Saturday, October 29, 2011

Royal Canadian Mint to offer "Exchange Traded Receipts" for Gold

The Royal Canadian Mint made an interesting announcement yesterday.

The Mint is launching a Canadian Gold Reserves program within which they are offering Exchange Traded Receipts (ETRs).

These 'receipts', according to the Mint, will provide evidence of ownership in physical gold bullion held in the custody of the Mint at it's facilities in Ottawa.

Ian E. Bennett, President and CEO of the Royal Canadian Mint says:
  • "We believe that this new program will build on our reputation and continued success as a world-class custodian of precious metals. With the introduction of the Canadian Gold Reserves ETR program we hope that investors will see this as a convenient, efficient and secure method for investing in and owning physical gold."
According to the Mint Press Release the purchaser of an ETR owns the actual gold rather than a unit or share in an entity that owns the gold, unlike other gold investment products.

The net proceeds of the initial offering will be used to purchase gold on behalf of the initial purchasers of ETRs at the London pm fix price on the closing date of the offering (Closing Date). Subject to certain restrictions, ETR holders will be entitled to redeem their ETRs for physical gold products in the form of 99.99%, or for cash based on the future gold price or market price of the ETRs.

Subject to market conditions, the initial offering of ETRs is targeting an issue size of approximately CAD $250 million. The issue price per ETR will be CAD $20.00 or the USD equivalent and the Per ETR Entitlement to Gold will be determined on the Closing Date and will be reduced daily by an annual service fee of 0.35 per cent. Subject to the satisfaction of certain conditions, the ETRs will be listed on the Toronto Stock Exchange and commence trading on the Closing Date. ETRs will be listed in both Canadian and U.S. dollars and may be traded in either currency.

The ETRs have not been and will not be registered under the U.S. Securities Act of 1933, as amended, and may not be offered or sold in the United States.

The precious metals community has always been highly skeptical of any arrangement where paper claims are offered in place of physical Gold in hand so it will be interesting to see how this is received.

Clearly the Royal Canadian Mint is betting on it's reputation in offering these ETR's.

It will be interesting to keep an eye on this and whether or not the Mint makes a similar offering in Silver.


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  1. I'd rather stick with Sprott, etc... this is too narrowly focused being limited to Canada.

  2. Is it limited to Canada? I think that as Americans we could buy this, it's just not registered with the US Securities Act (which means Uncle Sam can't seize it). Or am I wrong here?

  3. I'll stick to physical thanks.


  5. It's still paper and I can't fondle it like my physical gold.
    Can I take that piece of paper anywhere in the world and trade it for goods or local currency?
    Better than a ETF maybe but that's not saying much.

  6. I think the key element is that, even more than Sprott's PSLV, you actually own the Gold and you can receive the physical. If you have no faith in PSLV you will have no faith in this. If you believe in PSLV, you may be interested in this.

  7. My broker called me on Oct 28 about this. There is no prospectus, only an "Information Statement" that they don't have yet.

    The holder of an Exchange Traded Receipt (ETR) will supposedly get an "undivided interest" in physical gold at the Mint, but that gold does not appear to be segregated or allocated. The amount of gold per ETR will get established at closing in late November. I expect that a distribution cost will come off the top when this closes. Annual service fee is 0.35%.

    ETR holders will have a right to redeem for their choice of physical gold or cash, but the precise terms of this are not clear yet.

    This is really a scheme of tradable certificates issues by a Canadian government agent.

    That may be convenient and better than nothing for Canadian RRSPs, TFSPs, RIFs etc., but it does not seem to me to be direct physical ownership.

  8. Interesting... that's for the contribution. Definately need to watch this as it evolves.

  9. More clear evidence that they're running out of metal. Oldest trick in the book, I'll have to double down on my PM purchases from now on.