DESPITE being first out of the blocks to announce its intention to offer investors gold bullion through Australian Stock Exchange tradeable securities, Perth Mint has been out-gunned by another private offering.
In what is believed to be a world’s first, investors in Gold Bullion Securities have the ability to buy a direct interest in bars of gold, and not just a promise by a bank or other party to pay in gold.
The offering almost mirrors the Perth Mint Gold Quoted Product (PMG) first flagged in January. While release of the PMG was expected to investors on February 28, Gold Corporation business development manager Michael Kile said the product disclosure statement was likely to be available sometime later this month.
Although initially hoping to beat Gold Bullion Securities to the boards, Mr Kile said it would not stop the Perth Mint product from going to market despite his concerns with the depth of interest in the Australian market.
“I’m not sure that the Australian market is big enough for two products,” he said.
Yet while both products would offer investment into a physical gold product, according to Mr Kile a point of difference was that the PMG product would have gold housed in Perth, rather than London, giving investors easier access to the gold when the shares are redeemed.
In addition, the PMG product will have the backing of government guarantees.
In the case of Gold Bullion Securities, which is backed by executive chairman and managing director of Investor Resource Limited, Graham Tuckwell, the physical gold is insured and held in London vaults by the custodian bank, HSBC Bank USA.
Each gold security gives the investor a tenth of an ounce of gold bullion.
On listing day last week investors bought more than 700 ounces of gold, while the price of the securities closely tracked the gold price throughout the day, trading at a small premium of less than 0.9 per cent of the gold price.
The bid-offer spread was just 5 cents per security, equivalent to 50 cents per ounce, compared with the approximate $1.50 spread in the spot gold market.
Gold Bullion securities is a joint initiative between the World Gold Council and the Australian company Gold Bullion Limited, wholly owned by Investor Resources Limited.
World Gold Council chief executive Jim Burton said buying gold through securities offered significant advantages to investors.
“In the past, many investors have found investing in gold a cumbersome and costly process. Retail and institutional investors have encountered barriers to entry in the form of difficulties with purchase, storage and insurance,” Mr Burton said.
“The securisation of gold, as proposed by Gold Bullion Limited in this Australian initiative, is a means of addressing these issues.”
ITC’s new MIS offering
INTEGRATED Tree Cropping Limited subsidiary ITC Project Management Limited recently lodged its managed investment scheme prospectus with the Australian Securities and Investment Commission. The company says it has introduced a number of innovations in its new investment projects for 2003, which will comprise pulpwood, solidwood and sandalwood.
ITC managing director Tony Jack said the new investment structure effectively meant ITC was co-investing with growers in the outcome of the projects.
Investors will pay for the establishment of the plantations while ITC will commit to maintaining the trees through to harvest for a share of around 50 per cent of the harvest proceeds.
“One of the big drawbacks for forestry investment is the time scale, with many investors not prepared to commit to making ongoing payments for a 10 or 15 year project,” Mr Jack said.
“With the new structure, investors make no commitment beyond the first year but, depending on their circumstances, can chose to make additional tax deductible payments during the project’s life and increase their investment in the project.”
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