Sprott CEO Peter Grosskopf gives BNN Bloomberg his positive gold outlook and discusses the firm's acquisition of Tocqueville's gold business.
Amber Kanwar, BNN: Gold is up 17% thus far this year trading near a six-year high. Sprott Inc. (TSX: SII) provides investors with exposure to precious metals and is up more than 40% this year. As Sprott looks to take advantage of the strength in precious metals, we are joined by the CEO Peter Grosskopf.
Sprott has been talking about the rally that must come in gold, now that it's here what do you look at as the fundamental drivers that are currently in place? Why is the needle now moving on gold?
Peter Grosskopf, Sprott: We've been talking about these issue for a long time, and I think that people realize that monetary policy, so far as they result in lowering interest rates to negative levels in many cases, is no longer going to be impactful in terms of handling the equation between debt and economic growth. Now we're into a different chapter.
Kanwar: How sustainable is this new chapter given that people can feel “risk-off” one moment, and this sentiment switch with a tweet.
Grosskopf: It’s very tough for me to call “risk-on” versus “risk-off.” But we are committed to the view that gold is a good hedge for that uncertainty, and gold is an excellent insurance policy. I think more investors are seeing gold as a mandatory insurance policy, compared to 20 years ago when gold was viewed as more of a fringe asset.
Kanwar: Sprott has stepped into this market in a more significant way to grow your assets under management, and you’ve made an acquisition in this space. What were the fundamental drivers of doing this new deal with Tocqueville Asset Management?
Grosskopf: Sprott has gone all-in on gold since our reorganization two years ago. We decided we could be the best in the world, and want to be the global leader in the field. Tocqueville is the other thought leader in the gold investing industry, and it represents an amazing opportunity for us to grow our business, as they are more prominent in the U.S. and Europe. We thought that this was the perfect time to make this move and that Tocqueville will bring us an amazing gold asset management franchise in the U.S.
Kanwar: Is this the beginning of an M&A strategy where you can become a greater consolidator in the space, or is it a one-off event where you have a shared vision.
Grosskopf: We do have a shared vision and this is a unique opportunity. But there are likely to other attractive situations ahead, and Sprott will continue to be an acquisitive company going forward.
Kanwar: This acquisition comes with C$2.5 billion of assets under management. How confident are you that those assets will remain?
Grosskopf: We think that we are giving these clients a bigger and better firm, specializing in exactly what they want, perhaps a bit bigger and better. We're very confident that these assets will stay with us. (Read Press Release.)
Kanwar: In the most recent quarter, I think you experience outflows from your ETFs [Sprott Physical Bullion Trusts], but they were smaller than what they had been previously. If we are in a hot cycle, why is that happening and are you seeing a turnaround now?
Grosskopf: There was a bit of a lag factor, and it took time for the discounts to NAVs (net asset values) to narrow. But we are now seeing positive inflows in our Trusts, as are many gold ETFs.
Kanwar: When you look at the discounts, what do people need to think about when they are investing in your Trusts?
Grosskopf: For the average everyday investor, the discount is not usually very significant because it translates to a minimal discount to the value of the underlying precious metals bars. But for institutional investors, occasionally as the discount gets wider, they may be motivated to arbitrage the discount.
Kanwar: The bulk of Sprott’s business is creating products that give investors exposure to precious metals and gold in particular. But you've also got a resource lending business. Talk to me about what these initiatives look like.
Grosskopf: Sprott aims to provide investment services across the spectrum for gold. Bullion is a big part of that, but managed equities are also going to be an increasingly significant part of our business, especially given the venture with Tocqueville. The private resource strategies are focused on either lending or private equity. This has been a very steady business for us, and it continues to grow because our clients love the yields that we can achieve from lending to gold companies.
Kanwar: What are you talking about in terms of yields?
Grosskopf: In the past, we have achieved yields between 12 to 17%; this is senior secured lending and for us, it is quite safe, as it is what we do every day.
Kanwar: How would you characterize the financing environment today versus a couple of years ago when gold prices were more subdued?
Grosskopf: We are in a very different environment than even 6 or 12 months ago. We are sensing that many clients are getting ready to allocate parts of their portfolio to gold. Investors have moved from being nervous and scared about staying in the gold space to being eager to invest more.
Kanwar: Where is the financing going to? Is it just in pure exploration, or is M&A activity starting to perk up?
Grosskopf: Money is definitely heating up in the sector and we continue to make the call that the junior mining companies will be consolidating either among themselves or be acquired by the seniors. We see capital flows across the spectrum right now. Bullion is leading right now, but capital is coming into equities and private strategies as well.
Kanwar: Thank you, Peter.
Past performance is no guarantee of future results. You cannot invest directly in an index. Investments, commentary and statements are that of the author and may not be reflective of investments and commentary in other strategies managed by Sprott Asset Management USA, Inc., Sprott Asset Management LP, Sprott Inc., or any other Sprott entity or affiliate. Opinions expressed in this commentary are those of the author and may vary widely from opinions of other Sprott affiliated Portfolio Managers or investment professionals.
This content may not be reproduced in any form, or referred to in any other publication, without acknowledgment that it was produced by Sprott Asset Management LP and a reference to sprott.com. The opinions, estimates and projections (“information”) contained within this content are solely those of Sprott Asset Management LP (“SAM LP”) and are subject to change without notice. SAM LP makes every effort to ensure that the information has been derived from sources believed to be reliable and accurate. However, SAM LP assumes no responsibility for any losses or damages, whether direct or indirect, which arise out of the use of this information. SAM LP is not under any obligation to update or keep current the information contained herein. The information should not be regarded by recipients as a substitute for the exercise of their own judgment. Please contact your own personal advisor on your particular circumstances. Views expressed regarding a particular company, security, industry or market sector should not be considered an indication of trading intent of any investment funds managed by Sprott Asset Management LP. These views are not to be considered as investment advice nor should they be considered a recommendation to buy or sell. SAM LP and/or its affiliates may collectively beneficially own/control 1% or more of any class of the equity securities of the issuers mentioned in this report. SAM LP and/or its affiliates may hold short position in any class of the equity securities of the issuers mentioned in this report. During the preceding 12 months, SAM LP and/or its affiliates may have received remuneration other than normal course investment advisory or trade execution services from the issuers mentioned in this report.
SAM LP is the investment manager to the Sprott Physical Bullion Trusts (the “Trusts”). Important information about the Trusts, including the investment objectives and strategies, purchase options, applicable management fees, and expenses, is contained in the prospectus. Please read the document carefully before investing. Investment funds are not guaranteed, their values change frequently and past performance may not be repeated. This communication does not constitute an offer to sell or solicitation to purchase securities of the Trusts. You will usually pay brokerage fees to your dealer if you purchase or sell units of the Trusts on the Toronto Stock Exchange (“TSX”) or the New York Stock Exchange (“NYSE”). If the units are purchased or sold on the TSX or the NYSE, investors may pay more than the current net asset value when buying units or shares of the Trusts and may receive less than the current net asset value when selling them.
The risks associated with investing in a Trust depend on the securities and assets in which the Trust invests, based upon the Trust’s particular objectives. There is no assurance that any Trust will achieve its investment objective, and its net asset value, yield and investment return will fluctuate from time to time with market conditions. There is no guarantee that the full amount of your original investment in a Trust will be returned to you. The Trusts are not insured by the Canada Deposit Insurance Corporation or any other government deposit insurer. Please read a Trust’s prospectus before investing.
The information contained herein does not constitute an offer or solicitation to anyone in the United States or in any other jurisdiction in which such an offer or solicitation is not authorized or to any person to whom it is unlawful to make such an offer or solicitation. Prospective investors who are not resident in Canada or the United States should contact their financial advisor to determine whether securities of the Funds may be lawfully sold in their jurisdiction.
The information provided is general in nature and is provided with the understanding that it may not be relied upon as, nor considered to be, the rendering or tax, legal, accounting or professional advice. Readers should consult with their own accountants and/or lawyers for advice on their specific circumstances before taking any action.
© 2022 Sprott Inc. All rights reserved.
You are now leaving Sprott.com and entering a linked website. Sprott has partnered with ALPS in offering Sprott ETFs. For fact sheets, marketing materials, prospectuses, performance, expense information and other details about the ETFs, you will be directed to the ALPS/Sprott website at SprottETFs.com.Continue to Sprott Exchange Traded Funds
You are now leaving Sprott.com and entering a linked website. Sprott Asset Management is a sub-advisor for several mutual funds on behalf of Ninepoint Partners. For details on these funds, you will be directed to the Ninepoint Partners website at ninepoint.com.Continue to Ninepoint Partners
You are now leaving sprott.com and linking to a third-party website. Sprott assumes no liability for the content of this linked site and the material it presents, including without limitation, the accuracy, subject matter, quality or timeliness of the content. The fact that this link has been provided does not constitute an endorsement, authorization, sponsorship by or affiliation with Sprott with respect to the linked site or the material.Continue