23 Million Gold Sovereigns Melted Down 1990 National Audit Office Report on the Royal Mint

[LawrenceChard]

23 Million Gold Sovereigns Melted Down 1990 National Audit Office Report on the Royal Mint

Today I stumbled across an NAO report online, which included:

(g) The Exchange Equalisation Account has met the capital servicing costs of the Precious Metal Unit, installed in 1986; and the Mint have melted down some of their 23 million gold Sovereigns in stock, paid for by the Account, to use as raw material for the new Britannia coin. However, the Unit has so far been engaged only on commercial work and the contractual arrangements with the Treasury were terminated in 1987-88. The Treasury pointed out that the decision to impose Value Added Tax on gold coins and the fall in the gold price in the early 1980s had both affected the demand for sovereigns to an extent which could not have been foreseen at the time the new Unit was commissioned.

I was completely unaware of this at the time, and indeed until now.

I am only up to page 6 of the 22 page report, so I expect to find some more intriguing stuff soon.

For anyone interested:

https://www.nao.org.uk/pubsarchive/wp-content/uploads/sites/14/2018/11/The-Royal-Mint.pdf

Enjoy!

😎

 

[LawrenceChard]

More:

Quality Assurance 2.12 The NAO found that, while the Mint had sound quality assurance procedures, they were geared more to defect detection rather than to defect prevention. This approach tended to be costly in terms of the level of reject rates in some products. The Mint told the NAO that their level of reject rates was consistent with or better than the general rates in industry. Nevertheless, they had recognised that their quality assurance procedures needed to be updated and were taking positive steps towards this. The NAO also noted that the Mint had not yet adopted the full disciplines of British Standard 5750. This specifies the functions and facilities which should be covered by a management system to ensure that products and services are produced consistently to the required specification.

 

The Royal Mint’s arrangements with the
Exchange Equalisation Account
3.15 The Exchange Equalisation Account is
operated by the Bank of England on behalf of the
Treasury. One of its main uses is to check undue
fluctuations in the exchange value of sterling. The
Treasury may cause any funds in the Account to be
invested in securities or gold. Until the introduction
of the Britannia gold coin in 1987 (paragraph 2.7),
the Mint had a long standing contractual
relationship with the Treasury for the production of
bullion sovereign coins for the Account. In 1986, to
improve security, a new Precious Metal Unit
costing El.56 million was installed at the Mint in
support of this work (Appendix 2, Section [a)
refers).
3.16 The NAO noted that the Mint had already
been paid processing costs from the Exchange
Equalisation Account over a number of years for
the 23 million bullion sovereigns still in stock when
the Precious Metal Unit was approved. The extent
of these payments could not be easily determined.
Some of these coins are now being melted down by
the Mint to produce the new Britannia coins for
commercial sale. Apart from questioning the need
for this Unit (Appendix 2, Section (a)], the NAO
were concerned about the losses caused by
excessive Sovereign production.
3.17 The NAO considered that the agreement was
unduly favourable to the Mint in that the Treasury
agreed that the Exchange Equalisation Account
would meet the capital servicing costs of the new
Unit of about f310,OOO a year, although it could also
be used for the Mint’s commercial work. In the
event it has been used only for such work, thus
resulting in additional reimbursement of the Mint’s
costs.
3.18 The Treasury considered that the agreement
was justified as the Mint needed to be given some
assurance of continuity of sovereign production and
a return on their investment. It was designed so
that the Unit’s recurring capital costs were not
borne entirely by the Exchange Equalisation
Account, since the Mint would retain control of the
building and could use it for other purposes. The
agreement provided for the Exchange Equalisation
Account to place annual orders for coins; the price
would be agreed annually between the Mint and
the Treasury and was expected normally to reflect a
progressive increase in the Mint’s efficiency over
the previous year. With no orders having been
placed for the Exchange Equalisation Account, the
Treasury gave notice in June 1986 of their intention
to cancel the arrangements, which were terminated
at the end of the Unit’s second year. The NAO
noted that all the Unit’s capital servicing costs of
f310,OOO a year (paragraph 3.17) had been borne by
the Account.
 

The NAO examined investment appraisala supporting five major projects at the Mint with the following results: (a) In 1963 the Treasury approved a new El.56 million unit to produce sovereign coins, following external advice that the old unit was insufficiently secure. At the time the project was under consideration, the Exchange Equalisation Account had a stockpile of 23 million sovereigns, representing around 10 years’ sales. Since then sales of these coins have almost ceased. The NAO thought that the possibility of low demand should have been considered in the appraisal; which might also have explored other options, for example, limiting further the stock levels of precious metals, and hence their security needs. The Treasury considered the case for building a new unit on security grounds overwhelming. At the time they approved the project they concluded, after careful consideration, that the Unit’s prospects were more than sufficient to cover the investment; and that the large stockpile of sovereigns was necessary to cover demand whilst production was suspended for three years while the new Unit was being built. In the event, the demand for gold coins, and particularly sovereigns, declined more quickly than the Treasury or the market had anticipated. According to the Treasury, this was due to the imposition of Value Added Tax on gold coins and the fall in the gold price in the early 1980s.

Edited May 23, 2022 by LawrenceChard

[StackerBritt]

Happy to let you summarise it for us Lawrence 

[Thelonerangershorse]

In short, 183.5 tonnes of sovereigns ! !

[LawrenceChard]

6 minutes ago, Thelonerangershorse said:

In short, 183.5 tonnes of sovereigns ! !

If you say so. I didn't think about the weight. I did find myself trying to work out how much space we would need in our strongrooms, though!

😎

[RDHC]

16 hours ago, LawrenceChard said:

23 Million Gold Sovereigns Melted Down 1990 National Audit Office Report on the Royal Mint

Today I stumbled across an NAO report online, which included:

the Mint have melted down some of their 23 million gold Sovereigns in stock, paid for by the Account, to use as raw material for the new Britannia coin. 

 

Enjoy!

😎

 

 

[RDHC]

Just now, RDHC said:

 

But apparently only 'some' of the 23 million were actually melted down?

[RDHC]

Just one further thought or question: did the Mint filter out the copper and silver from the melted down sovereigns, and if it did not do so, is that why the early Britannias contain some copper and the later ones do not? Or have I missed something?

[LawrenceChard]

9 minutes ago, RDHC said:

But apparently only 'some' of the 23 million were actually melted down?

Good spotting. For some reason, I had taken that on board as being all or most of them.

Logically, the next question should be how many of them, and this is something the report seems to have omitted.

[RDHC]

1 hour ago, LawrenceChard said:

Good spotting. For some reason, I had taken that on board as being all or most of them.

Logically, the next question should be how many of them, and this is something the report seems to have omitted.

Thank you, Lawrence. (Rare for anyone to be able to add usefully to one of your posts.) And thank you for sharing the very interesting material that you unearthed.

Roger

 

[LawrenceChard]

2 hours ago, RDHC said:

Thank you, Lawrence. (Rare for anyone to be able to add usefully to one of your posts.) And thank you for sharing the very interesting material that you unearthed.

Roger

 

You're welcome!

It's not all that rare to be able to supplement my posts

😎