Steve Higgins is responsible for the design, development and management of exchange-traded receipts (ETRs) at the Royal Canadian Mint. He has overseen the program since the launch of the gold ETR in 2011 and through the launch of the silver ETR in 2012. Before joining the Mint in 2009, Higgins was the Manager, Corporate Performance, at Sustainable Development Technology Canada, which makes early-stage investments in the clean-tech sector. He completed his MBA at HEC School of Management in Paris and his Bachelor of Science and Business at the University of Waterloo.
Following is an edited interview with Steve Higgins:
Silver News: Explain the structure of the Canadian Silver Reserves, stock symbol MNS (Toronto Exchange). How is it backed, how is it traded, how/where is the physical silver held?
Mr. Higgins: Each exchange-traded receipt (ETR) represents a direct interest in physical silver bullion held at the Royal Canadian Mint. The ETRs differ from ETFs or other funds in that there is no entity structure: investors directly own the silver. We keep the silver in a variety of forms including our finished products: 1000 ounce bars; 100 ounce bars, one ounce Silver Maple Leaf coins and the intermediary products like blanks, coils and grain. This allows us to offer investors a choice of form if they choose to withdraw their silver.
SN: The Mint started with a gold instrument, MNT. What was the impetus for a similar silver product?
Mr. Higgins: Our gold ETRs (Toronto Exchange MNT) launched in November of 2011 and was very well received. We issued $580M USD worth of gold ETRs - which made it the largest IPO on the Toronto Stock Exchange that year. On the heels of this successful launch, and after receiving numerous inquiries, it was clear that investors wanted silver, too. Silver is a massive part of our business so we were eager to offer a silver ETR. In November 2012 we launched the silver program and raised US$100M to buy 3.1 million ounces of silver.
SN: If an investor wants to redeem his/her shares will they receive physical silver? In what form is it and how is the transaction handled?
Mr. Higgins: Once a month investors can redeem ETRs for newly fabricated one-ounce Maple Leaf coins, 100-oz. bars and 1000-oz. London Good Delivery bars. Investors can submit a request through their brokers and specify what products they want and give us delivery instructions so they can arrange through a list of major armored couriers. There is a CAD$100 fee and fabrication fees that vary depending on the form of silver bullion. We have one of the lowest minimum redemption amounts; investors must redeem a minimum of 5,000 ETRs or around 3,000 oz. of silver.
SN: What are the advantages to shareholders of the MNS instrument?
Mr. Higgins: The instrument offers the most flexible set of redemption rights for coins or bars, secure storage with a government backing and an all-in annual service fee of 45 bps (0.45%). MNS provides investors with a secure, convenient and low-cost means of direct physical ownership of silver that is stored at the Royal Canadian Mint with a proud history of over 100 years of refining and custodial experience.
SN: How does the Mint convert a shareholder’s cash purchase into physical silver… daily, upon receipt of cash, etc.?
Mr. Higgins: The Mint issues new ETRs from time to time when there is demand rather than on a daily basis. This keeps handling costs down. When new receipts are issued, the silver is bought immediately and stored in our facility. On a day-to-day basis, investors buy and sell ETRs through the Toronto Stock Exchange from other holders or the market makers. Market makers ensure investors can buy or sell when they need to. However, if an investor wants to buy several million dollars worth of silver they can contact us to discuss their purchase.
SN: What are the Mint’s fees associated with the buying and selling of silver for MNS?
Mr. Higgins: The Mint doesn’t charge any ongoing fees for buying and selling silver. We only charge the 0.45 % per year. We don’t buy and sell day-to-day so there are no costs associated with this.
SN: What is the breakdown between institutional and retail owners? Are you satisfied with the mix?
Mr. Higgins: The breakdown is difficult to pin down. Because investors own silver and not an entity, there are no requirements for institutions to report their holdings for control purposes. Having said that, I believe our silver ETRs are over three-quarters held by retail investors. The gold ETRs have traditionally had more of an institutional following with between a third and half being held by institutions.
SN: Do any other mints offer a similar product?
Mr. Higgins: The ETR program is unique to the Royal Canadian Mint. No other national mint offers an exchange-traded investment that is backed by physical silver. It’s also worth noting that, globally, ETRs are the only exchange-traded bullion investments issued by an agent of a sovereign government.
SN: Where can readers get more information about the silver product?
Mr. Higgins: Investors can get details at www.reserves.mint.ca and we may also be reached toll-free at +1-866-677-1477 or in Ottawa, Canada, at +1-613-991-1456.
SN: What else would you like our readers to know?
Mr. Higgins: We really appreciate the work of the Silver Institute; it’s a great resource for the industry. We love silver and we are going to keep providing innovative ways for people to invest in and enjoy silver. We want to continue to grow our ETRs and are looking for opportunities to bring ETRs to Europe and Asia. Stay tuned.
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