Wednesday, November 11, 2009
Earlier today, the new Market Vectors Junior Gold Miners ETF (NYSEArca:GDXJ) from Van Eck Global began trading in New York. This is the first exchange traded fund to focus on the small- and mid-cap gold/silver mining sector and follows the very popular Market Vectors Gold Miners ETF (NYSEArca:GDX). More details are provided by Business Wire:
“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.”There's more from Van Eck Global here.
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%.