THE Western Australian Gold Corporation has got the jump on possible competitors, announcing its intention to issue an Australian Stock Exchange pro-duct giving personal investors and institutions exposure to gold.
The move requires special exemptions from the ASX, which has given The Gold Corporation room to trade on its warrants board.
While the amount that the Gold Corporation hopes to raise in this initial offer is yet to be determined, the corporation’s business development manager, Michael Kile, said it could be more than 50 tonnes – worth an estimated $1 billion based on today’s gold price.
The Perth Mint Gold Quoted Product (PMG) is believed to be the first product of its kind where investors and institutions will be able to buy gold with physical backing.
While a product disclosure statement is not due to be released until February 28, the Gold Corporation decided to pre-empt the issue to let potential competitors and insti-tutions know its intentions.
Mr Kile said it would be an open ended product only limited in scope by the vault space available at the new $15 million Campbell-Forrest House facility at the Gold Corporation, and by investor demand. The new coin manufacturing facility includes a vault with a 100t capacity.
PMG will be structured as a call warrant under ASX Business Rules and be backed by gold owned by Gold Corporation. Its ASX price is intended to track closely the international spot gold price.
A day after Gold Corporation made the statement, Westpac issued its own product statement a gold participation deposit. The deposit is a derivative product that pays investors a return when the spot price of gold expressed in Australian dollars moves over a chosen term in the direction selected.
Westpac equity derivatives manager Tom Halliwell said that, with the volatility
of the equity market, many investors had reverted to what they considered safe havens.
“US dollar weakness is seen as one of the driving forces currently behind the strength in the gold market, combining with continuing geo-political concerns,” he said.
“By linking returns to the performance of gold, investors have the potential to earn returns substantially in excess of those available in traditional deposit investments.
“What we see here is that if investors have a view on one of these markets that proves to be correct over the short term, they could earn significantly enhanced returns on their cash deposit.”
However, Mr Kile said the product he was proposing was different, and was made in response to concerns from investors about whether their investment with bank securities were actually backed by the physical asset. The PMG will be a physical, rather than a virtual, product.
A PMG holder would have the right to exercise the PMG and call for physical delivery of the underlying gold at any time before the PMG’s expiry date.
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