Sprott Physical Gold Trust to buy more gold

[pmbug]

Sprott Physical Gold Trust Announces Completion of Its Follow-on Offering of Trust Units
Feb 3, 2012

TORONTO, Feb. 3, 2012 /CNW/ - Sprott Physical Gold Trust (the "Trust") (NYSE: PHYS / TSX: PHY.U), a trust created to invest and hold substantially all of its assets in physical gold bullion and managed by Sprott Asset Management LP, today announced that it has completed its follow-on offering of 20,000,000 transferable, redeemable units of the Trust (the "Units") at US$15.19 per Unit for gross proceeds of US$303,800,000 (the "Offering").

The Trust will use the net proceeds of the Offering to acquire physical gold bullion in accordance with the Trust's objective and subject to the Trust's investment and operating restrictions described in the prospectus related to the Offering. The net proceeds of the Offering per Unit are greater than 100% of the most recently calculated net asset value per Unit of the Trust prior to, or upon determination of, pricing of the Offering, as required under the trust agreement governing the Trust.

At today's prices this offering will pull about 176,000 ounces of gold off the public market.
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http://jessescrossroadscafe.blogspot.com/2012/02/net-asset-value-premiums-of-certain.html

 

[ancona]

Is this the reason for the big drop in niminal assessed value of his silver trust? When you have all that cash, the shares would be each entitled to some cash if the trust liquidated?

 

[pmbug]

The gold trust mentioned in the OP is completely separate from the silver trust. PSLV's NAV took a hit when Sprott announced the follow-on offering because it was way too high to begin with (around 30% IIRC).

The point, as far as I'm concerned, is that Sprott will be taking a significant amount of physical gold out of the normal (rehypothecated) supply. It's like pulling reserves out of the over-leveraged bank (although not as dire as the situation in silver if the silver bugs are correct).