Global X Funds introduces small-cap mining fund, Global X Junior Miners ETF (JUNR)

Sep 10th, 2012 | By | Category: Equities

Global X Funds, a New York-based provider of exchange-traded funds (ETFs), has launched the Global X Junior Miners ETF (JUNR), the first ETF to provide access to junior mining companies across multiple resource sectors globally.

Global X Funds introduces small-cap mining fund, Global X Junior Miners exchange-traded fund (ETF) (JUNR)

The NYSE-listed Global X Junior Miners ETF (JUNR) is the first ETF to provide access to junior mining companies across multiple resource sectors globally.

The NYSE-listed fund, which charges an annual management fee of 0.69%, adds diversification across resources by including companies involved in the production of coal, copper, gold, iron, nickel, silver, titanium and other materials.

The mining industry relies on junior mining companies to provide additional supply of key commodities – as large miners exhaust existing resources, junior miners are often poised to explore, develop, and monetise new mines to bring additional supply to the market.

While junior miners typically have a higher risk/reward profile than large-cap miners, JUNR helps reduce company-specific risk by diversifying investments across almost 100 junior mining companies.

Investors may also benefit from increased merger and acquisition (M&A) activity in the sector, as large mining companies look to acquisitions and partnerships as additional sources of supply and geographic expansion.

According to Canaccord Capital, a broker and wealth manager, low interest rates, above-average metal prices, well-funded junior programmes, and M&A potential driven by balance-sheet strength of the major mining companies are positive underlying factors supporting the junior mining sector.

In addition to traditional M&A activity from large industry players, PwC, an international accounting and consulting firm, noted that more deal activity is expected from sovereign wealth funds, specialised private equity funds, large pension funds and other industrials like steelmakers and iron producers.

JUNR tracks the Solactive Global Junior Miners Index, an index complied by Structured Solutions to track the market performance of small-capitalisation mining companies globally including those companies engaged in mining, producing, smelting, and/or refining materials across coal, copper, gold, iron, nickel, silver, titanium and other materials.

The index is well diversified and currently has 96 constituents, the top five of which are currently Coeur d’Alene Mines Corp (2.58%), a US-based silver producer, AuRico Gold Inc (2.57%), a Mexico-focused gold miner, Alumina Ltd (2.29%), an Australian bauxite miner, refiner and smelter, China Molybdenum Co (2.23%), a Chinese molybdenum producer, and Alacer Gold Corp (2.18%), a Turkey-focused gold producer.

In terms of country exposure, Canada and Australia comprise the largest weights, as is typical for mining ETFs, with 34.0% and 26.0% respectively. Rounding out the top five is the US (18.4%), the UK (7.3%), and China (4.3%). Over ten countries are represented.

Commenting on the launch, Bruno del Ama, CEO of Global X Funds, said: “We see value in junior miners at current valuations, particularly in an environment that could bring significant inflation over the next few years following massive quantitative easing globally.”

For small-cap resource exposure, the closest rivals to the new Global X Fund are the PowerShares S&P SmallCap Materials Portfolio ETF (PSCM) and the Market Vectors Junior Gold Miners ETF (GDXJ). The NYSE-listed PowerShares fund tracks the S&P SmallCap 600 Capped Materials Index, an index which provides exposure to companies within the S&P SmallCap 600 that are principally engaged in production of raw materials, including paper or wood products, chemicals, construction materials, and mining and metals.

Meanwhile the Market Vectors fund, also listed on the NYSE, tracks the performance of the Market Vectors Junior Gold Miners Index, an index which provides exposure to small- and mid-cap companies in the gold (and silver) mining industry. GDXJ also happens to be certified as a UK Reporting Fund by the HMRC, making it appealing to UK-based investors, despite being domiciled in the US.

(The Global X Junior Miners ETF supersedes the Global X S&P/TSX Venture 30 Canada ETF following a change of index, name, ticker, expense ratio and investment objective.)

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