Canada to drop penny from circulation in 2013

OTTAWA - Canada will no longer circulate the one-cent penny as of Feb 4, 2013, Finance Minister Jim Flaherty announced Monday.

In his 2012 federal budget delivered in March, Flaherty said the Royal Canadian Mint would stop distributing the coins, worth 1/100th of a Canadian dollar ($0.9983), this fall since it costs 1.6 cents to produce each penny, or 11 million Canadian dollars annually.

However, Ottawa delayed the move to a penny-less marketplace after consulting with small business and retailers who requested the transition date occur after the busy Christmas holiday shopping season.

The federal Finance Department also said the new date would enable charities to hold special "penny drive" fundraising campaigns to collect the coins before they're out of circulation.

With the penny officially out of circulation early next year, the federal government expects a slight increase in demand for higher-denomination coins, such as the five-cent nickel, 10-cent dime and 25-cent quarter, resulting in a rise in net-coinage revenues.

25 years ago, Canada dropped its one-dollar bill and replaced it with a gold-colored coin dubbed the loonie because it featured the image of a common loon, a bird familiar in Canada's lake country, on one side. In 1996, the two-dollar bill was also replaced with a nickel and copper coin - the toonie - that features an adult polar bear on the reverse.

The federal government says dropping the one-cent penny will result in environmental benefits. The mint will be able to reduce the use of base metals in its coin-production process and metals from pennies (composed mainly of steel) will be recycled. Ending their production will also save energy used to make, transport and distribute pennies.

Over the past five years alone, about 7,000 tons of the coins have been produced and distributed annually.

Canada's last penny was produced in early May.

However, the coin will remain legal tender in Canada and non-cash payments (such as through debit, credit cards and checks) will still be settled to the cent. If the coins are unavailable, cash transactions will be calculated to the nearest five-cent increment.

For instance, the price of a 1.01 (one dollar and one cent) or 1.02-dollar item would be rounded down to one dollar, 1.06 or 1.07 rounded down to 1.05, while a 1.03 or 1.04-dollar item would be rounded up to 1.05 dollars, 1.08 or 1.09-dollar rounded up to 1.10 dollars.

The formal end to the penny's production in Canada follows the end of production or removal from circulation of low-denomination coins in other countries such as Britain, Australia, New Zealand, Switzerland, Brazil and Israel.

In use since 1858 - nine years before Canada became a country - the penny was made of copper until 1997.