New ETF Provides access to Junior Miners

Jeff Nielson submits:

I was just alerted by a reader to an exciting, new opportunity for U.S. investors to get access to Canadian “junior”, precious metals miners – and the explosive, profit-potential which they represent.

This new, ETF will be offered by Van Eck Global. It is not their first precious metals mining-ETF, as they already have an ETF for gold miners: [[GDX]]. However, what makes this new product unique is that it will be comprised solely of “junior” miners in the precious metals sector. While the press release simply refers to these companies as “junior miners”, the vast majority of these companies are Canadian-based and Canadian-listed companies (on the TSX and “Venture” exchanges).

The press release itself refers to these companies as offering (potentially) “very strong returns” and a “leveraged play” on the precious metals market – but does not explain how and why this is the case.

By coincidence, I recently published a commentary which directly explains precisely these attributes of “junior”, precious metals miners (see “A Novice’s Guide to Precious Metals, Part II: the miners”).

To briefly summarize these facets of “junior” miners (and commodity-producers, in general), these companies generally have much more aggressive business models and growth profiles than the larger-cap miners – thus the potential for “very strong returns”. However, in order to achieve these growth targets, “junior” miners typically operate with smaller profit-margins and/or higher debt-levels. This increases the risk of these companies, but simultaneously also increases their leverage.

For a more detailed explanation of these characteristics, please refer to my original commentary on this subject.
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