Department of the Treasury

“ Whenever the Secretary of the Treasury determines that the use of copper in the one-cent piece is no longer practicable, he may change the alloy of the one-cent piece to not less than 96 per centum of aluminum and such other metals as he shall determine. ”

“ Iron The leading world source of iron ore in 1971 was the U.S.S.R. which produced 132 million tons. This represented approximately 27 percent of the total world production of 488.4 million tons. Other significant producers were the United States (54.3 million tons) , Australia (43.8 million tons) , Brazil (31.5 million tons) , Peoples Republic of China (30.2 million tons) and Canada (30.1 million tons) .
The importance of iron to an industrialized economy makes it mandatory that any highly developed country fulfill a large fraction of its requirements from domestic sources. ”

“ Several countries, including Japan, Spain, and Poland, use coins of cupro-nickel and aluminum in sizes which are closer to one another than the U.S. cent is to the nickel. If an aluminum alloy is selected for the penny, there is not expected to be any problem in distinguishing the cent from the dime or nickel.
Most machines which utilize cents require no modification to utilize aluminum cents alone or in combination with present cents. This is true of counting machines, cash registers, change dispensing machines, parking meters, and simple vending devices like bubblegum machines. ”

“ In order to minimize the possibility of a cent shortage without expending large sums for new processing machinery, the selected substitute material must be readily fabricated into pennies using equipment which is presently in operation at the Bureau of the Mint's coining facilities.
It is also desirable J as a simple matter of efficiency, to minimize the cost of manufacturing coins of acceptable quality. It is axiomatic that the Treasury should seek to achieve the lowest possible total coinage cost, inclusive of materials used. ”

“ Since the evaluation of substitute materials for pennies has resulted in the conclusion that an aluminum alloy is the best alternative, a review of the merits of an in-house capability to produce aluminum alloy strip for penny blanks is required to justify the substantial capital investment in plant and equipment. The Mint's recent history of heavy reliance on outside vendors as sources for coinage strip has made orderly production planning difficult. ”

“ Although several advantages and some disadvantages of aluminum alloys have been discussed, the potential savings in the annual cost of raw materials which exceeds $35 million at present production levels, the favorable future supply and price outlook and the ease of fabricating aluminum alloys to coins are the most compelling reasons for strongly considering aluminum as a substitute material for one-cent coinage. ”

“ Manganese ore is used in the United States chiefly for the production of ferroalloys, most of which is consumed by iron and steel plants throughout the U.S. Used chiefly as a desulfurizing agent in steel making, manganese also improves the rolling and forging characteristics of steel and adds to the strength, toughness, wear-resistance, hardness, and hardenability. Manganese is also added as a desulfurizing agent in the production of copper-nickel alloys and as a alloying addition to aluminum. ”

“ Industrial leaders at a recent forum in London predicted that the world price for refined copper would rise to $1.05 per pound in the next two months 2. Approximately two weeks after the prediction was made, the market price of copper reached $1.05. It is evident that the government must be prepared for the possibility that cents will be produced at a cost which exceeds the face value of the coin unless a cheaper material is substituted for the bronze alloy which is currently being used. ”

“ Research and development aimed at reducing the cost of extracting aluminum metal from anorthosite and other non-bauxite aluminum containing clays is being actively pursued by the Bureau of Mines. It is not unreasonable to expect that technological advances would make it economically more attractive to extract aluminum from clays and thereby eliminate our dependence on foreign ore for aluminum. ”

“ For price stability, minimal market disruption and reasonable assurance of a reliable supply of rolled strip from domestic sources are essential. Commercial production of the coinage alloy should be many times greater than Mint requirements.
Coinage materials must be available at acceptable costs for a minimum of 15 years since there is a risk of a coin shortage each time the value of the raw material approaches the face value of the coin. A shortage due to withdrawal of coins from circulation cannot be alleviated immediately by changing materials. ”

“ The United States has large supplies of such materials and could meet all or most of its aluminum raw materials needs indefinitely if domestic firms exploit these alternate sources of aluminum. At the current price of aluminum of less than $0.30 per pound and the availability of bauxite and alumina from foreign sources at reasonable prices, it is economically more advantageous to import large quantities of these raw materials from Jamaica, Surinam, and Australia than develop domestic clays on a large commercial scale. ”

“ The economic benefits of bronze clad steel are highly questionable. The intrinsic value of the raw material would be decreased substantially compared with gilding metal but two factors tend to narrow the difference in cost. First, the cost of strip fabrication is almost 300 percent higher for the clad material compared with gilding metal. Second, gilding metal blanking scrap is readily recycled but bronze clad steel scrap has a very low recovery value. ”

“ The short range projections are that the price of copper will continue to rise because many domestic copper mining and strip producer labor contracts expire in mid-1974. This will keep prices up during the next six months as consumers try to accumulate larger inventories. While the long range projections are far from absolute in determining precise economic data, the general trend seems to indicate that considering all factors the price of copper, in constant dollars, can be expected to increase. ”

“ Aluminum can be more economically fabricated into one-cent coins at an annual savings in manufacturing and transportation costs of more than $500,000. Most of this savings is a result of the fact that coin blanks punched from aluminum strip do not require a high temperature softening treatment prior to coining.
3. The outlook for future supplies of refined aluminum and aluminum alloy strip in the United States is favorable. Furthermore, a change in penny material would have a negligible impact on the aluminum and copper alloy strip markets. ”

“ In recent months the commercial demand for copper alloy strip has been very high. This has resulted in fewer competitive bids and contract awards have often been made even though one commercial firm submitted a bid. Prices are starting to increase and, if the current situation persists, the Mint will pay substantially more for strip fabricated by commercial vendors. Similar shortages of commercial strip fabricating capacity exist during high demand periods in the aluminum industry. ”

“ The required pressure was high enough so that a coin was not successfully produced with image and lettering completely filled even at the limitation of the available press tonnage. Without a more expensive annealing treatment to soften the steel core, the material would cause reduced die life and increased press wear. Furthermore, the image relief would probably have to be reduced even if the core were completely softened because, even at much slower speeds or higher furnace temperatures, the blanks could be not reduced in hardness to the level of annealed gilding metal. ”

“ Characteristics of the new coins The new coins should be durable, easily distinguished from the other denominations and be made of a non-toxic material. The coins must have an attractive, lustrous appearance. A history of acceptance of a similar alloy for coinage in highly developed foreign countries is considered a positive factor. ”

“ While the United States must rely heavily upon foreign sources to fulfill its demand in the future, the distribution of resources throughout the world, a more than adequate supply in relation to expected world demand and increasing competition among a large number of producing countries are factors that point to a favorable picture concerning the price and availability of manganese through 2000. ”

“ The largest domestic use of aluminum is for building and construction items such as residential siding, mobile homes, doors, windows, roofing, curtain walls, screening, bridge and guard rails, pre-engineered structures and other bridge, street and highway uses. The transportation industry is another major consumer where aluminum is used in automobiles, trucks, railroad cars, ships, and aircraft. Aluminum is also used in virtually all types of cans and containers as well as in the electrical and communications industries. ”

“ A clad material consisting of 90 percent copper - 10 percent zinc clad on both sides of mild steel was studied as candidate replacement material for penny bronze.
Stainless Steel Coins made of stainless steels have an attractive luster and superior resistance to wear and corrosion. However, stainless steel has two disadvantages which eliminated it from further consideration. The prices of various stainless steels are higher than any of the substitute materials mentioned above and most stainless steels are more costly than penny bronze. ”

“ The world demand for aluminum in 1971 was 13.3 million short tons. By the year 2000 the world demand is projected to be 81.3 million tons. World reserves are estimated at 3 to 6 billion tons and the potential world supply for at least a century is virtually unlimited. Many of the major bauxite deposits are owned by domestic firms. However, taxes and royalties on bauxite mining in foreign countries are expected to increase and since the U.S. currently depends on imports of bauxite for more than 85 percent of its requirements, domestic prices of refined aluminum can be expected to increase. ”

“ After examining several zinc Austrian coins which had become almost black, it was decided that zinc alloys do not merit further consideration.
Plastics There are no known instances of the use of plastic as a coinage material and it was rejected from consideration on the basis of three factors: (1) The growing world wide shortage of-petroleum derivative products has caused an inadequate supply of plastics to meet current and projected industrial demand; (2) It is highly improbable that plastic coins would be acceptable to the public ”

“ An aluminum alloy cent is preferred when compared with other candidate materials including the currently utilized 95 percent copper - 5 percent zinc alloy for the following reasons:
1. In recent weeks the market price of copper has increased to more than $1.00 per pound and the Treasury Department's seigniorage* on one-cent coins is seriously threatened. An annual savings in raw materials exceeding $35 million would be realized at current penny production levels if an aluminum alloy were used for one-cent coins. ”

“ Bronze Clad Steel Cladding is a manufacturing process for metallurgically bonding sheet materials. The United States is now using cupro-nickel clad copper coinage for dimes, quarters, half dollars and dollars as a substitute for the traditional silver coinage.
Copper-zinc alloys clad on low cost sheet steel have been used for coins in West Germany for many years. This class of three layer clad products offers the surface characteristics of copper-zinc alloys at a reduced total cost of raw materials. ”

“ Review of potential high feasibility materials with respect to raw material availability and costs, strip and coinage production costs, ease of fabrication, acceptability, longevity, compatibility with present coinage, counterfeiting potential, energy consumption and vending machine use. Perform preliminary screening of available alloys and establish a priority list of high feasibility materials. Perform laboratory-scale coin fabrication studies on several high feasibility materials and sizes. ”

“ These-conditions as well as transportation and other logistical problems in Zambia, adversely affected the supply of copper to world coppermarkets. The supply shortage, combined with the high level of demand, has driven prices upward.
The largest domestic use of copper is in electrical equipment and supplies. Electrical wiring, test equipment, power generation and distribution systems, sophisticated electronic navigation and communications systems require large quantities of copper. ”

“ A Department of Commerce study projects the domestic demand for magnesium metal in 2000 to be 460,000 tons equal to a 4.7 percent annual growth rate based on the 1968 demand of 106,000 tons. The forecast projects U.S. demand will be approximately one half of the total world demand as is the current trend.
Future technology will bring major improvements and new developments in magnesium extraction and fabricating techniques, and magnesium alloys. ”

“ Implications on new Denver Mint strip facility. Lack of satisfactory short term (as related to production scheduling and inventory requirements) and long term (as related to coining capacity requirements) demand forecasts. Scope of Study Test and analysis of promising substitute cent materials including changes in size and copper content. Study of the feasibility, acceptability, and benefits and impact of an additional coin denomination between the 1¢ and 5¢ pieces. Analysis of the coin distribution and consumption system to improve our ability to predict short and long range coin demands. ”