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Sprott Gold Miners Exchange Traded Fund (NYSE: SGDM) seeks to deliver exposure to the Sprott Zacks Gold Miners Index (NYSE: ZAXSGDM). The Index aims to track the performance of large to mid-capitalization gold companies whose stocks are listed on major U.S. exchanges.
The Index uses a transparent, rules-based methodology that is designed to identify 25 gold stocks with the highest beta† to the spot price of gold, with each stock's weighting in the index adjusted based on its quarterly revenue growth on a year-over-year basis and the quality of its balance sheet, as measured by long-term debt to equity. The Index is rebalanced on a quarterly basis to incorporate the latest financial data into the screening process. The Index can also invest to a lesser degree in silver companies that meet the above criteria.
Why Sprott Zacks Gold Miners Index?
- The Index seeks to outperform a purely passive representation of the gold and silver mining industry
- Transparent, rules-based methodology designed to overweight gold stocks with attractive investment merits relative to the other stocks in the index
- Weighting methodology seeks to emphasize gold stocks with the highest quarterly revenue growth measured on a year-over-year basis and stronger relative balance sheets as measured by long-term debt to equity
- The stock selection and index weighting criteria were co-developed by Sprott Asset Management, a leading, long-time gold sector investor, and Zacks Index Services
- Quarterly rebalancing seeks to ensure that the latest company results are reflected in the composition and weighting of the index
Why Invest in Gold Miners?
- Strong demand for gold, particularly from China, Russia and India
- Gold miners are trading at multi-year lows based on a number of valuation metrics3
- Gold miners have underperformed the price of gold since April 20114
- Many gold companies have reduced their costs in response to a lower gold price4
- Gold equities provide exposure to gold and may provide high beta† to a rising gold price5
- Low historical correlation to traditional asset classes
3 Bank of Nova Scotia.
4 Bloomberg – gold equities represented by the AMEX Gold BUGS Index.
5 Gold price is a key factor driving the overall profitability of gold mining companies, and their stock price. Assuming that in the short term mining company's expenses are constant, an increase in the price of gold contributes directly to the profitability of the company.
Sources: World Gold Council (www.gold.org), Bank of Nova Scotia, Bloomberg
Sprott Junior Gold Miners Exchange Traded Fund (NYSE: SGDJ) seeks to deliver exposure to the Sprott Zacks Junior Gold Miners Index (NYSE: ZAXSGDJ). This factor- based Index aims to track the performance of small-capitalization gold companies whose stocks are listed on major U.S. and Canadian exchanges.
The Index uses a transparent, rules-based methodology that is designed to identify between 30 to 40 junior gold stocks with market capitalization between $250 million and $2 billion. Excluding companies with market capitalization below $250 million aims to exclude very early stage exploration companies whose historical success rate is low.
Each stock’s weighting in the Index is adjusted based on 2 company factors 1) Revenue Growth and 2) Price Momentum. The Index is reconstituted on a semi-annual basis, in November and May, to incorporate the latest factor scores into the selection and weighting process. The Index can also invest to a lesser degree in junior silver companies that meet the above criteria.
Why Sprott Zacks Junior Gold Miners Index?
- The stock selection and weighting criteria were co-developed by Sprott Asset Management LP, a leading, long-time gold sector investor, and Zacks Index Services.
- The Index seeks to outperform a passive representation of the junior gold and silver mining industry.
- The Index methodology tends to favor junior and intermediate producers versus early stage exploration companies whose historical success rate is low.
- The factor-based Index methodology seeks to emphasize companies with the strongest relative revenue growth and price momentum, two factors that historically have been strong predictors of long-term stock performance for junior gold miners.
- Semi-annual rebalancing seeks to ensure that the latest company results are reflected in the composition and weighting of the Index.
Why Invest in Junior Gold Miners?
- Sentiment is extremely negative – the junior gold stock sector is down over 80% since its market high in late 2010*
- High-value discoveries and mine development can create enormous upside potential
- Shares in junior gold miners can be highly sensitive to the price of gold
- High-quality junior miners are potential acquisition targets for senior miners
* NYSE Arca Junior Gold BUGS Index, February 28, 2015