A Closer Look At The Two Gold Miner ETF’s (GDX, GDXJ)
Frugal Millionare put together an interesting piece we thought we would share with our readers: (GDXJ) was debut this Wednesday. Both (GDX) and (GDXJ) (the junior companies) are offered by Van Eck.
Here are the links to the company site for GDX and GDXJ. The complete weighting of the components are listed below:
| Fund Holdings of (GDXJ) as of 11/13/09 | |||||
| No. | Holding | Ticker | Shares | Market Value | % of net assets |
| 1 | Coeur d’Alene Mines Corp. | (CDE) US | 56,910 | $1,191,695.40 | 6.42% |
| 2 | Silver Standard Resources | (SSRI) US | 51,510 | $1,003,414.80 | 5.40% |
| 3 | New Gold Inc | (NGD) CN | 251,160 | $972,587.72 | 5.24% |
| 4 | Hecla Mining Co | (HL) US | 177,285 | $946,701.90 | 5.10% |
| 5 | Gammon Gold Inc | (GRS) US | 89,085 | $878,378.10 | 4.73% |
| 6 | Alamos Gold Inc | (AGI) CN | 80,610 | $808,060.57 | 4.35% |
| 7 | Silvercorp Metals Inc | (SVM) CN | 117,615 | $712,342.27 | 3.84% |
| 8 | Semafo Inc | (SMF) CN | 187,800 | $707,530.16 | 3.81% |
| 9 | European Goldfields Ltd | (EGU) CN | 95,100 | $648,543.09 | 3.49% |
| 10 | Golden Star Resources Ltd | (GSS) US | 175,590 | $598,761.90 | 3.22% |
| 11 | Northgate Minerals Corp | (NXG) US | 192,960 | $567,302.40 | 3.06% |
| 12 | Kingsgate Consolidated Ltd | (KCN) AU | 65,010 | $548,420.73 | 2.95% |
| 13 | Jaguar Mining Inc | (JAG) CN | 52,200 | $545,176.21 | 2.94% |
| 14 | San Gold Corp | (SGR) CN | 185,925 | $530,226.29 | 2.86% |
| 15 | Aurizon Mines Ltd | (ARZ) CN | 112,455 | $528,783.59 | 2.85% |
| 16 | Novagold Resources Inc | (NG) US | 97,935 | $509,262.00 | 2.74% |
| 17 | Andean Resources Ltd | (AND) CN | 229,485 | $503,424.58 | 2.71% |
| 18 | Gabriel Resources Ltd | (GBU) CN | 147,360 | $444,139.06 | 2.39% |
| 19 | Minefinders Corp | (MFN) US | 43,560 | $433,857.60 | 2.34% |
| 20 | Allied Nevada Gold Corp | (ANV) US | 38,055 | $428,499.30 | 2.31% |
| 21 | Ventana Gold Corp | (VEN) CN | 38,040 | $420,147.07 | 2.26% |
| 22 | Rubicon Minerals Corp | (RMX) CN | 99,240 | $411,744.96 | 2.22% |
| 23 | Great Basin Gold Ltd | (GBG) CN | 251,820 | $393,900.33 | 2.12% |
| 24 | Lake Shore Gold Corp | (LSG) CN | 92,505 | $355,567.89 | 1.91% |
| 25 | St Barbara Ltd | (SBM) AU | 1,032,395 | $343,436.08 | 1.85% |
| 26 | Kirkland Lake Gold Inc | (KGI) CN | 38,685 | $332,075.92 | 1.79% |
| 27 | Avoca Resources Ltd | (AVO) AU | 194,325 | $333,011.01 | 1.79% |
| 28 | Fronteer Development Group | (FRG) US | 79,110 | $328,306.50 | 1.77% |
| 29 | Romarco Minerals Inc | (R) CN | 245,175 | $327,383.28 | 1.76% |
| 30 | Medusa Mining Ltd | (MML) AU | 77,745 | $284,326.89 | 1.53% |
| 31 | Detour Gold Corp | (DGC) CN | 20,685 | $271,275.45 | 1.46% |
| 32 | Gold Wheaton Gold Corp | (GLW) CN | 759,960 | $217,452.43 | 1.17% |
| 33 | Dominion Mining Ltd | (DOM) AU | 55,260 | $202,474.00 | 1.09% |
| 34 | Real Gold Mining Ltd | (246 HK) | 127,500 | $194,484.35 | 1.05% |
| 35 | Colossus Minerals Inc | (CSI) CN | 37,230 | $187,135.39 | 1.01% |
| 36 | U S Gold Corp | (UXG) US | 61,875 | $167,681.25 | 0.90% |
| 37 | Avocet Mining Plc | (AVM) LN | 97,665 | $156,218.24 | 0.84% |
| 38 | Lingbao Gold Co Ltd-H | (3330 HK) | 210,000 | $81,009.51 | 0.44% |
| Fund Holdings of (GDX) as of 11/13/09 | |||||
| No. | Holding | Ticker | Shares | Market Value | % of net assets |
| 1 | Barrick Gold Corp | (ABX) | 18,718,639 | $783,749,414.93 | 14.49% |
| 2 | Goldcorp Inc | (GG) | 14,249,524 | $614,011,989.16 | 11.36% |
| 3 | Newmont Mining Corp | (NEM) | 9,475,288 | $470,353,296.32 | 8.70% |
| 4 | AngloGold Ashanti Ltd | (AU) | 6,999,199 | $304,045,204.56 | 5.62% |
| 5 | Lihir Gold Ltd | (LIHR) | 8,569,682 | $265,317,354.72 | 4.93% |
| 6 | Cia de Minas Buenaventura | (BVN) | 7,114,374 | $263,587,556.70 | 4.87% |
| 7 | Yamana Gold Inc | (AUY) | 21,130,631 | $259,484,148.68 | 4.80% |
| 8 | Randgold Resources Ltd | (GOLD) | 3,203,698 | $255,110,471.74 | 4.72% |
| 9 | Kinross Gold Corp | (KGC) | 13,436,964 | $252,883,662.48 | 4.68% |
| 10 | IAMGOLD Corp | (IAG) | 14,744,197 | $251,536,000.82 | 4.65% |
| 11 | Gold Fields Ltd | (GFI) | 16,291,819 | $229,714,647.90 | 4.25% |
| 12 | Agnico-Eagle Mines Ltd | (AEM) US | 3,748,931 | $223,736,202.08 | 4.14% |
| 13 | Eldorado Gold Corp | (EGO) | 16,025,187 | $207,205,667.91 | 3.83% |
| 14 | Silver Wheaton Corp | (SLW) | 13,420,202 | $199,692,605.76 | 3.69% |
| 15 | Harmony Gold Mining Co | (HMY) | 17,100,638 | $175,452,545.88 | 3.24% |
| 16 | PAN American Silver Corp | (PAAS) | 3,501,327 | $82,036,091.61 | 1.52% |
| 17 | Royal Gold Inc | (RGLD) | 1,636,283 | $81,715,973.02 | 1.51% |
| 18 | Coeur d’Alene Mines Corp. | (CDE) US | 3,026,689 | $63,378,867.66 | 1.17% |
| 19 | New Gold Inc | (NGD) | 15,532,015 | $59,176,977.15 | 1.09% |
| 20 | Silver Standard Resources | (SSRI) US | 2,878,399 | $56,071,212.52 | 1.04% |
| 21 | Hecla Mining Co | (HL) US | 9,493,058 | $50,692,929.72 | 0.94% |
| 22 | Gammon Gold Inc | (GRS) US | 4,993,219 | $49,233,139.34 | 0.91% |
| 23 | Seabridge Gold Inc | (SA) | 1,505,674 | $35,142,431.16 | 0.65% |
| 24 | Golden Star Resources Ltd | (GSS) US | 9,492,472 | $32,369,329.52 | 0.60% |
| 25 | Aurizon Mines Ltd | (AZK) | 6,375,413 | $30,219,457.62 | 0.56% |
| 26 | Northgate Minerals Corp | (NXG) US | 10,274,632 | $30,207,418.08 | 0.56% |
| 27 | Minefinders Corp | (MFN) US | 2,376,917 | $23,674,093.32 | 0.44% |
| 28 | Great Basin Gold Ltd | (GBG) | 13,386,929 | $20,883,609.24 | 0.39% |
| 29 | Nevsun Resources Ltd | (NSU) | 5,149,665 | $14,882,531.85 | 0.28% |
| 30 | Tanzanian Royalty Exploration | (TRE) | 3,603,954 | $12,469,680.84 | 0.23% |
| 31 | Cash | 6,655,296 | $6,655,380.14 | 0.12% | |
| 32 | Vista Gold Corp | (VGZ) CN | 1,705,026 | $4,569,469.68 | 0.08% |
(DX) is a tracking ETF to (GDM) index, a mining index determined by Nyse. The component weighting cannot be determined by Van Eck. Unfortunately, the top holding (ABX) at 14.5% is probably one of the worst choice. ABX recently announced to dehedge its gold forward sale, which was costing ABX some 4 billion dollars. ABX is also rumored to be the accomplice of gold suppression scheme together with JPM & Fed. The other components in GDX that I don’t like are AU at 5.62%, GFI at 4.25%, HMY at 3.24%, all are deriving 100% or significant gold productions in Africa. As the gold prices zoom upward, mining gold in an impoverished (relatively speaking) continent will tend to be problematic. I expect more labor and theft and political problems. Also gold production from Africa is declining as a whole. With the exception of GFI, which has expanded its production to other continents, the other two companies are definitely not my preferred choice (especially HMY). GFI is probably the “cheapest” company among major gold producers that one can buy, since its mine life is still quite long. HMY may have the highest leverage to gold price, due to its very high cost basis. At later stages of gold bull market, HMY could easily come back with a vengeance despite the terrible management. Although one may consider shorting out those components when owning GDX, I hesitate to do that. The other company that derive its production from Africa is RangGold (GOLD) at 4.72%. This has been one of the company that has baffled me, easily outperforming all other components, without me owning it. Definitely one should not short this component out.
Onto the new (GDXJ), top components (CDE), (SSRI), (HL), (SVM) are taken by all silver mining companies instead of gold mining companies. That’s 21% of the GDXJ. My ongoing concern about investing in silver companies is that they will couple to the general stock market a lot more than gold mining companies (at least initially). In a deflation, gold/silver ratio will zoom upward, relatively depressing the price of silver. I would have hoped to have less silver components. By the way, junior companies or small-cap stocks also tend to get depressed more in a downwave. Regardless, CDE and HL (and MFN) don’t seem to have good management in shareholders’ interests, raising big amount of capital at the recent zenith of 2008/2009, diluting a big percentage of their stockholders. I suspect that the deals were hammered out with hedge funds in the Wallstreet who have shorted all these companies in the backroom. With a big short ratio, it was simply not possible to cover those short position via open market purchases without driving up the stock prices. And what is the chance of having so many companies silmultaneously raising capital all the the absolute zenith of the stock market?
Most of the rest of the GDXJ components beyond top ten are not familiar to me. And that is the beauty of investing in an ETF, not needing to know every individual company. Assuming that gold bull market continues, GDXJ will eventually outperform GDX, with much higher volatility. I expect the rallies in both will be kind of in stages, with GDX the big cap leading the way.
Both gold & mining companies are short-term overbought, and had a tremendous recovery since 2008 crash. Based on Elliot wave reading, I’m fairly certain that we are looking at major wave 3. It is hard to tell whether wave 2 of 3 has happened or not. Regardless, if you have the nerves to buy and the stomach to ride out the tremendous volatility (20% to 50% up and down probably for more than 4 times per year), I think the reward may be good.
Granted, I’m still holding back due to my expectation of a significant general stock market correction in Q1/Q2 next year. But no one can predict the stock market with certainty. The best thing to do is to pick and weigh each of your portfolio position carefully, and stand firmly to ride out the combined volatility.
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VISIT OUR STORY ON THE LAUNCH OF THE (GDXJ) JUNIOR GOLD MINERS ETF
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