Sprott Inc. Price & Performance (SII)

Whitney George, Please go ahead, Mr. George.

Thank you, operator, and good morning, everyone. Thank you for joining us today. On the call with me today is our CFO, Kevin Hibbert and John Chimpalia, CEO of Sprott Asset Management. Our twenty twenty four fourth quarter and year end results were released this morning and are available on our website, where you can also find the financial statements and MD and A. I'll start on Slide four with a review of 2024 highlights. We will discuss in more detail later in the call but a lot has happened since we last spoke and we hope you are all managing well in this rapidly evolving environment. It's very difficult to give you a current outlook because the letter I wrote two weeks ago has already become dated with things moving [indiscernible] Turning now to our results, I'm pleased to report that in 2024, was Sprout's seventh consecutive year of double digit AUM growth. Despite a pullback in the fourth quarter, our AUM increased by $2,800,000,000 during the year to $31,500,000,000 as of 12/31/2024. Importantly, we have carried that momentum into 2025 with assets increasing by $2,000,000,000 year to date to 33,500,000,000.0 Our AUM growth in 2024 was driven by rising Sprott precious metal prices as well as almost $700,000,000 in net sales mostly in our exchange listed products.

Our managed equity strategies also performed well in 2024 with certain funds generating performance fees. During the year, we continued to expand our critical materials offerings with the launch of two new ETFs and one physical trust. At the corporate level, we paid down our line of credit during the fourth quarter resulting in a debt free balance sheet. In November, we increased our quarterly dividend by 20%. We were also in the market at the end of the year for modest repurchases of our shares through our normal course issuer bid. With that, I'll pass it over to Kevin for a look at our financial results. Kevin? Thanks, Whitney, and good morning, everyone.

I'll start on Slide five, which provides a summary of our historical AUM. AUM finished the year at $31,500,000,000 down 6% from $33,400,000,000 last quarter but was up 10% from $28,700,000,000 at the end of twenty twenty three To Whitney's point, although fourth quarter AUM was negatively impacted by market value depreciation, across most of our funds and the termination of certain sub advised fund contracts 2024 was nevertheless our seventh consecutive year of double digit AUM growth as we benefited from strong full year market value appreciation our precious metals physical trusts and net inflows to our exchange listed products more broadly Subsequent to year end, on February 21, our AUM increased by $2,000,000,000 to $33,500,000,000 Slide six provides a brief look at our three and twelve month earnings.

Net income this quarter was $11,700,000 up 21% from $9,700,000 for the same three month period last year. On a full year basis, net income was $49,300,000 up 18% from $41,800,000 last year. Our three and twelve months ended results benefited from higher average AUM, on strong market value appreciation in our precious metals physical trusts and inflows to the majority of our exchange listed Sprott, We also benefited from carried interest and performance fee crystallization in [indiscernible] in our managed equities, and Private Strategies segments. Adjusted base EBITDA was $22,400,000 in the quarter up 19% from $18,800,000 earned over the same three month period last year and was $85,200,000 on a full year basis Twelve month ended results benefited from higher average AUM on both strong market value appreciation and flows to our precious metals physical trust. Finally, Slide seven provides a few treasury and balance sheet management highlights. And as you can see, due to our improved earnings, our cash and liquidity profile strengthened this year We raised our dividend by 20% in November to Whitney's point. And became debt free in the fourth quarter. For more information on our revenues, expenses, net income, EBITDA and balance sheet metrics you can refer to the supplemental information section of this presentation as well as our annual MD and A and financial statements filed earlier this morning.

With that said, I'll pass things over to John. Thank you, Kevin, and good morning, to everybody. I'll start on Slide eight and with our AUM growth. Despite softness in gold, silver and uranium prices in the fourth quarter, We experienced very strong AUM growth for the overall year. This product category continues to be our primary growth engine as we see growing investor interest in physical metals right across the world, and across multiple investor segments. Year to date, our AUM has experienced a sharp recovery lifted primarily by pressure metals prices. I think it's also important to note that AUM in the segment stands at an all time high and that this product category is highly scalable. Moving to the next slide, please. On Slide nine, our sales, we generated $126,000,000 of net flows in Q4 despite softer metal prices For the full year, we achieved $957,000,000 in dollars in net flows including the proceeds from the Sprott Physical Copper Trust IPO. While we're pleased with these results on both an absolute and relative basis, many investors were focused On other high flying market segments like Tech Stocks, However, we see the early stages of rotation underway as investors are becoming increasingly cautious about growing market and political risks and are once again adding gold to their portfolios after an extended period of indifference And in the last few days, we're starting to see inflows into the silver ETF segment as well after a period of net outflows.

Spot uranium prices experienced a material correction over the last twelve months, which we believe has largely run its course. The spot price at $65 now sits $15 below the term price of $80 which increased 20% last year. We believe the sell off of the past few months was exacerbated by year end selling and the liquidation of the Kazakh based ANU Energy Fund which held over 2,000,000 pounds of uranium, which came into the spot market. At one point in 2024, the spot price traded more than $30 over the term price which acted as a strong disincentive for producers and utilities to buy in the spot market to top up their inventories, which they do from time to time historically. The current $15 price differential seems unsustainable to us in a market that is projected to have a 35,000,000 pound production deficit in 2025 and is only forecast to widen over the next few years. On the next slide, shifting to our ETFs, AUM growth was largely flat in 2024. Primarily on weakness in uranium equities. Changes in this segment tends to be more volatile given the smaller cap nature of many of holdings held by these ETFs.

On Slide 11, we generated sales of $17,000,000 in the fourth quarter despite softer equity values. And for the full year, we achieved $297,000,000 in net flows It's important to note our growing suite of ETFs covering multiple market segments and trading across trade stock exchanges positions us well to capture investor flows when interest returns to these thematics. Turning to Slide 12, as Whitney mentioned, we're very pleased to report two new additions to our ETF lineup. Firstly, the Sprott Silver miners and physical silver ETF. The ticker is SLDR on the NASDAQ. Is a natural extension and complement to our Sprott Physical Silver Trust. This is a passively managed ETF that tracks an index that we co developed with our partners at NASDAQ We were very fixated in designing an index that provided investors with a significantly higher exposure to silver some of the existing competitors in the marketplace. When we dissected competitor silver mining indexes, we were shocked to learn that the underlying exposure to silver range from only 26% to 31%.

Just because a silver a company may have silver in its name doesn't mean it's a silver this company SLVR currently provides approximately 70% exposure to silver, which provides a highly differentiated thoughtful approach The Fund is receiving very good traction and interest in its first few weeks of life and we're very excited about adding this to our lineup. Secondly, we'd like to highlight our Sprott nice ticker GBUG, GBUG, This ETF represents a number of firsts for us It's our first actively managed ETF and it's also the world's first actively managed gold and silver miners ETF. Our active investment team, which has over one hundred years of collective experience, manages over $1,000,000,000 in similar strategies via our flagship mutual fund, separate accounts, sub advisor relationships and limited partnerships, Offering our active capabilities within an ETF wrapper will allow us to target investors that of Migrades ETFs, which has quickly become the go to product structure for many. ETF will offer inter day trading, lower fees, as well as greater transparency and tax efficiency relative to our mutual fund. Should also note that this ETF will not be an exact clone of our flagship gold equity fund as it will not own physical gold, but it will be highly similar in nature.

And with that, I'll pass it over to Whitney. Thank you, John. Turning to Slide 14, our managed equity strategies delivered strong full year performance in 2024, notwithstanding weaker gold and silver prices during the fourth quarter. Our flagship gold equity fund was down 9.3% in the fourth quarter, but post full year gain of 20.6%.

Despite good performance, investors have not yet taken advantage of the opportunities in precious metals equities. We reported $182,000,000 in net redemption in fourth quarter and $349,000,000 on a full year basis. I should note $127,000,000 of those redemptions were related to the cancellous cancellation of certain sub advisory agreements during December.

We remain optimistic that investor flows will eventually return to mining equities.

I'll now turn to Slide 15 for a look at our private strategies.

Combined Lending and Streaming Strategies AUM was $2,300,000,000 as of 12/31/2024, the team is continuing to monitor and harvest investments on our second product lending fund and is actively assessing new investment opportunities for Lending Fund three and the streaming team is also monitoring and managing its portfolio of investments. Slide 16, in summary, Rising precious metals prices were the main driver of our asset growth in 2024 and this trend has continued into the early months 2025. Shortly after the U. S. Election, a new dynamic emerged in the gold market that has made its way into the headlines as prices are making all time highs on a nearly daily basis.

Concerns over potential tariffs on precious metals have caused premium prices in The U. S. Market relative to others, especially London, Although there have never been tariffs on gold except during the Nixon administration when the rate was set at zero, the ongoing arbitrage is putting enormous pressure on physical markets. Beginning in January, record amounts of physical gold were shipped from London to New York, Lead times for delivery became extended and lease rates rose significantly. There are additional logistical delays due to the fact that Comenex vaults will only take delivery of 100 ounce gold bars, while the London bullion market 400 ounce bars. While this is all short term activity, it does demonstrate the fragility of the old system and the need need for it to adapt to gold's larger role as a global reserve asset. For many critical materials, 2024 was a challenging year as investors struggled to gauge the impact of the Fed's interest rate path geopolitical tensions and slowing demand from China. Spot uranium prices, as John mentioned, declined by 10.100.7% during the fourth quarter and closed the year down 19.7%. After reaching record highs during the second quarter of twenty twenty four, copper bore the brunt of weakening Chinese demand falling 20% from its peak close and to close the year up just 2.2%.

Obviously, today's news is [indiscernible] Increased interest in copper as it becomes subject to potential tariff is well. We expect further volatility in 2025 as evolving trade alliance alliances force many countries to focus on security of supply incentivizing domestic production to guard against an increasingly fragile global supply chain. Despite the near term turbulence, we remain confident in our critical materials thesis which is rooted in the growing global electrification. Western electricity demand is outpacing power production capacity and aging grids must be upgraded to accommodate power in intensive technologies like artificial intelligence. Massive amounts of critical materials will be required to achieve these goals. We continue to expand our exchange listed product offerings launching three critical mineral strategies in 2024 and two new precious metals ETFs so far in 2025. Looking ahead, Sprott is well positioned for an uncertain future. Global central banks are clearly focused on reducing their reliance on U. S. Treasuries and have turned to gold instead. We expect this trend to accelerate and broaden with investor participation increasing. The recent turmoil in the metals markets has highlighted the importance of physical ownership an area where Sprott offers best in class solutions to individual and institutional investors.

The realignment of global trade and the focus on energy security will create demand for critical materials produced in friendly jurisdictions We are pleased to offer investors a range of unique strategies to capitalize on this power We have continued to invest in our sales and marketing capabilities deliver our clients the highest levels of client service while building our position as thought leaders in our core teams. We remain contrarian, innovative and aligned And that concludes our remarks for today's call. I'll now turn it back to the operator for Q and A. Operator?

Thank you.

And our first question coming from the line of Matt Hewitt with Canaccord. Your line is now open.

Hey, good morning, guys. Thanks for taking my question.

There's been a considerable pullback in uranium Sprott prices the last quarter.

Trust continues to turn a bit of a discount to NAV. You maybe talk about what your expectations are for the Iranian market and spot prices over the next couple of quarters?

Yes.

Hey, good morning. I've just finished over 40 meetings with institutional investors down at the Bank of Montreal Mining Conference. So this has been a hot topic. What we think is really going on right now, want to break it into two parts is, if you think about the term market, where utilities buy uranium, it was a mediocre year last year in terms of pounds contracted. And if you think about what utilities are facing right now, it's it's a whole lot of uncertainty coming from multiple angles. Potential changes to the Inflation Reduction Act is obviously a concern even though the current administration is very pro nuclear.

We know all kinds of things are being tinkered with Obviously, tariffs on uranium could become a meaningful cost increase for them. Remember, The U. S. Requires about 47,000,000 pounds of uranium each year The U. S. Produces less than 1,000,000 domestically. So they're hugely dependent on countries like Canada, There could be retaliatory export taxes And then finally, President Trump's recent coziness with President Putin is clearly creating some anxiety around what does this mean for the ban against Russian enriched uranium? How could that change the fuel cycle? And with all of these uncertainties, I think it's fair to say that market participants are frozen waiting for some clarity. That is clearly creating downward pressure in the spot price.

Where a lack of sellers where there's regular sellers and one large seller that I mentioned, but buyers have really stepped to the sidelines until they get some more clarity. So unfortunately, the theme of the day and it's not just the rain, it's obviously happening with Fizz markets across many different commodities. There's just a lot of uncertainty right now I would note that the price of uranium that is is sitting in The United States right now is trading at a $2.5 premium over uranium sitting in Canada. So while there are no tariffs officially announced, the market is starting to build in some expectation.

So until we get some clarity, I think we're going to chop away here for the next quarter or two.

That's great color. And then you mentioned the friendly jurisdictions a couple of times. So Does that imply maybe a demand for an ETF that focuses on material producers in particular geographies?

Yes. I mean, that's a good question. So I mean we used the term friendly geography I used to we obviously thought Canada was a friendly geography at one point to The U. S. But that's obviously changing with the threat of tariffs on all our commodities that The U. S. Buys.

But putting that aside for a moment, obviously, what's happening is the tariffs are designed to try to incentivize reshoring or restarting of lost industries many lost industries include things like uranium mining, copper mining, etcetera in The United States. Sprott processing of materials. And so if you can give your local producers a cost advantage and like I mentioned just a minute ago, that $2.5 spread for U. S. Domiciled uranium right now it could go to a $5 or $6 premium. Could that give producers with higher cost structures in The United States, which they currently do, relative to their counterpart mines in places like Canada and Australia and Kazakhstan. Could that give them an advantage? Sure it could. Again, tariffs are unpredictable and tariffs can change. So that's obviously the economic rationale around the tariffs. We'll see what happens right now. I think my message to investors is we're in a cloud of uncertainty and uncertainty is always worse than bad news. So it's almost like you need to rip the Band Aid and move forward and to understand what the new new rules of the game are going to be.

Okay. Understand. That's helpful. And then maybe just [indiscernible] Obviously, there's some puts and takes there regarding fee levels. But it's pretty nice step down in Q4 and for the year. You just talk about how that's trending for 2025 and how you see that going going forward?

Hey, Matt. Kevin here.

So I would say it's fair to assume that we probably be in the somewhere ebbing and flowing in the mid to high 40s range of through 2025. Okay.

That's all for me. Thanks.

Thanks.

Thank you. And our next question coming from the line of Mike Kozak with Cantor Fitzgerald. Your line is now open.

Yes. Good morning, everybody. Thanks for hosting the call. Just two questions from me. First one, so Bloomberg physical gold ETFs they posted their biggest week of net inflows in over two years last week.

And I see that in the data that you guys post every day on the on the website for PHYS. So you're seeing those inflows as well. My first question is, do you have any way to gauge kind of geographically where and maybe by what type of investor that demand is coming from? Like is it are you seeing mostly inflows from U. S. Buyers or your best estimation, is it mostly retail at this stage? Or are you seeing some real chunk institutions?

Yes. Hi, Mike. It's John.

Yes, I mean getting ETF data is not the easiest in terms of the And you raised some really good points that gold ETFs have finally gone into net inflows. They were largely in net outflows for most of last year as people were really not paying attention and chasing things like MEG7 stocks.

That has clearly changed. The sentiment's changed. The price action's changed. And we're starting to see trend building in the gold ETFs back into net sales. U. S. Institutions last year were the biggest sellers of gold ETFs because quite frankly everything else was working for them. So why bother with gold? Obviously, the mindset right now given all the uncertainty politically, geopolitically, trade wars and tariffs, etcetera, etcetera, now causing pop people to rethink potential risks and whether they need to have some physical goals in their portfolio as a ballast.

And I think it's a very good sign. We're clearly at Sprott seeing renewed interest in our gold products We had a very good capital raising day the other day. [indiscernible] on the silver side, again, it's a hybrid metal, so it's not going to have the exact attributes.

But We're starting to see some inflows on the silver side as well. Across the industry, which up until recently has been just steady net outflow. So price action and ETF flows don't always correlate the way you would think.

But we think it's the start of a rotation as these risks and all these uncertainties things that we've highlighted, investors are starting to think very differently about risk in the portfolio. And gold Historically, in these periods of market dislocation or calamity, again, not promising anything, but historically, gold has done very well on a relative basis.

Okay. That's helpful. And then maybe as a follow-up on that and just because you brought it up earlier in the call, you're down at BMO. It sounds like most of the investors you were chatting with are still talking to you about the uranium side as opposed to the precious side?

That fair assessment.

At this stage, Yes. I think I'm here specifically to talk about uranium, but naturally the discussion has cascaded into precious metals and copper.

As well and what's going on in the world. It's interesting because last year, I would say the focal point of the conference was uranium, the year before that [indiscernible] and for two years gold was kind of in the shadows. Clearly, there's a lot more interest right now going on in gold market given it's at all time highs and that many of these gold companies are well positioned here to capture that operating leverage. So the tone is definitely more buoyant on the on the gold side, but uranium remains a very intriguing long term investment for many of these institutions because they do believe that Nuclear Renaissance is underway It is a slow moving, as we know, glacial kind of target. But they firmly believe that the supply demand imbalance that we're dealing with has to be solved through higher prices. And that's why I think many institutions remain very well positioned in the Iranian space.

Okay.

And then last one for me. And you kind of front ran this one a little bit because you mentioned $2.5 per pound premium for uranium sitting at Conradine. I know you guys store a lot of material there. So my final question is, Could you and would you and to what extent would you feel comfortable putting location swaps on to raise some capital in the trust that way?

Yes, that's a really great question. And obviously, we're contingency planning for all kinds of outcomes. And one of them that we've been thinking very seriously about is the strategic value of our stockpile of uranium held in The U. S, which is about 25% of the trust or about 16 odd million pounds That is obviously has the potential to trade theoretically at a $5 or $6 premium over the rest of the market. And we would absolutely look to optimize that value through location swaps we've done historically in the past. That could be a very nice kind of win and bump to our NAV if we can do that.

Okay. That's it for me. Very helpful. I'll turn it over.

Thank you. Our next question coming from the line of Michael with Key Securities. Your line is now open.

Hi, good morning.

Just it looks like your base EBITDA margins came up almost just over 100 basis points in 2024.

And just wondering what you think if that level of expansion is doable again in 2025 or 2026? And what your forecast might be for those margins for the next two years? Mike, thanks for that. We don't provide forecast of earnings or margins, but what I can say is there is definitely ample operating leverage in the model to see this number continue to rise at least for the remainder of this year.

Okay, great. Thanks.

And just also now that your debt free plans for excess cash flow through 2025?

So, we've been a dividend payer for a long time and plan to continue that. So that's one source. As I've said, we've been [indiscernible] And we have a couple of smallish opportunities that might come to fruition along the way. And we'll continue to see new Sprott, nothing on the private side in the first part of the year, but the team has a very good record we might have an opportunity down the road to do our next fund. So lots of uses. We're not a money market fund, so we're not going to sit on a pile of cash. We're going to return it to shareholders as prudently as we see fit and try and continue to grow our business.

Great. Thanks. And just one final quick one, if I may.

Just how flows are looking Q1 twenty twenty five to date. Obviously, we're two thirds of the way through the quarter now. And just sort of what the overall flows picture looks like? And then maybe if any particular products are standing out on that front? And that'll be all for me. Thanks.

Yes. Hi, it's John. Obviously, the physical gold trust given the price action we're seeing in gold and its role, as a portfolio diversifier, I think is where we're seeing the most traction and the most global flows across the whole suite of funds. So the way it's trading right now very tight to its net asset value is a very strong signal in terms of investor interest which positions us very well to raise capital when we get these intraday moves. So I would say that that's going to be our go to fund. It would be nice to get silver kind of going as well. They usually work together in tandem. It's been a little quieter, but it feels as though it's it's positioning itself to join the party. Unfortunately, uranium, given the very different market dynamic and all the geopolitical risks that it's dealing with right now, seems to be a little bit on the sideline. So gold and silver would be my guess in terms of where we're going to see the most interest.

Great. Thanks very much guys.

Thank you.

I'm not showing any further questions in the queue. I will now turn the call back over to Mr. For any closing remarks.

Thank you, and thank you everyone for participating in this call. We appreciate your interest in Sprott and look forward to speaking to you again our first quarter year end results. Have a great day. Thanks.

This concludes today's conference call. Thank you for participating. You may now disconnect. Two, two,