Does Sprott have to re-value Gold holdings, and therefore do we see a loss upon quarter's earnings due to drop in gold prices since last quarter? Could PPS be reflecting the quickening pace and longer term trend of gold price decline?
Yes. It runs through the income statement quarterly. The approximate hit will be $24 million or about 5% of book value. Another way of getting there is: gold is about 25% of book value and gold has declined about 20% during the quarter. 25% times 20% = 5%. In terms of your 2nd question, the decline in bullion should only have a 25% impact on the share price because it is 25% of book. The other assets affect the other 75%. Based on the change in value of bullion the dividend per share is not going to be dramatically cut after the Q2 earnings because the other assets are presumably performing OK. I highly recommend SCPZF for any income portfolio. Monthly divided over-collateralized with real assets.
Thanks. At what PPS level (assuming gold could drop to $1000?) do you think SCPZF becomes strong value? Exceptional value? Appreciate your insights. I would assume that since the dividend was initiated that mgt believes that it has the ongoing financial capability to sustain the dividend close to the current level.