Price of Copper Creates Investment and Business Opportunities with Pennies

In 2006 the US Mint implemented a rule making it illegal to melt nickels and pennies, or to export them in quantity. Violators are subject to fines of up to $10,000, five years in prison or both. In addition, the violator forfeits all the pennies and nickels that were melted down or illegally exported. This rule was implemented in an attempt to maximize the coinage used in commerce.

US copper pennies are composed of 95% copper and 5% zinc. These pennies were minted prior to 1982. In 1982, the mint changed the composition to approximately 97.5% zinc with a thin copper coating. Some 1982 pennies were minted under the old formula and some under the new, cheaper zinc makeup. US pennies minted after the 1982 transition year are commonly referred to as US zinc pennies.

The melt value of the raw material that makes up a US copper penny and nickel is above face value. In the case of the US copper penny the difference between the intrinsic value of the metal that makes up the coin and its exchange value of only one cent is significant. With copper at $3.83 a pound the metal value of $100 worth of copper pennies is $252.00. For the latest data on the metal (melt) value of the copper penny as well as other coins see http://coinflation.com/ .

The disparity between the monetary exchange value of a common penny and the metal value of a US copper penny has created some interesting entrepreneurial opportunities. Although it is illegal to melt copper pennies it is not against the law to save them or sell them to other US citizens, even at a premium to face value. Prices are all over the map but in small quantity copper pennies sell for approximately 1.5 cents each, a 50% premium.

The casual collector may flip copper pennies into a jar found in their change at the end of the day. It takes time to look at the date on each penny and separate out the good ones. The more serious collector wants to get their hands on lots and lots pennies. They will buy many rolls of pennies at the local bank, sort out the good ones and "dump" the rest back at a bank with a coin counting machine. Obviously this can become a pain for the banks so these hoarders have strategies, including using multiple banks, to stay under the radar of the banks operations management. The alternative is to use a service such as Coinstar but their 10% service fee is a huge drawback. There are still hundreds of millions copper pennies in circulation. On average bank rolled pennies are about 20% of the copper variety. This percentage will certainly go down over time.

Those that decide to become big time hoarders find it inefficient to sort pennies by looking at the dates. There are actually machines that will do the work of sorting out the copper pennies. A quick review of the more popular coin hoarding forums gives very good reviews to the Ryedale Apprentice that goes for about $500. Ryedale's can sort up to 18,000 pennies per hour. Handy entrepreneurs have created several models of coin sorters that they sell online. A less expensive option to the heavy duty Ryedale is the "Penny Wise Penny Miser" that has a housing made of wood but that can sort up to 3000 pennies per hour.

There are others that build their own coin sorting machines using a relatively inexpensive comparator that can immediately identify zinc vs. copper pennies by their unique electric signatures. Comparators can be purchased on eBay or other web sites. Other materials can be purchased at the local hardware store.

Collecting copper pennies could certainly be a profitable hobby or investment; however you want to look at it. It will be even more profitable if copper prices continue to rise or the US mint does away with the penny. Many economists are predicting future inflation. But in a worse case scenario of plummeting copper prices you can always get your original investment back.

Like the idea of hoarding pennies but don't want to hassle with finding and storing them? Take a look at the Portland Mint. This relatively new business (established in 2008) allows people to purchase copper pennies in volume. Big Volume! This business sells copper pennies in one ton units and offers secure storage for a cost of $50 every six months. If you would like the thrill of a ton of copper pennies dropped at your door step they would be happy to ship them to you in a specially constructed box. You pay shipping and $150 for the container. You could also skip the fancy box and get your pennies via 30 US priority mail boxes. Thank goodness for flat rate shipping!

References:

http://www.realcent.org/

http://www.ryedalecoin.com/