Government Operations Committee on Feb. 13th, 2007

[Ian E. Bennett]

There are three ways the Government of Canada benefits. One is seigniorage. By keeping our costs down, when we produce a nickel for our customer, the Department of Finance, to the extent that we can produce it more cheaply, allows for there to be greater seigniorage. When we sell it to the banks, we charge them a full nickel; we don't give them any discounts. To the extent that we can keep our costs down, the difference between the cost of production and the face value of the coin is called seigniorage, and over the past five or six years it's amounted to about a half a billion dollars to the Department of Finance in seigniorage. So that's one way.

The second way is that we're a taxable crown corporation. To the extent that we make profits, we pay income tax at what I now think is an exorbitant rate--I didn't when I was in the finance department--on those profits.

The third way is that we do pay a dividend. To the extent that we make profits, the board of directors each year looks at the profits and declares a dividend to the government. In the last few years it's averaged about a million dollars per year in dividend from our operations.

To the extent that we become increasingly profitable, I think it would be a fair game for the Department of Finance or the Treasury Board to come to us to ask, “Could we have a dividend policy that isn't quite so arbitrary?” That's something we're quite prepared to discuss with the government so that there's....

I guess the last thing I'd mention is the economic activity we generate generally.

[Harold Albrecht, Conservative, Kitchener—Conestoga, ON]

I was thinking more in terms of it just goes into general revenues. Is that how it's handled?

[Ian E. Bennett]

Yes.

[Harold Albrecht, Conservative, Kitchener—Conestoga, ON]

Okay, thank you.

Could you outline, as well, how the employees are disbursed--Winnipeg, Ottawa? What are the numbers? Is it 300 and some in total?

[Ian E. Bennett]

It's about 750, about 60-40, Ottawa-Winnipeg, approximately.

[Harold Albrecht, Conservative, Kitchener—Conestoga, ON]

I noticed in your appendix that you commented about the issuance of the poppy-coloured circulation coin in 2004. I think there have been others since that, with a pink ribbon. Are those limited edition, or are they constantly being produced?

[Ian E. Bennett]

Well, they're circulation coinage, so they're sold for their face value, and we don't charge a premium for any numismatic characteristic. We produce a certain number--it was 30 million--and once they're produced, that's it. We're not going to produce more poppy coins or more breast cancer coins.

[Harold Albrecht, Conservative, Kitchener—Conestoga, ON]

Okay. I have one final question, if I could, about the foreign markets. You have already mentioned New Zealand and Thailand. Are there other major foreign markets? Just list half a dozen of them or so.

[Ian E. Bennett]

Over the years we have produced coins for 52 countries. Right now we are producing coins for 12 countries. It varies, of course, because we hope to get more customers. Barbados, for example--and I did visit them, and it was in winter, I will confess--is our oldest customer. We have been producing coins for Barbados for 33 years at the Royal Canadian Mint.

More recent customers would include Ghana, Uganda, Ecuador, Papua New Guinea, and Chile, I think. Panama is a recent customer. Thailand, maybe I mentioned, is a very interesting customer, because the volumes are so huge should they make the decision to go with our multi-ply technology. It is volatile, too.

[Harold Albrecht, Conservative, Kitchener—Conestoga, ON]

Thank you.

[The Chair, Liberal, Diane Marleau]

Thank you.

We'll go to Mr. Wrzesnewskyj, for five minutes.

[Borys Wrzesnewskyj, Liberal, Etobicoke Centre, ON]

Thank you, Madame Chair.

From the table, I assume that the seigniorage that you just spoke of provides about $500 million. Or did I mishear?

[Ian E. Bennett]

From 2002 to 2007, it is about $450 million.

[Borys Wrzesnewskyj, Liberal, Etobicoke Centre, ON]

Okay. I don't see that reflected. Is that right in your revenue stream here?

[Ian E. Bennett]

It is really a separate calculation. It simply reflects the value to the department. We never see a nickel of that.

[Borys Wrzesnewskyj, Liberal, Etobicoke Centre, ON]

Okay.

Do you have a table you could provide us with that would show the various revenue sources and the accompanying expenses? Going back to the trend lines I referenced earlier, profitability is trending downwards by 2007, down to 1.95% of revenues. Are there any particular areas you are losing money on? Are you losing money on gold refinery? I assume that on the numismatic part of your business you are making money. Do you have those sorts of tables to provide for us?

[Ian E. Bennett]

We can.

One general comment I will make is that some of the big growth in revenues is in bullion, and there the margins are very low. They are a maximum of 3%. To the extent that the revenue growth is from bullion, it will drive down those percentages. It doesn't necessarily represent a general problem, it just represents a shift in the source of revenues from one area to more bullion. We are trying to get more bullion, because even though the margins are small, you can still make money doing it.

[Borys Wrzesnewskyj, Liberal, Etobicoke Centre, ON]

Are you trying to tell us that for some of these revenues, if we extrapolated from income that has been made strictly from sitting on reserves of bullion, we might see negative operational...?

[Ian E. Bennett]

No, I am not trying to say that at all. It is still positive. It simply is the fact that the bullion market is processing large, high volumes of gold or silver, and you don't make an awful lot of margin on it. In some of our other businesses--foreign circulation--the margins are greater. To the extent that there is a shift, so that more of our total revenues come from bullion, that will, on average, bring down the margin.

[Borys Wrzesnewskyj, Liberal, Etobicoke Centre, ON]

Mr. Bennett, in my first round of questioning I asked for some tables, and it would be interesting to also see this breakdown of revenues and profitability by department or by type of business. When could we expect that sort of information from you?

[Ian E. Bennett]

We are going to be tabling our corporate plan on March 23, and it will be available then.

[Borys Wrzesnewskyj, Liberal, Etobicoke Centre, ON]

On your marketing and sales costs, you keep mentioning all these wonderful opportunities internationally, and you keep saying that you have gone on trips. I assume that you have a whole sales team, that this doesn't entail you going to Thailand or you going to New Zealand, as you have said, or you going to Bermuda, as you have said. I assume you have a sales team that does most of this travel and most of this work.

[Ian E. Bennett]

Yes, you are quite right. I end up having to go to some of these places, because the customer wants to see the CEO, wants to be satisfied that the Mint is taking them seriously, that there is a real dedication to the product, to the contract. I don't go to every place, no.

[Borys Wrzesnewskyj, Liberal, Etobicoke Centre, ON]

So you'd be the clincher or the guy who comes when the contract is ready to be signed?

[Ian E. Bennett]

Sometimes. Sometimes I'm just there for show. I feel like a politician--no offence.