is $0.014 earned?

Caught this over at Digg:

Representative Jim Kolbe wants to do away with the penny – and for a second time has introduced legislation that would effectively kill it.

The Currency Overhaul for an Industrious Nation (COIN) Act would force the rounding off of all cash transactions to the nearest 5 cents, making the penny coin useless for everyday transactions.

The move is in part a reaction to the rising cost of zinc – the penny’s main ingredient – which at current prices brings the cost of making the coin to 1.4 cents each.

Very interesting. Then there’s this from Wikipedia:

As of June 29, 2006, the price of copper is $3.42 per pound and zinc is $1.50 per pound. At these prices, the pre-1982 copper cent contains 2.204 cents worth of copper metal; it is now potentially profitable to melt them down. Presumably with the rapid rise in price for zinc (more than doubled in the last six months), the US Mint will have to find another alternative. Just the scrap zinc in a cent is worth 0.9 cents. With the costs of manufacturing and distribution, the net cost to produce one cent is about $0.0123, significantly higher than the face value of the coin.

So the rise in value from the last Wikipedia update and the CNN article is $0.0017/penny. Also from Wikipedia, the monetary makeup of a penny is as follows:

Copper-plated Zinc
97.5% Zn, 2.5% Cu
Mass: 2.5 g

Ok, so let’s run some simple math here. The latest prices of metals can be found here. Let’s assume that I bought $10,000 worth of pennies, and melted them down and sold the constituent metals at today’s market prices. Unfortunately, as per my calculations, the value of the constituent metals would only amount to $8,813. Not a profitable venture.

But let’s say we used the old pennies, the ones which ran from 1962 to 1982, which are 95% copper and 5% zinc. There are still plenty of those floating around. If I melted $10,000 in those pennies down, I would have $19,474 in constituent metals. Now THAT sounds like a plan.

I kind of have to run, but assuming you could buy tons of these older pennies and melt them down, you could make a fortune. In fact, you could short the copper and zinc metal markets in advance of your metals sales, given that you would be flooding the market with these metals. Now if only one could find a way of cycling through vast numbers of pennies, sorting out the older ones for meltdown…

In any event, my spreadsheet fooling with these numbers is here. Enjoy.

UPDATE: Ok, so there’s 12 pennies sitting on my desk. 4 of them are the old kind of pennies. If that rate held up, it would still be profitable to melt all teh pennies you could get without bothering with a sort. Pretty neat.

Also, I heard on teh news last night that nickles aren’t profitable to produce either. Each one costing $0.055 to produce. That may make for an even more profitable venture. I’ll have to run the numbers.

This entry was posted on Wednesday, July 19th, 2006 at 8:34 am and is filed under News & Politics. You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.