Central Gold-Trust closes IPO, buys gold (July 18, 2003)

North America’s first gold trust, Ontario-based Central Gold-Trust (GTU.UN-T) has closed its initial public offering and raised $46 million.

Gold-Trust raised the first C$40 million by placing 2 million units priced at $20 apiece, and then pocketed the remaining $6 million by having the underwriters fully exercise their over-allotment option by buy another 300,000 units at the same price.

The underwriting syndicate was co-led by CIBC World Markets and RBC Capital Markets, and included a who’s who of Bay Street brokers: National Bank Financial, Scotia Capital, TD Securities, Pollitt & Co., Canaccord Capital, Desjardins Securities, Dundee Securities, First Associates Investments, Haywood Securities, HSBC Securities (Canada), Raymond James and Sprott Securities.

With proceeds from the $40-million IPO, Gold-Trust has already bought 76,000 oz. of gold, comprised of 71,600 oz. of physical gold bullion and 4,400 oz. in certificate form, representing 90.6% and 5.6% of the proceeds, respectively.

The $6-million over-allotment purchase was completed on July 17, and proceeds will presumably be used to buy more gold in the short term.

Gold-Trust is the product of a collaboration between the managers behind North America’s only publicly traded bullion fund, Central Fund of Canada (CEF.A-T), and Toronto-based brokers Sprott Securities (T.N.M., May 26-June 1/03).

Gold-Trust’s mandate is to provide a “secure, convenient, low-cost and low-risk investment alternative for investors interested in holding gold bullion.”

Specifically, the trust will do this by investing at least 90% of its assets in 400-oz. bars of physical gold, which will be stored on an unencumbered, allocated and segregated basis in the treasury vaults of CIBC in Canada.

The balance will be invested in gold certificates and cash-related securities in order to meet redemptions.

Units are redeemable at any time for either 90% of the market price of the last 10 trading days or the last closing price, whichever is less.

Unlike physical gold held directly by a Canadian individual, the Gold-Trust units are eligible for Canadian registered retirement savings plans, registered retirement income funds, deferred profit-sharing plans, and registered education savings plans.