Global X Funds launches junior miners ETF
Global X Funds, the New York based provider of exchange traded funds, launched Thursday the Global X Junior Miners ETF (NYSE Arca: JUNR). It is the first ETF to provide access to junior mining companies globally, and adds diversification across resources by including companies involved in the production of coal, copper, gold, iron, nickel, silver, titanium and other materials.
The mining industry relies on junior mining companies to provide additional supply of key commodities – as large miners exhaust existing resources, junior miners are often poised to explore, develop, and monetize new mines to bring additional supply to the market. While junior miners typically have a higher risk/reward profile than large-cap miners, JUNR helps reduce company-specific risk by diversifying investments across 96 junior mining companies.
Investors may also benefit from increased merger and acquisition (M&A) activity in the sector, as large mining companies look to acquisitions and partnerships as additional sources of supply and geographic expansion.
“Low interest rates, above-average metal prices, well-funded junior programs, and M&A potential driven by balance sheet strength of the major mining companies are positive underlying factors supporting the junior mining sector” (Canaccord Capital 2011). In addition to traditional M&A activity from large industry players, more deal activity is expected from sovereign wealth funds, specialized private equity funds, large pension funds and other industrials like steelmakers and iron producers (PwC 2012).