What Would Cause This ?

Looks like acid damage to me.

Our coins are homogeneous throughout. What you're seeing is not a hole in a coating, but a result of the chemical reaction that has taken place between the coin and whatever it was that ate it. Metals, especially alloys, can turn strange colours when they are attacked by corrosive chemicals, often a very different colour to the "natural" colour of the metal. In this case, I suspect the corrosive substance seems to have eaten away preferentially at the aluminium and zinc components of the alloy, leaving the copper behind and making the surface more coppery-coloured.

If you want to see funky coloured coins, try dipping a corroded copper coin in ammonia solution. The corrosion will dissolve, but in the pitting left behind will likely be a very un-natural-looking shade of almost-fluorescent orange.

Thanks for that Sap and Markn, I was thinking along the same lines.I just did't know which acid would react just with the aluminium. I know that HCl acid reacts quite explosively with aluminium but not sure what it does with the copper.