Central Gold-Trust closes IPO, buys gold (July 28, 2003)

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

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

The underwriters were 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 immediately bought 76,000 oz. gold, consisting of 71,600 oz. physical bullion and 4,400 oz. in certificate form.

The over-allotment was completed in mid-July, and proceeds were used to buy another 11,200 oz. physical gold.

Central Gold-Trust now holds 87,200 oz. gold, consisting of 82,800 oz. physical bullion in the form of two-hundred and seven 400-oz. gold bars, and 4,400 oz. gold in certificate form.

The trust now has 96.1% of its assets in gold, with the balance consisting of Canadian and U.S. dollars.

Gold-Trust is 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 invest 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 of its assets 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, which ever is less.

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