The Canadian Mint Announces Silver ETR, but ‘Redeeming’ Your Silver May Not Be So Easy

Last week The Royal Canadian Mint announced that it will make an initial public offering of $100 million in silver exchange-traded receipts.  This comes after the success of the Mint’s Gold ETR last year.

MineWeb reports that “The Mint will offer exchange-traded receipts, priced at $20 each, Proceedings from the C$100 million offering will be used to purchase silver bullion. … The silver ETRs will trade on the TSX and will be redeemable once a month for either cash or silver bullion.”

However, a careful read of the ETR’s prospectus, reveals that physically redeeming your silver is a complicated process that is subject to “suspension” and “Any declaration of suspension made by the Mint shall be conclusive.”

The investor’s silver is unallocated and the initial “co-ownership interest” represented by each $20 ERT will be “0.619525 of one troy ounce of physical silver bullion” with a formula determining the ETR share thereafter.

The physical redemption option is only available “for a minimum of 5,000 ETRs,” this is an investment of $100,000.

There are several steps and forms involved in the redemption process and the redemption process can be cancelled if not done correctly, “Any Physical Silver Redemption Notice that does not meet the requirements of this Section 9, as determined by the Transfer Agent and the Mint, in their sole discretion, will for all purposes be void and of no effect.” The investor is also responsible for the pick-up, transfer and delivery of the physical silver.

But the biggest redemption concern is the “Suspension of Redemptions” clause.

“The Mint may suspend the right of an ETR Holder to redeem its ETRs or postpone the date of delivery or payment of the redemption proceeds (whether physical silver bullion and/or cash, as the case may be) for any period during which the Mint determines that conditions exist which render impractical the fabrication, evaluation or sale of silver or which impair the ability of the Mint to determine the value of the silver bullion owned by the ETR Holder or the redemption amount for the ETRs. Any declaration of suspension made by the Mint shall be conclusive.”

Buyer beware.

View the prospectus here.

 

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