It’s not quite Fort Knox, but when you step into New Zealand Mint’s premises in central Auckland, you’re certainly under no illusion that this company deals in precious metals. In the boardroom, while waiting for CEO Simon Harding, I browse over some of the extensive range of collectable coins, legal tender commemorative coins and medallions his company has produced. While New Zealand Mint is a precious metals bullion trader, a large and growing slice of its business is done in the numismatic, collectable coin market – many of which are recognised as sound long-term investments. Globally the collectable coin sector is a multi-billion dollar market, and 97 percent of New Zealand Mint’s coin business is exported overseas.
“We literally trade with the world,” says Harding, “and because we’re one of the world’s few private mints we are much more agile in terms of innovative products we can bring to market.”
Harding didn’t know what the word ‘numismatic’ (a numismatist is a coin collector) meant when he took control of the company in April 2012, but with his background in the international finance industry he was the ideal person to introduce the necessary working capital and manage the company’s global expansion. This year turnover is tipped to rise by 30 percent.
Previously a manufacturing jeweller, the New Zealand Mint brand has been around since the 1980s. Harding saw an “undercapitalised business with bucket-loads of opportunity”.
The company is four businesses rolled into one: commemorative coins, bullion exchange, jewellery (think Trelise Cooper and Boh Runga brands), and an effigy (facilitating the creation of legal tender) business – and the potential for growth is across all four, he says.
Harding lets me hold a kilo of silver and an ounce of gold while he explains the difference between a medallion or medal and a coin. “To make a commemorative coin, it has to be legal tender, and we have an exclusive royalty arrangement with the government of Niue to produce legal tender coins with the Queen’s effigy.”
New Zealand Mint has a number of global alliances with major brands – they include licensing agreements to make commemorative coins for the likes of Anne Geddes, Muhammad Ali, Lucas Films for the Star Wars franchise (the coin launch went viral on social media sites), Hasbro for Transformers and the boardgame Monopoly (released this year) and the Lunar Series (probably the largest single revenue earner). Licensed products, which involves a steep learning curve, are indeed their forté.
This year the BBC granted New Zealand Mint a three-year worldwide licence to produce a commemorative coin series celebrating the 50thanniversary of the iconic TV show Dr Who. The coins will be packaged in a scaled down Tardis, which plays the Dr Who theme when opened.
Harding points out that each coin mintage is limited to around 5000 units, “so it’s a case of constantly reinventing products.”
Some coins are manufactured in New Zealand, some are outsourced overseas, depending on costings, market proximity, and the degree of technical expertise required. Pretty much all the packaging is made offshore.
IP and innovation
Most of the packaging ideas the team comes up with are clever and ambitious – Harding describes the Transformers box which opens by centrifugal force when you spin it. The Monopoly coins come in a big green Monopoly house.
He says there is huge potential for New Zealand Mint to increase its share of the global commemorative coin market. “It’s a high value product that’s not constrained by overhead costs such as shipping,” he says, “and primarily involves IP and innovation; that’s what this business is all about.”
Europe and the US are important markets, but Russia and its surrounding Commonwealth of Independent States (CIS) has become the primary export market. A large Russian bank, which contacted them through the website, is one of New Zealand Mint’s biggest customers.
“In Russian culture, giving coins is the same as us giving greeting cards,” Harding explains.
The New Zealand Mint brand has a strong following he says, largely due to the innovative packaging. (Although innovation has its downside, with one water-filled product freezing and breaking while being trucked in the harsh Ukrainian winter!)
Export sales are primarily business to business, with New Zealand Mint selling to wholesalers, who then on-sell to private collectors. Online sales are limited due to freight costs, customs ramifications, and sensitivities about precious metals and currencies crossing borders. China, for example, slaps a 21 percent tax on coins.
Speaking of China – that country is high on the radar, as is the prospect of manufacturing there and marketing through a local strategic partner to eliminate hassles such as customs and taxes. Harding is currently in dialogue with NZTE regarding support for its China initiative. “China is a tough nut to crack, and if we’re too successful we’re susceptible to counterfeiting.”
Harding says the plan this year is to up volumes, with two new coins released every month.
The bullion market holds great promise for growth too. Gold and silver coins, such as New Zealand Mint’s popular Gold Kiwi and Fijian taku, are popular investments as they are practical, easy to sell, becoming universally recognised, don’t invoke GST and are certainly hard to counterfeit.
Is the Kiwi exchange rate an issue for this globally focused exporter? Harding says yes. “We’re a USD company to gross profit level, but our overheads are covered in Kiwi dollars,” he says. “We have to look at efficiencies, and transferring some costs into US dollars. We endeavour to naturally hedge by borrowing in US dollars, which means paying less interest; we try to be smart in terms of our procurement; and fortunately we also buy in US dollars.
“The ideal strategy is to match currencies in the different markets – so, for example, when you’re buying in Euros you’re selling in Euros.”
Clearly, New Zealand Mint is not your typical exporter, and has its own unique set of challenges. Producing licensed products for large global brands is a steep learning curve and a laborious process, says Harding. Working capital requirements are enormous, he adds. “We’re financing precious metal and the distribution process means in some cases we don’t get paid until several months after production.”
Identifying the right partners in overseas markets is a challenge too – “you can waste a lot of time and money” – and cultural appropriateness is a factor. “For example, Germans are not into coloured coins.”
A good deal of market research takes place at international coin fairs. New Zealand Mint attends on average four a year, including Berlin’s World Money Fair. “There’s a coin show on every weekend somewhere in the world, the challenge is knowing which ones to go to. And they’re expensive; for the Berlin show we fly over six staff; 100K can get spent in one weekend.”
Another major challenge is the fluctuating price of silver – if it goes up it impacts directly on the coins’ sales margin (all coins have an ounce of pure silver).
“So with the high exchange rate and price of silver – it’s a double whammy. Therefore with large coin orders we’ll agree with the client on a premium over the metal price to minimise risk.”
One major factor working in New Zealand Mint’s favour is the reputation New Zealand has on the international front for being corruption-free and trustworthy. “International bullion clients come here because it is New Zealand – and this reputation definitely helps our brand,” says Harding.
Glenn Baker is editor of Exporter.