Central Fund of Canada Sells Shares to Buy Gold & Silver

By Douglas A. McIntyre Published Nov 30, 10:20AM EST

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Stock Tickers: CEF, GLD

Central Fund of Canada Limited (CEF-AMEX; CEF-A/TSX) of Calgary, Alberta announced today that it plans to offer Class A Shares to the public in Canada and the United States under its existing US$250,000,000 base shelf prospectus filed with the securities commissions (US/Canada) to a proposed underwritten offering by CIBC World Markets Inc. The real offering is 7.2 million shares that priced at $9.40 for total proceeds of $67.68 million.

Substantially all of the net proceeds of the offering have been committed "TO BUY GOLD & SILVER BULLION," with additional capital being used to reduce annual expense ratios. Any additional capital raised by any such offering is expected to reduce the operating expense ratio.

The US equivalent market cap of this Canadian "fund" is $946 million. Shares closed at $10.01 yesterday and have a $6.08 to $10.64 trading range over the last 52-weeks. The low for the day is $9.45 and the last price seen was $9.70. This "fund" traded at under $4.00 back in 2002 and is within 10% of decade highs.

As this capital is being used to buy bullion, it makes you wonder where they think gold and silver prices are going from here. Even with gold at these levels, they are betting it is going even higher. We overlayed a chart comparing CEF to the STREETTRACKS Gold Trust (GLD) for comparison here:

Central Fund of Canada Limited (est. 1961) is an exchange tradeable refined gold and silver bullion holding company. Class A shares are qualified for inclusion in many North American regulated accounts. Bullion holdings are stored on an unencumbered, allocated, segregated and insured basis in the treasury vaults of a major Canadian bank and are audited semi-annually in the presence of Central Fund’s auditors and bank representatives.

Jon C. Ogg
November 30, 2006

About the Author Douglas A. McIntyre →

Douglas A. McIntyre is the co-founder, chief executive officer and editor in chief of 24/7 Wall St. and 24/7 Tempo. He has held these jobs since 2006.

McIntyre has written thousands of articles for 24/7 Wall St. He is an expert on corporate finance, the automotive industry, media companies and international finance. He has edited articles on national demographics, sports, personal income and travel.

His work has been quoted or mentioned in The New York Times, The Wall Street Journal, Los Angeles Times, The Washington Post, NBC News, Time, The New Yorker, HuffPost USA Today, Business Insider, Yahoo, AOL, MarketWatch, The Atlantic, Bloomberg, New York Post, Chicago Tribune, Forbes, The Guardian and many other major publications. McIntyre has been a guest on CNBC, the BBC and television and radio stations across the country.

A magna cum laude graduate of Harvard College, McIntyre also was president of The Harvard Advocate. Founded in 1866, the Advocate is the oldest college publication in the United States.

TheStreet.com, Comps.com and Edgar Online are some of the public companies for which McIntyre served on the board of directors. He was a Vicinity Corporation board member when the company was sold to Microsoft in 2002. He served on the audit committees of some of these companies.

McIntyre has been the CEO of FutureSource, a provider of trading terminals and news to commodities and futures traders. He was president of Switchboard, the online phone directory company. He served as chairman and CEO of On2 Technologies, the video compression company that provided video compression software for Adobe’s Flash. Google bought On2 in 2009.