Van Eck's Highly Anticipated Market Vectors Junior Miners ETF Is Set for Its Debut 13 comments
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Van Eck’s Market Vector Junior Miners ETF is set for trading to begin on Wednesday, November 11, 2009 under the ticker symbol (GDXJ). The arrival of this ETF couldn’t come at a better time as gold continues to reach new all time highs. Investors looking to get into the gold craze have found it to be worth investing in gold miners as the current Market Vectors Gold Miners ETF (GDX) has outperformed the SPDR Gold ETF (GLD) by a substantial amount. See the chart below:
The Market Vectors Junior Miners ETF will represent the “Junior Gold Miners Index (MVGDXJ)” and have a total net annual operating expense of .60%. The ETF will represent 38 junior mining and exploration companies that have mining potential. Here is a look at a few of the key principal investment objective and strategies of the fund that we found in the SEC filing below: (See The Whole SEC Filing)
- Investment Objective: The Fund’s investment objective is to replicate as closely as possible, before fees and expenses, the price and yield performance of the Market Vectors Junior Gold Miners Index (the “Junior Gold Miners Index”). For a further description of the Junior Gold Miners Index, see “Junior Gold Miners Index.”
- Principal Investment Policy: The Fund will normally invest at least 80% of its total assets in securities that comprise the Fund’s benchmark index. This 80% investment policy is non-fundamental and requires 60 days’ prior written notice to shareholders before it can be changed.
- Indexing Investment Approach: The Fund is not managed according to traditional methods of “active” investment management, which involve the buying and selling of securities based upon economic, financial and market analysis and investment judgment. Instead, the Fund, utilizing a “passive” or indexing investment approach, attempts to approximate the investment performance of the Junior Gold Miners Index by investing in a portfolio of securities that generally replicates the Junior Gold Miners Index.
- Market Capitalization:The Junior Gold Miners Index is composed of securities of small-and medium-capitalization companies selected by the Index Provider on the basis of their relative market capitalization weighting in the gold mining and silver mining industries. As of August 28, 2009, the Junior Gold Miners Index included companies with a market capitalization range of between approximately $190 million and $1.25 billion with an average market capitalization of $560 million across the 38 securities in the Junior Gold Miners Index at that date. The market capitalization range of companies in the Junior Gold Miners Index may change at each quarterly rebalance date.
- The Junior Gold Miners Index (the “Junior Gold Miners Index”) is a rules based, modified capitalization weighted, float adjusted index intended to give investors a means of tracking the overall performance of publicly traded companies of small-and medium-capitalization that are involved primarily in the mining for gold and/or silver. The Junior Gold Miners Index includes common stocks and depositary receipts of U.S. and foreign companies that are involved in mining for gold and/or silver and that are listed for trading on a leading stock exchange.
- Constituent stocks for the Junior Gold Miners Index must have a market capitalization of greater than $150 million on a rebalancing date to be eligible for the Junior Gold Miners Index. Stocks whose market capitalization falls below $75 million as of any rebalancing date will no longer be eligible for the Junior Gold Miners Index. Stocks must have a three-month average daily trading volume of at least $1 million to be eligible for the Junior Gold Miners Index and issuers of such stocks must have traded at least 250,000 shares each month over the last six months.
Here is a detailed list of the Junior Gold Miners Index (MVGDXJ) we put together using Van Eck’s site as a reference. (This list is subject to changes and errors)
| Market Vectors Junior Gold Miners Index (MVGDXJ) Constituents | ||||
| Company Name | Ticker Symbol | ETF % | Company Website | |
| 1 | Alamos Gold Inc. | AGI.TO | 5.11% | alamosgold.com |
| 2 | Allied Nevada Gold Corp. | ANV.A | 2.22% | alliednevada.com |
| 3 | Andean Resources Ltd. | AND.TO | 2.99% | andean.com.au |
| 4 | Aurizon Mines Ltd. | (AZK) ARZ.TO | 3.52% | aurizon.com |
| 5 | Avoca Resources Ltd. | AVO.AX | 2.06% | avocaresources.com.au |
| 6 | Avocet Mining PLC. | AVM.L | 0.88% | avocet.co.uk |
| 7 | Coeur d’Alene Mines Corp. | (CDE) CDM.TO | 6.20% | coeur.com |
| 8 | Colossus Minerals Inc. | CSI.TO | 0.89% | colossusminerals.com |
| 9 | Detour Gold Corp. | DGC.TO | 1.38% | www.detourgold.com |
| 10 | Dominion Mining Ltd. | DOM.AX | 1.33% | dml.com.au |
| 11 | European Goldfields Ltd. | EGU.TO | 2.13% | egoldfields.com |
| 12 | Fronteer Develop. Group Inc. | (FRG) FRG.TO | 2.37% | fronteergroup.com |
| 13 | Gabriel Resources Ltd. | GBU.TO | 1.55% | fronteergroup.com |
| 14 | Gammon Gold Inc. | (GRS) GAM.TO | 4.32% | gammongold.com |
| 15 | Gold Wheaton Gold Corp. | GLW.V | 1.07% | goldwheaton.com |
| 16 | Golden Star Resources Ltd. | (GSS) GSC.TO | 3.31% | gsr.com |
| 17 | Great Basin Gold Ltd. | (GBG) GBG.TO | 2.54% | greatbasingold.com |
| 18 | Hecla Mining Co. | (HL) | 3.80% | hecla-mining.com |
| 19 | Jaguar Mining Inc. | JAG.TO | 3.67% | jaguarmining.com |
| 20 | Kingsgate Consolidated Ltd. | KCN.AX | 2.96% | kingsgate.com.au |
| 21 | Kirkland Lake Gold Inc. | KSI.TO | 2.41% | klgold.com |
| 22 | Lake Shore Gold Corp. | LSG.TO | 1.78% | lsgold.com |
| 23 | Medusa Mining Ltd. | MML.AX | 1.22% | medusamining.com.au |
| 24 | Lingbao Gold Co Ltd. | 3330.HK | 0.52% | lbgold.com |
| 25 | Minefinders Corp Ltd. | (MFN) MFL.TO | 2.79% | minefinders.com |
| 26 | New Gold Inc. | (NGD) NGD.TO | 6.13% | newgoldinc.com |
| 27 | Northgate Minerals Corp. | (NXG) NXG.TO | 3.11% | northgateminerals.com |
| 28 | Novagold Resources Inc. | (NG) NG.TO | 2.74% | novagold.com |
| 29 | Real Gold Mining Ltd. | 0246.HK | 0.80% | realgoldmining.com |
| 30 | Romarco Minerals Inc. | R.V | 1.69% | romarco.com |
| 31 | Rubicon Minerals Corp. | (RBY) RMX.TO | 2.17% | rubiconminerals.com |
| 32 | San Gold Corp. | SGR.V | 3.73% | sangoldcorp.com |
| 33 | Semafo Inc. | SMF.TO | 2.71% | semafo.com |
| 34 | Silver Standard Resources Inc. | (SSRI) SSO.TO | 6.70% | silverstandard.com |
| 35 | SilverCorp Metals Inc. | (SVM) SVM.TO | 3.10% | silvercorpmetals.com |
| 36 | St Barbara Ltd. | SBM.AX | 1.60% | stbarbara.com.au |
| 37 | US Gold Corp. | (UXG) UXG.TO | 1.24% | usgold.com |
| 38 | Ventana Gold Corp. | VEN.TO | 1.21% | ventanagold.com |
We believe the Market Vectors Junior Miners ETF (GDXJ) will become a very liquid and popular ETF and are excited to finally see it come to the market.
Disclosure: No Positions
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This article has 13 comments:
Anyone interested in this fund should read Jeff Nielson's blog today.
> Update:
>
> Anyone interested in this fund should read Jeff Nielson's blog today.
--------
Indeed. Excerpts from his blog:
seekingalpha.com/insta...
"Unfortunately, the “small print” in the prospectus also gives potential investors in this fund a good reason for worry: the intention of the fund to invest in “derivative” investments. This category of investments is described as “swaps, options, warrants, futures contracts, and currency forwards”. The prospectus warns that investments in these instruments could result in losses exceeding 100% of the amount invested.
It gets worse. The fund intends to have at least 80% of its capital invested in the core assets around which the fund is based. However, this does not mean it will have at least 80% of those dollars invested in the shares of these companies. The company stated that these “derivatives” would be considered part of the core assets of this fund (meaning part of that 80% core). This means that theoretically the fund could hold 0% mining shares, and all derivative instruments.
Obviously that is an extremely unlikely scenario. The point, however is that there is no possible excuse for deviating into these especially risky assets. In a recent dialogue with readers, I pointed out that one of the exploration “juniors” I'm currently holding has already registered more than a 20-fold gain in its share price off of last fall's lows (i.e. a return in excess of 2000% in one year).
Apparently, the people managing this fund don't think that they can achieve a high enough return through investing in mining equities alone. ...
There are two ways to play this: trade shares of the ETF (which is what the vast majority of brokers and personal financial advisers will tell their clients, so a heck of a lot of shares will be traded), or trade shares of the stocks in the ETF's list of holdings. For the time being, I'm doing the latter. IPOs of ETFs are tricky, and ETFs (e.g., SMN) don't always perform like the label implies they will (Jeff's point, again).
If people buy a large volume of GDXJ shares, and they almost certainly will, it will pull up the demand/supply curve for many of these small miners, and share prices of the small miners’s stock will also be pulled upwards. GDXJ share prices should leverage GLD and GDX, all things being equal, and volume of GDXJ shares traded will increase the extent to which the individual small miner stocks leverage the price of gold and leverage the value of the gold miner sector.
In the same way GLD's bullion holdings raise the price of gold when lots of new shares of GLD are bought, an increase in the volume of GDXJ outstanding shares will raise the prices of small miner stocks. I’m betting that will happen in the next week or two, as this new ETF catches on, and it will pull up share prices of the junior miners.
Some of the stocks, like GRS and JAG and NXG, have terrific fundamentals right now, and they should do very well as GDXJ pulls their share prices up while their fundamentals combined with the rising price of gold have the same effect.
On Nov 11 12:20 PM yellowhoard wrote:
> Update:
>
> Anyone interested in this fund should read Jeff Nielson's blog today.
On Nov 11 12:52 PM JeffDB wrote:
> On Nov 11 12:20 PM yellowhoard wrote:
> are there sufficient junior shares available to do anything else
> but an indirect representation? how else to sample junior world
> and provide liquidity?
----------
I think I know what you're saying, but hopefully you won't mind me paraphrasing to make sure.
Are you saying that you think the demand for this ETF would overwhelm the juniors' such that it would move the share prices too far from everyone getting in or dropping them too far if too many people wanted to exit at roughly the same time?
and further, that the best way then for all these additional investors to mimic what they could have if there were more shares or more juniors to go around, or if there weren't so many new investors, would be for them to buy some shares but to augment that with derivatives intended to pay off in similar fashion to the underlying shares in the ETF?