Sprott tender for Central Gold Trust and Silver Bullion Trust

[coinbug]

I hold Silver Bullion Trust (not Central Gold Trust - I hold Central Fund instead) and have urged others to consider it (in these forums I think) as it is a way to buy silver at a discount and hold it without costs, and without third party risks (the metal is unencumbered and segregated).

Sprott is offering unit holders the chance to exchange their holdings in SBT and GTU for Sprott units in their respective funds, claiming that this exchange will "unlock" value to those making the exchange as Sprott's funds' discounts are smaller.

Anyone have any thoughts or opinions on Sprott?

I have to say that my first impulse is to not tender my units as one of the reason I hold them is my concern over derivative exposure (and who knows what else Sprott is involved in?).

 

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[jim4silver]

I hold Silver Bullion Trust (not Central Gold Trust - I hold Central Fund instead) and have urged others to consider it (in these forums I think) as it is a way to buy silver at a discount and hold it without costs, and without third party risks (the metal is unencumbered and segregated).

Sprott is offering unit holders the chance to exchange their holdings in SBT and GTU for Sprott units in their respective funds, claiming that this exchange will "unlock" value to those making the exchange as Sprott's funds' discounts are smaller.

Anyone have any thoughts or opinions on Sprott?

I have to say that my first impulse is to not tender my units as one of the reason I hold them is my concern over derivative exposure (and who knows what else Sprott is involved in?).

I would sell the paper stuff and buy real physical. The only reason to buy paper PM's (or some other thing were you don't hold the physical in your possession) is if you are getting some type of leverage like in the Comex market. I don't know anything about Sprott's funds. I only buy physical PM's that I control directly. As someone from the US, I don't see the point in buying physical PMs and having them held for me (how would I really confirm this?) in another country. Did you ever read about some countries who were trying to get their gold back from the US, etc, and how that turned out?

Based on your post, how do you think it could be financially possible for a "trust" or such to buy PM's then sell it to the customers "at a discount" and also hold it for them "without costs". Doesn't that sound a bit unrealistic to you? How would they make a profit if they were buying physical to cover every customers' purchase and were selling to said customers at a discount and NOT charging to store it? It sounds almost too good to be true.

Just my opinion.

Jim

 

[coinbug]

Based on your post, how do you think it could be financially possible for a "trust" or such to buy PM's then sell it to the customers "at a discount" and also hold it for them "without costs". Doesn't that sound a bit unrealistic to you? How would they make a profit if they were buying physical to cover every customers' purchase and were selling to said customers at a discount and NOT charging to store it? It sounds almost too good to be true.



Jim

They operate as closed-end funds. These funds raise capital, buy assets, then the units trade, sometimes at a premium to net asset value, and sometimes at a discount. They don't buy assets to cover purchase of units that are being traded; they already own them.

With PMs the discount goes up when PM prices go down, and decreases when they go up.

Sprott is apparently offering a cash-out option at 95% of NAV to make their bid more competitive, which is useful if you have to liquidate when prices have been falling for a while and the discount is high.

Sprott also makes the point that they're a public company so you can tell what they're up to; the Spicer family runs GTU and so they're not transparent (although the funds themselves are audited and claim to be unencumbered so perhaps that's not a major consideration).

I'd love to hold physical metal instead, but don't fully trust storage options like Kitco, and buying monster boxes of maple leafs and sitting on them with my shotgun, fun as that would be, has its risks as well.

 

[coinbug]

By way of update, SBT has fended off Sprott by converting from a closed-end fund to an ETF with a redemption feature that has removed the discount (today the discount to NAV was 0.4%; effectively nothing). Details below, at the end of this post.

So Silver Bullion Trust is no longer a way to buy silver at a discount.

However Central Fund still is. The discount to NAV today was about 5.5%. They are about 65% gold and 35% silver (they've always aimed at 50/50 so the current ratio hints at how attractive silver is).

So, if you don't mind buying gold to get your silver discount, CEF.A, CEF.U is still an option.





SILVER BULLION TRUST UNITHOLDERS APPROVE ETF CONVERSION WITH
PURPOSE INVESTMENTS AND ENHANCED REDEMPTION FEATURES
(Toronto, ON, January 26, 2016) – Silver Bullion Trust (“SBT” or the “Trust”) (symbol: TSX –
SBT.UN (C$) and SBT.U (US$)) today announced that SBT Unitholders voted to approve
amendments to SBT's Amended and Restated Declaration of Trust dated July 9, 2009 (the
“DOT”), in order to permit its conversion from a closed-end fund to a silver-bullion exchange
traded fund (the "ETF Conversion") at a special meeting of Unitholders held earlier today in
Toronto.
As soon as possible, Purpose Investments Inc. will become the new manager and trustee of the
Trust once the amendments to the DOT are signed and the bullion holdings will be administered
by Silver Administrators Limited, SBT’s current administrator.
In addition, following signing of the amendments to the DOT, for the period prior to completion
of the ETF Conversion, SBT’s current redemption features will be amended to provide
significantly enhanced liquidity for ALL unitholders, similar to the liquidity expected after
completion of the ETF Conversion. During this period, ALL unitholders will be able to
redeem their units for cash at 100% of NAV1
on a bi-weekly basis.

 

[Goose-0]

I see a Canadian 1 0z gold coin, .9999 fine going for $1230....+ our states 7.375% sales tax = $1320.70. That makes the premium over spot price ($1220 today 3 PM CT) of 8.25% ($90). Is 8.25% too much over spot to buy?

 

[Rich in Central PA]

I see a Canadian 1 0z gold coin, .9999 fine going for $1230....+ our states 7.375% sales tax = $1320.70. That makes the premium over spot price ($1220 today 3 PM CT) of 8.25% ($90). Is 8.25% too much over spot to buy?[/QUOTE

YES! Personally, I'm a cheapskate when it comes to spot prices, I tend to look for my best bargain which includes the bullion dealer, spot prices, the type, and brand of PM I am considering to buy. So, I think your $90 (tax) over spot is high. I suggest you shop around and buy out-of-state to one of the reputable dealers online. Here is a link with some relative information. Best of luck......................Rich

Buying Silver Sales Tax-Free - How and Where to Do It

 

[Goose-0]

Thanks Rich. I've purchased many foreign silver proof sets and coins at or below melt price in the past. I guess I do it for the silver content. Why does a Canadian silver proof set, weighing 1.11 ozs of silver sell for less than a U S silver proof set weighing .61 oz of silver? AND, the Canadian set has less minted in each year. Popularity I guess, but you get a better bang for your buck going foreign for silver....which I've done a lot.