Sprott raises $400 million from gold trust IPO


By Shirley Won
The Globe and Mail, Toronto
Wednesday, March 3, 2010


Gold bullion fever continues.

Sprott Asset Management said Wednesday that it has raised US$400 million from its initial public offering (IPO) of its Sprott Physical Gold Trust at US$10 per unit.

(See final prospectus: http://www.sprottphysicalgoldtrust.com/)

This figure is reminiscent of Claymore Gold Bullion Trust, which raised more than C$400 million last May and has recently converted into an exchanged-traded fund (ETF). It now trades as Claymore Gold Bullion ETF (CGL-T).

Last Friday, Sprott Physical Gold Trust (PHY.U-T and PHYS-N) began trading, respectively, on the Toronto Stock Exchange and NYSE Arca.

The appeal of the Sprott offering is a low management expense ratio of 0.45 percent (compared to 0.65 percent in the preliminary prospectus), while the gold is stored at the Royal Canadian Mint and unitholders can redeem units for the physical gold, said Peter Loach, executive vice-president of product development at Sprott.

The fee for the Sprott gold bullion fund, he said, is attractive when compared with a 3.31 percent MER charged by Toronto-based Bullion Management Group Inc. for its BMG BullionFund, a mutual fund that invests equally in gold, silver, and platinum bullion.

Sprott Gold Trust is overseen by a team consisting of Eric Sprott, John Embry, Charles Oliver, and Jamie Horvat. The trust has also granted its underwriters an over-allotment option to buy up to an additional 6 million units (in addition to the initial 40 million units) at $10 per unit up to 30 days from Feb. 25.

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