Following up on the success of the Sprott Gold Miners ETF (NYSEArca: SGDM), Sprott Asset Management introduced SGDM’s junior miners equivalent today with the launch of the Sprott Junior Gold Miners ETF (NYSEArca: SGDJ).
The new ETF tracks the Sprott Zacks Junior Gold Miners Index (NYSE:ZAXSGDJ) and is the first factor-based junior miners ETFs. Investors have an appetite for junior gold miners via the ETF wrapper as highlighted by the $1.6 billion in assets held by the Market Vectors Junior Gold Miners ETF (NYSEArca: GDXJ), making that fund the second-largest gold miners ETF.
“SGDJ provides investors with a more thoughtful strategy by focusing on more advanced stage companies where the historical success rates have been higher. The Index also weights companies differently by using two factors – revenue growth and price momentum – to emphasize companies with stronger growth potential. These factors have historically been strong predictors of long-term stock performance in the junior gold mining sector,” said John Ciampaglia, head of ETFs at Sprott, in a statement.
SGDJ, which holds both 36 U.S- and Canada-listed companies, weighs its components based on revenue growth and price momentum. The new ETF’s underlying index can also invest in junior silver miners that meet the aforementioned criteria. [A Different Spin on Gold Miners ETFs]
Investors have shown they like the idea of introducing fundamental weighting to a genre of the ETF market that has been dominated by cap-weighted products as it took SGDM less than five months of trading to accumulate $100 million in assets. The ETF now has close to $200 million in assets under management.
SGDJ’s index excludes companies with market values below $250 million in an effort to keep out very early stage exploration firms with low rates of success. The weighted average market value of the new ETF’s holdings is $745 million, according to Sprott data.
Some of SGDJ’s largest U.S-listed holdings include First Majestic Silver (NYSE: AG), Hecla Mining (NYSE: HL), Pan American Silver (NasdaqGS: PAAS) and IAMGOLD (NYSE: IAG). Those stocks combine for 21.5% of the new ETF’s weight.
SGDJ debuts at a time of extreme bearish sentiment toward junior miners, but the ETF could be a way to play a reversal in that sentiment.
“Sentiment is extremely negative – the junior gold stock sector is down over 80% since its market high in late 2010. High-quality junior miners are potential acquisition targets for senior miners,” according to Sprott. [Waiting for a Junior Miners ETF Rebound]
The new ETF charges 0.57% per year.
Chart Courtesy: Sprott