winnipeg now.

[Peggy Nash, NDP, Parkdale—High Park, ON]

It was like that, I remember, in southern Ontario, where I'm from, when the housing market was really taking off. Industrial workplaces couldn't keep trades people because they could make more money in the housing industry. We have booms and busts like that.

What will it mean if you come up with another facility in Tennessee? I see you're expanding your production significantly. You've increased your workforce significantly. Is the trend line such that you believe the numbers are just going to go up and an additional facility won't have an impact on the people here in Canada?

[Ian E. Bennett]

I don't think it will have an impact on the people here in Canada except in a positive way. Our ability to go out and get new business from foreign governments is a function in part of their faith in the Canadian Mint and our capacity to produce the product in a timely way. So the extent that we have a business relationship with this plant in Tennessee, Jarden, for plating, means there's greater faith in our ability to actually deliver the product.

As well, in the minting business—and I'm learning day by day about the minting business—there are different stages to the production of a coin. Every time we clear up one bottleneck another emerges if you want to increase production. Coining, the actual process of stamping the coin, is a challenge for us now in terms of the capacity we have in Winnipeg; hence, I was mentioning these new presses that can produce them more efficiently and quickly. That's one bottleneck we're dealing with now.

[Peggy Nash, NDP, Parkdale—High Park, ON]

Are there any other parts of the production that are sent out to a third party, or is most of the other work done in-house?

[Ian E. Bennett]

Most of the work is done in Canada, either in Ottawa or in Winnipeg, but we do have a particular contract with Thailand. We make the one and two baht coins for Thailand. We had some of that coined in an idle mint in India using our quality controls and our people on-site to make sure the quality was satisfactory to us.

I think the key here is that we want to be flexible to make sure that we can go out and get the foreign business and deliver it in such a way that we end up with a satisfied customer. Thailand now, not to go on too long, is contemplating changing their coins even more dramatically to use our multi-ply technology, and if we get that contract, that will mean billions of coins that we will be in the market for.

[Peggy Nash, NDP, Parkdale—High Park, ON]

How did we get this great technology? Who developed that?