Canadian mint considers creating ETF for precious metals

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Mint Sees Gold (and Silver) in TSX Offering; Considers Launching ETF-like Product

Paul Waldie
The Globe and Mail, Toronto
Wednesday, July 26, 2006

http://www.theglobeandmail.com/servlet/story/RTGAM.20060726.wxrmint26/BN...

The Royal Canadian Mint is considering launching an investment product on the Toronto Stock Exchange as a way of tapping into the growing demand by investors for precious metals.

The Mint is trying to develop "a new type of investment" that would be listed on the TSX and be eligible for registered retirement savings plans, according to a tender document released last week by the Crown corporation. The investment is expected to track the price of gold and silver in much the same way as an exchange-traded fund, or ETF.

"We're looking at everything," said David Madge, executive director of bullion and refinery services at the Mint. "It would be premature to say we are looking at one thing or another thing. We want to look at what's out there and what the possibilities are."

The Mint put out the tender for "legal advisory services" to help structure the product. According to the tender document, the corporation wants advice on how to design the investment, ensure that it qualifies for RRSPs, and get it listed on the TSX either through an initial public offering or a private placement. The total budget for the development is between $500,000 and $1-million, the document noted.

Mr. Madge did not put a time frame on the project, but said: "I'd really like to come back to you in three months ... once we get some feedback as to what direction we are going to go in."

With the price of gold and silver hitting record highs in recent months, investors have been clamouring for new ways to buy the metals.

That demand has spurred the creation of several ETFs that mirror the price of gold, silver, platinum, and other commodities, including oil.

Exchange-traded funds trade like shares and they have become a popular way to invest in precious metals without buying the physical commodity.

The Mint has been following the growing investor demand with interest, Mr. Madge said. Its own sale of silver coins has been hitting record levels in recent months as the price of that metal has soared.

"Silver Maple Leaf coin sales right now have gone through the roof. They are just flying out faster than we can make them, which is a good thing," he said.

The Mint has the capacity to refine about six million ounces of gold annually and it recently began refining silver as well. Most of the refined metal is used to produce coins -- regular currency and specialty products -- as well as gold and silver bars and wafers.

Last year the federal government changed the regulations for RRSPs and expanded the list of qualified investments to include gold and silver bullion coins and bars, as well as certificates for those investments. Mr. Madge said those changes prompted the Mint to start thinking about new investment opportunities.

If the Mint goes ahead with its plans, it will be among the few in the world to move into the investment market. The Perth Mint in Australia has gold and silver certificate programs that allow investors to purchase these metals without holding the commodity. Three years ago, the Perth Mint also developed the Perth Mint Gold Quoted Product, which is a warrant listed on the Australian Stock Exchange that tracks the price of gold.
Mr. Madge said most mints are government agencies that are not required to turn a profit.

However, the Canadian mint operates like a business, and it is constantly looking for new sources of revenue, he said. "We're looking at anything we could do that would make a profit and offer a good service to our customers and the industry," Mr. Madge said. Last year, the Mint's revenue increased 32 percent to $435.9-million, but its profit fell to $8.7-million from $10.6-million the year before.