Not all coins are rare and not all coins add value to your coin collection. We look at one type of coin that you should consider selling if you currently own any, the ‘production’ coin.
It takes many years and a lot of patience and research to build up a valuable rare coin collection from scratch. A true numismatic is very particular about the type of coins that they add to their collection, and this is for good reason. Certain coins aren’t rare at all and don’t benefit your collection in any way, whether they’re a short or long term investment. The coins we’re referring to here are production coins.
These are coin replicas that have been produced for a highly defined market with the sole purpose of the producer making a profit from the coin. Unfortunately, that highly defined market is made up of amateur or hobbyist coin collectors who don’t realize what they’re getting into.
The principal behind production coins is that they are manufactured as ‘limited’ replica coins and promoted as future rare coins. It’s a deceitful practice but it’s not illegal and many new coin collectors get caught out.
A genuine rare coin can only be considered rare if it was actually used as legal tender in the past. However a production coin isn’t legal tender and therefore can never be considered as a future rarity. Examples of South African production coins include the Natura series, Proteas, Proof Krugerrands, Britannia Sets and Gold Reef City Coins. Although these are attractive coins with low mintage figures, they are by no means ‘rare’ coins. If you want to know if any of the coins in your collection are production coins then you can establish this simply by seeing if the coin was used as official currency at the time it was manufactured or minted.
What many coin collectors don’t know (and may be shocked to realise), is that mints actually profit more from production coins than any other coin they manufacture. Things get worse for collectors when it comes to selling production coins as there is virtually no secondary market. If you research this it becomes glaringly evident and alarm bells should start ringing. Don’t be tempted to buy them. While they might be marketed as collectibles, they certainly aren’t investment coins, unlike genuine rare coins (which were once used as currency and today are very scarce).
Let’s look at an example of how a production coin ‘appreciates’ in value.
Generally, what happens is that these coins are available for the cost of their metal value plus a premium of about 20%. A would-be-buyer notices these low mintage coins which are selling for R15 000 and thinks it’s a great deal. After all, they’re going to appreciate over time, right? Ten years later, before selling, the collector has the coins valued and finds that they are only worth R18 000. How can this R 3 000 ‘profit’ be right?
Basically, production coins are only valued on their metal content. So, in this example, at the time of buying the coin, the value of the metal content was R5 000. Ten years later, the metal content is valued at R18 000. So when the coin was originally purchased, its price was based on what the expected metal content would be in the future. The coins value has not increased because of its rarity but rather its metal value.
The original R15 000 would have been better spent on purchasing rare coins which have a guaranteed, stable annual ROI. This is because rare coins become increasingly scarce with each passing year, and the rarity of a coin is one of the primary factors taken into consideration when it’s valued.
It’s important to point out that to date there is no record of any production coin maintaining a performance record of longer than 5 years.
Our professional advice to you is for you to sell any production coins you currently have in your collection or trade them in for rare South African coins.