Expert: Dmitry Livshits - 8/30/2011

Question
I have been collecting Philippine coins for about 12 years now, ranging from old Spanish through American colonization to current, and one particular category that concerns me now is the proof coins, and most specifically regarding the 1974 proof set.
The Klause catalog states that the 1974 Proof set was not released to the general public, but nevertheless mentions that there were 10,000 such sets made, and lists rather nominal values for the individual coins from that set, and for the set itself.  This "not released to the general public" business nearly appears to be true, in view of how they almost never seem to show up for auction, especially in comparison to the proof sets starting with 1975 onward.  The one account I once heard about them was that they were not well packaged, and as such were deemed unsalable, and so have virtually not appeared anywhere on the market.
A couple years ago someone had found three of them for me, which I promptly bought, despite their issues.  Unlike the 1975 and beyond Philippine proof sets, the 1974 set is packaged very much as was the US proof sets from 1968 to that point, in a blue cardboard box and in that a hard plastic frame surrounds clear hard plastic cladded with a holed material that holds the coins, with the one difference that the surface is purple instead of black as in the US proof sets of the time.
The reports of the sets not being very well packaged for the sake of the coins are quite correct, as the coins themselves are in varying states of chemical corrosion.  The Cupro-nickel coin surfaces (for 10 Sentimo through 1 Piso) as often as not have this ugly pasty white toning around the edges, but I figure that if I were to break open the three sets that I have and mix and match coins I could assemble a credible set of the Cupro-nickel denominations (and where they don't have that toning they are gorgeous brilliant proofs).  The aluminum 1 Sentimo coins seem altogether unaffected by their environment and therefore all in the most excellent condition.
It is the brass 5 Sentimo coin(s) that are my principle concern.  In two of the three sets that I have, the 5 Sentimo coins have become little more than rusted lumps, with a small round area of proof-like surface in the center of each face.  I think I have to write those two off.  The third shows some evidence of rust around the edges, but better than 95% of each face is clear and still fully proof-like, though the brass is just slightly grayish toned.
I am seriously thinking of breaking at least two, or probably all three sets to get the coins individually slabbed, but I am a little concerned as to whether I can even get the 5 Sentimo slabbed on account of the rust.
I really like having my coins slabbed by PCGS, as virtually every slabbed coin has been slabbed by them.  But then something happened with attempting to have some other Philippine proofs slabbed by PCGS.  Having paid the fees and filled out the forms correctly, in three cases (1903 20 Centavo, 50 Centavo, and 1 Peso) instead of slabbing them they returned the coins in plain plastic envelopes with a little notice stating "environmental damage"!  Well excuse me, but isn't the whole point of having a grading service is to quantify the degree of environmental damage that has happened to a coin?  I don't see any way for a coin to NOT have environmental damage except if it would be properly gradable as MS70 or PF70.  There does not seem to be any forum with PCGS to challenge their action or demand an explanation, so for the past couple years or so I instead turned my attention from coins to banknotes.  But now as I want to return to coins a bit I am rather spooked by PCGS, though I still would like to have them do the slabbing, if they are willing to actually do it.
What is the risk of my 1974 proofs (especially 5 Sentimo) being rejected for slabbing by PCGS?  Should I open the mint packaging and send the coins in some other packaging that might be better for them in going through the mails (heat humidity, presence of whatever chemical environment caused the discoloration/rusting) or send them in their present mint packaging and risk their further degradation?  I am also rather loath to destroy the packaging it is also has to be getting quite rare, but as it may be yet further destroying the coins, perhaps I must?
I wouldn't ordinarily worry about the preservation of a recent mass-produced proof coin which is already rusting, but my suspicion is that most (or even nearly all) of the original 10,000 1974 proof sets were either destroyed, put into circulation, or still rotting away in some hot and humid Philippine warehouse somewhere.  My only slightly rusty 5 Sentimo piece could well be among the best of what miniscule handful of tolerable specimens of that coin as might exist at all now.

Answer
Hi Griff,
By the sounds of it the cased sets were compromised by humidity, which is the only thing that will cause brass coins to heavily rust inside plastic casing. The white paste on the copper-nickel coins may very well be removed with a light soaking in pure acetone, which is an excellent way to remove organic surface materials without compromising the surfaces themselves. The rust on brass coins cannot be safely removed, since it's become fused with the surface instead of just sitting on top of it.
Unfortunately when it comes to slabbing by a reputable company, even a little rust means it will not be slabbed, or will be slabbed as a details grade only (does not apply to proofs). I do not believe PCGS slabs coins as "impaired proof", though some of the less reputable companies do have that category.
They will only slab coin with a details grade that have been professionally restored by NCS, another company that works closely with NGC and PCGS.
Environmental damage is independent of grade. An MS-70 coin with environmental damage gets and UNC details grade, while a coin that is well worn and has environmental damage will get VG details or something like that, but no specific number grade. I can understand your frustration at having the coins returned, especially since the environmental damage can be very difficult to tell apart from natural toning. In the case of Philippine coins like the three you mention, the issue is most likely that they had been sea salvaged (after US troops dumped tons of the silver coins into the sea to keep them out of Japanese hands). Such coins account for a significant percentage of early US administration Philippines coins and, technically speaking, due to salt water exposure can not be slabbed with a normal number grade. This would not be fair to the potential buyers, who would then be paying top dollar for an imperfect coin while thinking it was just normally toned. In this manner, slabbing a coin can actually work to decrease it's value compared to if it were sold as a raw, unslabbed coin.
I hope I've sufficiently answered your question.
Thanks! =)