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Central Fund of Canada Raises $200 Million in Bought Deal

Wednesday morning, Central Fund of Canada completed an overnight stock offering of a whopping $200 million, dramatically larger than any deal ever done by the Company and particularly impressive given that it occurred amidst yet another vicious Cartel attack on gold and silver following the bogus G-20 boondoggle last week. Details of the deal are at the bottom of this note.

Assuming exercise of the $10 million greenshoe by day's end, the deal essentially increases the size of CEF's gold/silver holdings and shares outstanding by roughly 13%, to approximately 1.2 million ounces of gold, 59 million ounces of silver, and 185 million shares outstanding (yielding a current market cap of roughly $2 billion.

As I have noted in prior notes, the size and frequency of CEF offerings has exploded upward in the past 12 months, and given the fund's resultant size and liquidity (traded on average 1.4 million shares per day before this offering), CEF's role as an effective (and dramatically safer) alternative to the ETF's GLD and SLV is accelerating upward. This has become quite obvious in the record premiums to Net Asset Value (NAV) that it typically trades at.

Before the deal, CEF (60% gold, 40% silver) was trading at a 16.5% premium to NAV, at the high end of its historical trading range. The deal was priced at $10.50 to maximize its size (which it certainly did!), or roughly a 6.5% premium to NAV, making it still extremely accretive to current shareholders. This temporary premium decline has occurred in EVERY deal done by CEF and GTU in recent years, so I fully expect the NAV premium to drift back up to its average level in the coming weeks.

Below is a list of CEF stock offerings since 2002.

As you can see, 2008 issuance was TRIPLE that of 2007.

And now, in just the FIRST QUARTER OF 2009 we have ALREADY EXCEEDED 2008's issuance!

• 2002 - $65 million
• 2002 - $98 million
• 2002 - $198 million
• 2002 - $0 million
• 2002 - $169 million
• 2002 - $111 million
• 2002 - $329 million
• 2009 YTD - $340 million (assumes $10 million green shoe exercise)

The Cartel will do EVERYTHING in their power to stem the rise of gold and silver prices, which signifies global mistrust in their fraudulent fiat currency system, particularly the cancerous dollar. This action represents the gist of Bernanke's statement earlier this year that "we will forcibly use all available tools to promote economic stability."

But it will not work.

Gold and silver demand is EXPLODING, and the proof is to be seen everywhere. This morning, as they always do, they smashed gold and silver right before 8 am EST, when the CEF deal closed, because they know that CEF typically buys its gold at that time (which the resultant spike up likely represented). This is the same "muting tactic" that it uses each and every time a key psychological point approaches in the gold market, such as hitting gold by $35 the day that the "quantitative easing" announcement was made three weeks ago, at which point gold proceeded to jump $70 higher in two hours.

As Jim Sinclair says, "gold is your lifeline." Don't take this advice for granted.

CENTRAL FUND OF CANADA LIMITED ENTERS INTO UNDERWRITING AGREEMENT

TSX SYMBOLS: CEF.A (Cdn. $) and CEF.U (U.S. $)

NYSE AMEX SYMBOL: CEF

TORONTO, Ontario (April 8, 2009) - Central Fund of Canada Limited ("Central Fund") of Calgary, Alberta announced today that it has entered into an underwriting agreement with CIBC, as underwriter, under which the underwriter has agreed to buy and sell to the public, in Canada (except Québec) and in the United States under the multijurisdictional disclosure system, 19,050,000 Class A Shares of Central Fund. The Underwriter has been granted the right to increase the size of the offering (the "Right") by up to an additional 950,000 Class A Shares, exercisable in whole or in part, at any point prior to 4:00 pm (EST) on April 8, 2009. The offering will be made under a fourth prospectus supplement to Central Fund's U.S.$750,000,000 base shelf prospectus dated March 31, 2008.

The purchase price of U.S.$10.50 per Class A Share is expected to result in gross proceeds of approximately U.S.$200 million, prior to the exercise of the Right. Substantially all the net proceeds of the offering have been committed to purchase gold and silver bullion for settlement at closing, in keeping with the asset allocation policies established by the Board of Directors of Central Fund. Any additional capital raised by the offering is expected to assist in reducing the annual expense ratio in favour of the Shareholders of Central Fund.

Closing is expected to occur on or about April 16, 2009.

Central Fund has filed a base shelf prospectus and registration statement with the Canadian securities regulatory authorities and the United States Securities and Exchange Commission ("SEC") for the offering to which this communication relates. Before you invest, you should read the base shelf prospectus and prospectus supplements and any other documents Central Fund has filed with the securities commissions in each of the provinces and territories of Canada, except Québec, and the SEC for more complete information about Central Fund and this offering. You may obtain a copy of the base shelf prospectus and prospectus supplements filed in the United States from CIBC, 425 Lexington Avenue, 5th Floor, New York, New York 10017, by fax at 212-667-6303 or by e-mail at useprospectus@us.cibc.com. You may obtain a copy of the base shelf prospectus and prospectus supplements filed in Canada from CIBC, fax 416-594-7242 or request a copy by telephone at 416-594- 7270.

Statements contained in this release that are not historical facts are forward-looking statements that involve risks and uncertainties. Central Fund's actual results could differ materially from those expressed or implied by such forward-looking statements. Factors that could cause or contribute to such differences include, but are not limited to, those risks detailed in Central Fund's filings with the Canadian securities regulatory authorities and the SEC.

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. Central Fund's bullion holdings are stored on an unencumbered, allocated, segregated and insured basis in the treasury vaults of a major Canadian bank and are inspected semi-annually in the presence of Central Fund's auditors and bank representatives. Class A Shares are quoted on the NYSE Amex, symbol CEF and the TSX, symbols CEF.A (Cdn. $) and CEF.U (U.S. $). For further information, please contact J.C. Stefan Spicer, President and CEO at 905-648-7878 Website: www.centralfund.com. Email: info@centralfund.com.

SOURCE: http://www.midasletter.com/commentary/090409-1_Central-Fund-of-Canada-Raises-200-million-in-bought-deal.php


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