lurgical bonding of the new alloys, and for the cost of the cladding equipment. We intend to observe the cladding operations in our suppliers' plants, and to select the most suitable process for installation in the new mint.

ESTIMATED COST OF CONSTRUCTING NEW MINT

As a result of the above changes, together with normal construction and equipment cost increase factors, the cost of the new Philadelphia Mint is now estimated at a total of $37,700,000. Although the present estimated cost of the building and equipment is much higher than originally planned, it is fully expected that very substantial savings in manufacturing costs will result from the use of the more efficient equipment, and that the cost of the new mint will be fully amortized in approximately 5 to 10 years.

EXPANSION OF DENVER MINT

At the present time, the Denver Mint is the larger and more efficient of our two mints. However, there is no space at Denver for installation of bonding equipment to produce the clad materials required by the Coinage Act of 1965. Land is available immediately adjacent to the Denver Mint which is owned by the Government, and which was purchased for future expansion of the Denver facility. Funds amounting to $100,000 are included in this request for engineering services to develop plans for an addition to the Denver Mint which would house a bonding line similar to the one expected to be installed in the new Philadelphia Mint. Funds will be requested at a later date for construction of the addition, and for the cost of the equipment to perform the cladding operations.

I would like to invite the members of this committee to visit our mint institutions and review our operations, particularly on the new coinage alloys, at first hand. We shall be happy to answer any questions which you may have on our various programs.

(Discussion off the record.)

COIN DEMAND AND PRODUCTION

Mr. STEED. Mr. Wallace, some years ago you had a study made of what the long-range needs of the mint would be, and certain determinations were arrived at, but then, of course, so many things have happened since which upset that whole concept. I notice that you are still having to revise upward the anticipated production levels. What factors did you take into consideration when you made your new determination for increasing your production capacity, not only for this year but in the long-range terms that you referred to?

Mr. WALLACE. There were so many unknown factors, and that is why we were trying to build up our production capacity. We do not know to what degree people will hoard the existing silver coins once the new coins come into circulation. Our production schedule is such that we can largely replace all existing silver coins in circulation in a matter of 212 years. We do not think this will be necessary for there is no reason why the new coins should not circulate side by side with

the old coins. Nevertheless, we have to be in a position to be able to do that to head off a severe coin crisis were that to occur.

Mr. STEED. Also, in the long-range terms you know there is a natural increase year by year, and you have had to take into account what the needs would be several years from now as a matter of normal growth. Mr. WALLACE. After this year and the following year, I think we will probably have made the transition to the new coins, and at that time I think we will go back to a more normal demand for coins. In fiscal 1964 we produced 4.3 billion coins. With the new Philadelphia facility and the Denver facility operating on the most efficient twoshift basis, we can produce 6 billion coins a year, of which about 1 billion would be the subsidiary coins. That is what I would expect to go back to starting, say, in fiscal 1968. As of now, that would be my expectation.

Mr. STEED. Have there been any changes noted in recent months as to the denominations in terms of demand for coins?

Mr. WALLACE. The problem we have had has been largely with the half dollar, which people still hold for sentimental reasons. Many of them we find are going abroad, which puts a greater strain on the quarter. So, the quarter is a problem. That is why we are producing the new quarter first. In commerce, two quarters can equal a half dollar, and two nickels can equal a dime. It is very difficult to replace the quarter. That is why we are starting on the quarter. Right now, the quarter is the one in which we are experiencing the greatest tightness, except for the half dollar.

Mr. STEED. Have you tried to make a determination as to what you think the impact on your total needs will be by virtue of this alloy change?

Mr. WALLACE. The need for coin production?

Mr. STEED. Yes. I mean in immediate terms. Do you think that will be more than a replacement?

Mr. WALLACE. We estimate at the moment about 112 to 12 billion silver coins in circulation.

Mr. STEED. Normally you would have a need, without changing the alloy at all, for many new coins each year. So, ordinarily, if you continued to produce that additional number you would be able to meet the need. Also, you are having to produce a backlog for what I suppose you would refer to as replacement. What other factors do you have to face by this alloy change? Do you think that requirement will be increased by hoarding, or do you think you will have to be prepared to meet a total replacement problem? Have you had any indication?

Mr. WALLACE. May I go off the record a moment.

(Off the record.)

Mr. STEED. You make justification for $32 million worth of new equipment from supplemental funds. What does that make your total 1966 budget for equipment come to?

Mr. WALLACE. $2,800,000 from supplemental funds and $700,000 from the regular appropriation, a total of $3,500,000.

Mr. STEED. Is this necessitated by the change in alloy, or is this brought about by the increased production?

Mr. WALLACE. Part of it is increased production.

Mr. TATE. The new alloy is authorized to be used, and we have to purchase additional equipment for San Francisco, and for the two mints.

Mr. WALLACE. It is mainly for production.

Mr. TATE. Yes.

Mr. STEED. In terms of this changeover, I believe you said you think 212 years will see the transition completed.

Mr. WALLACE. I think the transition ought to be completed in 2 to 212 years.

Mr. STEED. Mr. Conte.

NEW ALLOY COIN PRODUCTION

Mr. CONTE. You are having some difficulty with the coins that you have before us. Are the difficulties experienced by any one company, or is it generally across the board with the six companies?

Mr. WALLACE. We have gotten deliveries from only two companies so far.

Mr. CONTE. Has it been with both?

Mr. TATE. Could we go off the record. (Off the record.)

Mr. CONTE. You show that the cost of minting 9.3 billion coins is $13,350,000, and then you show the cost of minting 1.9 billion coins as $13,877,000, which is roughly 5 times more comparatively. Can you give some explanation for that? You are asking for $13,877,000 for 1.9 billion coins.

Mr. TATE. Much of the explanation there is in the Director's opening statement. If you recall, we compared the 1-cent pieces with the 25-cent pieces. In our original estimate we had 6,510 million 1-cent pieces as a part of the total of 9.3 billion. In the revised estimate we have reduced the 6,510 million pennies to 2,775 million. But on quarters we had only 465 million in the original estimate, and we have revised that upward to 2,985 million. The money for the quarters was $1,263,000. Now it is $8,809,000.

It is due to the fact that we have cut out the very low-cost item and added large numbers of the high-cost item. At first glance it looks as if there is something out of order there, but when you analyze it by the different denominations, you see what the change between the low- and high-cost denomination does.

Mr. BETTS. There is one other factor, Mr. Conte. The $13,350,000 is the total appropriation to the mint. Only $8,500,000 was included for the manufacture of coins. The rest is for the processing of the gold and silver bullion delivered, for the protection, the guard forces, for the refining, and for Washington executive direction. The total appropriation is $13,350,000.

Mr. CONTE. In your estimated production data you show at the bottom, the middle figure, estimated cost per thousand pieces-for dimes: old alloy, $1.20; new alloy, $1.28; for quarters: old alloy, $2.72; new alloy, $3.01; for 50-cent pieces: old alloy, $4.85; new alloy, $5.04. Why should the new alloy cost more than the old?

Mr. TATE. For some of the reasons that were spelled out in the statement. For example, we need more physical handlers to handle

the new alloy. We need more Engraving Division employees to make the dies. We will need more diesetters.

Mr. CONTE. When you are talking about the alloy, you are not talking about the alloy itself. You are talking about the overall

cost.

Mr. TATE. The cost of processing. The alloy itself is purchased out of the coinage metal fund.

Mr. CONTE. Does this figure include the purchase of that metal? Mr. TATE. NO. That is paid out of the coinage metal fund. You recall we have signed contracts to the value of $58 million. All of that comes out of the coinage metal fund.

Mr. CONTE. In other words, this really is a little misnomer. It is not the alloy you are talking about here. It is the cost of processing the alloy.

Mr. TATE. That is correct, sir.

SEIGNIORAGE

Mr. CONTE. The seigniorage will be greater. There is no doubt about that.

Mr. TATE. Yes.

Mr. CONTE. Could we have some figures on that?

Mr. TATE. Yes.

Mr. CONTE. May we put this in the record, Mr. Chairman? Mr. STEED. Yes; that will be included in the record at this point. (The information follows:)

It is estimated that the seigniorage from the additional coins that will be produced from this supplemental will be from $750 to $800 million in the fiscal year 1966. We had previously estimated $113 million would be derived from seigniorage in 1966 based on the program in the President's budget. Thus, a total of about $900 million is estimated for 1966.

Mr. CONTE. You estimate your seigniorage for fiscal year 1966 will be $900 million.

Mr. TATE. Yes, sir.

Mr. WALLACE. I think we ought to make sure that we understand these figures. The $900 million is total seigniorage. What was included in the budget for fiscal year 1966 before the new program was $113 million. The additional seigniorage if this production schedule is maintained would be on the order of $780 million. However, this does not take account of any possible slipups in delivery of material, production, or anything else. In other words, if there are no delays in the deliveries or production the amount of seigniorage involved would be an extra $780 million.

Mr. CONTE. What would you estimate seigniorage to be for fiscal year 1967?

Mr. WALLACE. Fiscal 1967 depends on how many coins we produce. If we were to produce 7 billion coins, it would be in the neighborhood of $1.5 billion extra. We hope it will not be necessary to produce nearly that amount. At this time, we cannot predict exactly what the coin demand will be. We must know what production will be before we can really estimate the seigniorage for 1967. Then I may say that after we make our transition to the new coins and it goes back to a more

normal level, 5 or 6 billion coins a year, then you get between $100 and $200 million a year.

Mr. CONTE. You are speaking of seigniorage?

Mr. WALLACE. Seigniorage.

COPPER SUPPLY

Mr. CONTE. While we are talking about the fantastic number of coins we are going to mint, how is our copper situation?

Mr. CARWILE. There is a hearing today in the Armed Services Committee of the House on releasing additional copper from the national stockpile. I think if we get that we will be all right.

Mr. CONTE. We have already released some earlier this year.

Mr. CARWILE. That was from the DPA stockpile; yes, sir. We have committed all of that on these contracts we now have. Mr. CONTE. What are you asking for?

Mr. CARWILE. 110,000 tons.

Mr. CONTE. What do we have in stockpile today?

Mr. CARWILE. I am not sure. This has been declared excess to the stockpile needs.

Mr. CONTE. I think you had better provide the figure on what is in the stockpile.

Mr. CARWILE. We can inquire. I think the last we had from them indicated they were keeping 775,000 tons.

Mr. CONTE. You are asking for 110,000 tons?

Mr. CARWILE. Yes; and that is in excess of the 775,000 tons.

Mr. ROBISON. This is release of copper from the stockpile to the mint or to private industry?

Mr. WALLACE. To the mint.

Mr. CARWILE. I think we could ask OEP to give you the stockpile information or get it from OEP. We do not have the exact information on the stockpile.

Mr. CONTE. If you can get it for us, I think it would be good to have it as a part of the record.

(The requested information follows:)

In a letter dated June 23, 1965, the Director of the Office of Emergency Planning advised the Secretary of the Treasury that the present conventional war stockpile objective for copper has been established at 775,000 short tons and that the 110,000 short tons to be released to the mint is in excess of that requirement.

Mr. CONTE. Do we have any problem on the cupronickel?

Mr. CARWILE. No.

Mr. CONTE. That is in excess.

Mr. CARWILE. Yes.

Mr. WALLACE. One of the reasons we are anxious to get that legislation this year is that the copper in the stockpile must be further refined. For the cladding process we must have copper which is electrolytically refined. We have to go through another refining process, which means we need a leadtime of 4 or 5 months. We are anxious to get it this year in order to start the process of refining it so it can be ready to go when we need the material next year.