New York-based asset manager Van Eck Global today launched Market Vectors™ Junior Gold Miners ETF (ticker: GDXJ) on the NYSE Arca.
GDXJ is the first Exchange-Traded Fund (ETF) in the country to provide investors with concentrated access to “juniors,”—small- and mid-cap mining companies which generally represent a dynamic subset of the global gold-mining industry as many are companies actively engaged in developing new sources of gold either through greenfields exploration or use of new geologic models to prospect for gold in overlooked or abandoned properties.
“Junior miners represent an early stage opportunity similar to a venture capital investment, the potential exists for high growth, but significant risks exist as well,” said Jan van Eck, Principal at Van Eck Global. “At a time when global gold production has been dropping while demand has been on the rise, nimble young companies with attractive projects are potentially both a key source of new gold production and attractive takeover targets for more established players in the field.”
As they are typically early–stage companies, there are several risks associated with investing in junior miners. Many juniors operated at a loss in 2008 and approximately a third of the companies in the Fund’s underlying index had negative cash flow on a trailing 12-month basis as of June 30, 2009. Juniors are particularly vulnerable to the price trend of gold as a drop in gold prices could affect their profitability as well as their ability to secure financing to develop new and existing properties, among other things.
GDXJ seeks to replicate as closely as possible, before fees and expenses, the price and yield performance of the Market Vectors™ Junior Gold Miners Index (ticker: MVGDXJ), a rules-based, modified market cap-weighted, float-adjusted index comprised of a global universe of publicly traded small- and mid-capitalization companies that generate at least 50% of their revenues from gold or silver mining. The Fund carries a gross expense ratio of 0.68% and a net expense ratio of 0.60%.
As of September 30, 2009, the weighted average market capitalization of the index’s constituents was $850 million. As of the same date, the six countries in GDXJ’s underlying index by weighting were Canada (62.6%), United States (21.8%), Australia (11.2%), South Africa (2.4%), China (1.3%) and United Kingdom (0.7%).
GDXJ joins its “big brother,” Market Vectors Gold Miners ETF (NYSE Arca: GDX), which seeks to track an index that focuses on the larger companies in the global gold-mining industry. As of September 30, 2009 the weighted average market capitalization of GDX’s constituents was $15.2 billion. GDX, which launched in 2006, has gathered more than $5 billion in assets and is one of the 100 largest ETFs in the United States as of September 30, 2009.
Van Eck Global has been a leader in commodity-related investment products and has been managing gold-related investments since 1968, when the firm launched the nation’s first actively managed gold fund, the Van Eck International Investors Gold Fund (INIVX). The Fund’s manager, Joe Foster, who currently allocates a portion of his portfolio to juniors, said “higher gold prices and new geologic models are helping bring new discoveries, many of which were made by junior-mining companies around the globe.”
“We believe the two key themes driving the gold market right now are gold as an alternative to paper currency and gold as a hedge against potential inflation,” said Foster. “While there have been no onerous levels of inflation so far in this gold cycle, firming commodities prices and the liquidity being created by current monetary policies could eventually bring much higher levels of inflation.”
In addition to the two gold-mining ETFs, Van Eck Global also offers other Market Vectors ETFs focused on hard assets, emerging markets, and municipal bonds. Market Vectors ETFs had a total of approximately $9.7 billion in assets under management as of September 30, 2009, making Van Eck the 6th largest provider of ETFs in the U.S.
About Van Eck Global
Founded in 1955, Van Eck Associates Corporation was among the first U.S. money managers helping investors achieve greater diversification through global investing. Today the firm continues this 50+ year tradition by offering global investment choices in hard assets, emerging markets, precious metals including gold, and other specialized asset classes.
Market Vectors exchange-traded products have been offered by Van Eck Global since 2006 when the firm launched the nation’s first gold mining ETF. Today, Market Vectors ETFs and ETNs span several asset classes, including equities, municipal bonds and currency markets.
Van Eck Global also offers mutual funds, insurance trust funds, separate accounts and alternative investments. Designed for investors seeking innovative choices for portfolio diversification, Van Eck Global’s investment products are often categorized in asset classes having returns with low correlations to those of more traditional U.S. equity and fixed income investments.
The Market Vectors Junior Gold Miners Index (the “Index”) is the exclusive property of 4asset-management GmbH, which has contracted with Structured Solutions AG to maintain and calculate the Index. Structured Solutions AG uses its best efforts to ensure that the Index is calculated correctly. Irrespective of its obligations towards 4asset-management GmbH, Structured Solutions AG has no obligation to point out errors in the Index to third parties.
The Market Vectors Junior Gold Miners ETF is not sponsored, endorsed, sold or promoted by 4asset-management GmbH and 4asset-management GmbH makes no representation regarding the advisability of investing in the Fund.
Gold- and silver-related investments are subject to risks including bullion price volatility, changes in world political developments, competitive pressures and risks associated with foreign investments. In times of stable economic growth, the value of gold, silver and other precious metals may be adversely affected. Mining companies are subject to elevated risks, which include, among others, competitive pressures, commodity and currency price fluctuations, and adverse governmental or environmental regulations. In particular, small- and mid-cap mining companies may be subject to additional risks including inability to commence production and generate material revenues, significant expenditures and inability to secure financing, which may cause such companies to operate at a loss, greater volatility, lower trading volume and less liquidity than larger companies. Investors should be willing to accept a high degree of volatility and the potential of significant loss. The Fund may loan its securities, which may subject it to additional credit and counterparty risk.
Fund shares are not individually redeemable and will be issued and redeemed at their NAV only through certain authorized broker-dealers in large, specified blocks of shares called “creation units” and otherwise can be bought and sold only through exchange trading. Creation units are issued and redeemed principally in kind. Shares may trade at a premium or discount to their NAV in the secondary market.
Investing involves risk, including possible loss of principal. An investor should consider investment objectives, risks, charges and expenses of the investment company carefully before investing. To obtain a prospectus, which contains this and other information, call 1.888.MKT.VCTR or visit vaneck.com/gdxj. Please read the prospectus carefully before investing.