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Edited Transcript of SII.TO earnings conference call or presentation 9-Aug-19 2:00pm GMT

Q2 2019 Sprott Inc Earnings Call

TORONTO Sep 2, 2019 (Thomson StreetEvents) -- Edited Transcript of Sprott Inc earnings conference call or presentation Friday, August 9, 2019 at 2:00:00pm GMT

TEXT version of Transcript

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Corporate Participants

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* John Ciampaglia

Sprott Inc. - Senior MD

* Kevin Lloyd Hibbert

Sprott Inc. - Senior MD, CFO & Co-Head of the Enterprise Shared Services

* Peter F. Grosskopf

Sprott Inc. - CEO & Director

* W. Whitney George

Sprott Inc. - President

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Conference Call Participants

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* Gary Ho

Desjardins Securities Inc., Research Division - Analyst

* Geoffrey Kwan

RBC Capital Markets, LLC, Research Division - Analyst

* Graham Ryding

TD Securities Equity Research - Research Analyst of Financial Services

* Nikolaus Priebe

BMO Capital Markets Equity Research - Analyst

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Presentation

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Operator [1]

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Good morning, ladies and gentlemen, and thank you for standing by. Welcome to Sprott Inc.'s 2019 Second Quarter Results Conference Call. (Operator Instructions)

As a reminder, this conference is being recorded today, August 9, 2019. On behalf of the speakers that follow, listeners are cautioned that today's presentation and the responses to questions may contain forward-looking statements within the meaning of the Safe Harbor Provision of the Canadian Provincial Securities Law.

Forward-looking statements involve risks and uncertainties, and undue reliance should not be placed on such statements. Certain material factors or assumptions are implied in making forward-looking statements, and actual results may differ materially from those expressed or implied in such statements. For additional information about factors that may cause actual results to differ materially from expectations and about material factors or assumptions applied in making forward-looking statements, please consult the MD&A for the quarter and Sprott's other filings with the Canadian securities regulators.

I will now turn the conference over to Mr. Peter Grosskopf. Please go ahead, Mr. Grosskopf.

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Peter F. Grosskopf, Sprott Inc. - CEO & Director [2]

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Thank you, operator. Good morning, everyone, and thanks for joining us today.

On the call with me today is Whitney George, President; Kevin Hibbert, our CFO; and John Ciampaglia, the Chief Executive Officer of Sprott Asset Management.

Our Q2 results were released this morning and are available on our website where you can also find the financial statements and MD&A.

I'll begin by saying that this has been the most pleasurable week in my 9 years with Sprott. After 8 years of correction, precious metals finally broke out of their trading range in the second quarter of 2019 and have recently been achieving multi-year highs. Gold and silver have gained 17% and 10%, respectively this year and the related gold equities are up by close to 35%. The catalysts for this change in sentiment, in no particular order, were the 180-degree turn from the Fed when it abandoned its tightening program or began to cut rates, the $15 trillion in negative-yielding debt globally and the looming possibility of a competitive currency devaluation.

We believe that the likely path forward is through fiscal stimulus, more spending and attendant deficit increases, all of which will be positive for gold, silver and precious metal equities.

The other reason for my happiness is that earlier this week is that we announced one of the most important transactions in Sprott's history, the acquisition of Tocqueville Gold strategies. John Hathaway and Tocqueville team are the preeminent active managers in the sector and co-thought leaders of the gold sector, along with ourselves, and we are thrilled to have them join our team.

This transaction is expected to add CAD 2.5 billion to our managed equities platform, and equally importantly, will give us access to relationships and distribution that would have been impossible to establish in this day and age.

I'll pass it over to Whitney George to talk about this transaction in more detail.

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W. Whitney George, Sprott Inc. - President [3]

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Thank you, Peter. Good morning, everybody.

As I'm sure many know, in particular, in the United States, John Hathaway and his team, Doug Groh and Ryan McIntyre are absolutely some of the most experienced investors in the gold mining space. They manage both mutual funds -- or a mutual fund and separate accounts. Certainly, John is a spokesmen for the gold trade of caliber. I would suggest that they're at Sprott south of the border here in Canada. And we're very thankful for the Tocqueville organization here, including Robert Kleinschmidt and his senior management team for partnering with us to put together these 2 organizations to make, what I believe, will be truly a world-class platform for both investors and issuers in the gold -- precious metals mining space.

The terms of the transaction are an upfront payment of $10 million in cash and $5 million in Sprott common shares, plus we have a contingent earnout partnership, I'd call it, over the course of the next 2 years that could value the transaction as much as $50 million, again, including Sprott shares and cash.

We're expecting and hoping to close the transaction in early-January. Currently, the Tocqueville Gold fund has about $1.1 billion in assets under management and the institutional and subadvised mandates for the team are currently about $800 million under management and are both in North America as well as Europe. So we got some geographic distribution expansion opportunities as well.

With that, I'd like to turn it over to John to talk a little bit about the rationale behind this transaction.

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John Ciampaglia, Sprott Inc. - Senior MD [4]

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Sure. Thank you, Whitney, and good morning, everybody.

Just want to go back, it's been about 2 years now since we completed the divestiture of our mutual fund business in Canada. And at that point, we undertook a strategic review and came to some conclusions that I'm happy that we're executing on. One of them was to improve scale across our different product lines. Second one was to improve our profit margins.

The first big initiative under -- to achieve those goals was, obviously, the acquisition of Central Fund of Canada, which added a lot of scale and revenues to our platform. The second leg of our strategy around active has been completed now with the Tocqueville announcement.

So we're very excited that both of these deals really helped solidify our plan from 2 years ago. We really like this plan, it's a very strong strategic fit. It's a good high-margin business, and we feel it will be accretive right away to our business.

Having over $2 billion of assets in a strategy in this space would put you amongst the upper echelon of the different teams in the world. So we think the team is very well positioned as the sector recovers and institutions start reallocating to it to be able to win new business. We know the people very well through our joint venture. That gives us a lot of comfort that we've got alignment of interest, and we've got partners that we feel good about and that's very important. We're not just acquiring assets, we're acquiring the people.

Second of all, it does strengthen our position in metals and mining and provides us a lot of operating leverage to higher gold prices. And I think the last part that was very attractive about this is that it does broaden our footprint in terms of distribution. We've historically been very strong in Canada and the U.S. We've always wanted to increase our presence in the U.K. and Continental Europe, which is a very large gold and mining market. We feel that with this fund, it gives us a very good toehold into that marketplace. So the distribution side of the equation is also as important, longer-term, as the sector recovers.

Moving to the next slide. Let's talk a little bit about our passive and active strategies. And while the quarter was a little challenging, what we've seen since the end of May has been really a sea change. At the end of May, gold was at $1,300 an ounce, silver was at $14.50. Gold is up 15%, and silver's up 17%. So we've seen really good bounce back in market prices. And that, obviously, is triggering renewed investor interest around the world.

What we're seeing in terms of inflows and what we think will continue to carry is that inflows have centered mostly on physical gold and that's because investors around the world, right now, are trying to hedge equity risk. That equity risk, obviously, is coming from trade anxiety, currency war anxiety and so forth.

We then see flows moving over to silver. It was a laggard at the beginning of this rally and is now catching up, and as I said, it's slightly ahead of gold since the end of May.

And then finally, we think that the interest in the flows will cascade down to the mining stocks. The mining stocks have had a very hard bounce here. Our gold miner ETF was up 33% since the end of May, so it's had a very nice balance that investors haven't quite paid a lot of attention to mining stocks as of yet. We think they're going to start to recognizing these numbers and see the operating leverage in the business has improved because of the higher metals prices, and we will start to see flows there.

Now we believe we're very well positioned in this market environment to capture flows. And since June 20, we've had $84 million of new inflows into our Gold Trust, PHYS, and the Silver Trust, which is PSLV. Just for background, we've not had any new creations of units in the silver fund for over a year prior to the new inflows of capital. So to us, that is very important that the flows and the trading volumes are all moving in the right direction, investors are responding to the market.

And on the redemption side, we have been seeing a moderation of overall redemption. So what we would expect is that we move from net redemptions to flat, and hopefully, to positive inflows in the next few quarters.

And with that, I'll pass it over to Kevin.

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Kevin Lloyd Hibbert, Sprott Inc. - Senior MD, CFO & Co-Head of the Enterprise Shared Services [5]

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Thanks, John, and good morning, everyone.

Slide 9 provides a summary of our AUM at quarter end as well as a pro forma estimate of where our AUM would have closed on August 6, inclusive of the AUM from the acquisition of Tocqueville Gold strategies.

AUM was $10.7 billion as at June 30, 2019, up $100 million or 1% from March 31, 2019. Our exchange-listed products segment benefited from strong oil price appreciation, particularly, late in the quarter, to John's point earlier, while our lending segment benefited from additional commitment fee earning AUM, which partially offset the capital distributions from the lending LPs in the quarter.

The on-boarding of the Tocqueville Gold strategies, assuming fund prices remain at current levels through to January 2020, would add an additional $2.5 billion in AUM through our managed equities segment, creating material operating scale and day 1 EBITDA accretion in the process.

In addition to top Tocqueville's Gold strategies, taking into account the current closing AUM estimates for all our other fund product offerings across the company, our pro forma AUM would be approximately $13.7 billion, creating a significant earnings capacity for Sprott beginning fiscal 2020 and beyond.

Moving on to Slide 10, for a look at our second quarter earnings. Adjusted base EBITDA in the quarter was $9.4 million, down $1.3 million or 12% from the prior period. The decrease was primarily due to lower net commissions on lower equity origination and placement activities in our brokerage segment, lower fee income earned in our exchange-listed products and managed equities segment, given lower average AUM year-over-year and lower income in our lending segment, given last year's fees generated on the early settlement of a loan. These decreases more than offset expense savings arising from our lower annual incentive accruals, LTIP amortization and SG&A.

For more information on our revenues, expenses and EBITDA, you can refer to the supplemental information section of this presentation as well as our 2019 Q2 MD&A filed earlier this morning.

That said, I'll pass it back to Peter for some final remarks.

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Peter F. Grosskopf, Sprott Inc. - CEO & Director [6]

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Thanks, Kevin. I'll summarize recent developments for our private resource strategies. Recently, our first private lending fund has been performing better-than-expected, delivering strong IRR and -- to our clients and operating earnings to Sprott. The downside of this performance is that we experienced shorter duration than expected due to some early loan repayments. And as a result, our AUM was somewhat reduced in the recent past. More importantly, as an offset, we've began deploying capital in our Lending Fund II in this current quarter with several notable deal announcements and more in the works.

We continue fundraising for this second lending fund and expect it to be closed at capacity before the end of the year. We are also advancing another private resource strategy, which would target approximately $500 million in AUM, and we should be able to give more details on that at our upcoming November quarter.

As we announced last quarter, Neil Adshead has rejoined Sprott and will be managing a new private mining equity fund, which we expect to launch in Q3.

And now turning to Slide 12 for some closing remarks. The recent change in sentiment in our sector is finally giving Sprott and providing Sprott with tailwinds in our business. We believe that Central Bank policies will no longer be the focus point of the markets in the future and that investors will now be focused on adding more insurance to their portfolios.

The Tocqueville acquisition is extremely significant for our business. It expands our global footprint and distribution, it's a perfect fit with our broader platform and it complements our other resource investment and financing businesses.

As John noted, our physical trusts are returning to growths and creations, creating new units and multiple funds. Our managed equity strategies have performed extremely well year-to-date, and our lending strategy is also delivering strong returns.

That concludes our formal remarks for today, and we'll now open the call for questions. Operator?

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Questions and Answers

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Operator [1]

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(Operator Instructions)

And our first question comes from Gary Ho with Desjardins Capital.

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Gary Ho, Desjardins Securities Inc., Research Division - Analyst [2]

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I just want to dive into the Tocqueville acquisition a little bit. Can you tell us kind of the blended fees from that $2.5 billion that you're acquiring and the potential perhaps kind of base EBITDA lift you expect, assuming today's gold prices?

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Kevin Lloyd Hibbert, Sprott Inc. - Senior MD, CFO & Co-Head of the Enterprise Shared Services [3]

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So Gary. So the blended fees, as I mentioned to you the other day, we will be disclosing that in the next quarter's results. What I'd say is, there are some data that is public that you can work with in your model. But as far as earnings impact in the managed equity segment, it's as I said in my opening remarks, I think that you'll see significant EBITDA accretion on day 1. And I think the most I could say on that is to expect a multiple increase in the managed equity EBITDA number from what you are going to see by the end of this year.

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Gary Ho, Desjardins Securities Inc., Research Division - Analyst [4]

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Okay. And then maybe just in terms of the USD 35 million contingent payment, are you able to kind of tell us kind of what those hurdles need to be met before you pay these announced? And is it based on maintaining current AUM or increasing AUM? Just want to kind of assess the likelihood of payments for these amounts.

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W. Whitney George, Sprott Inc. - President [5]

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Sure. It's a contingent payment based on maintaining and then ultimately growing AUM, where we're paying a multiple of revenues that remains consistent throughout the 2-year payment schedule. And I think it's an excellent sharing of risk in the transaction. And I hope that we pay the maximum because that would mean a very good thing for Sprott in the long run.

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Gary Ho, Desjardins Securities Inc., Research Division - Analyst [6]

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Okay. And then, Peter, just related to this and kind of what's your appetite for more transactions? And if so, which silo would that -- would those be in? And maybe as -- attach that to kind of, Kevin, can you remind me kind of your available capital pro forma of this transaction?

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Peter F. Grosskopf, Sprott Inc. - CEO & Director [7]

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All right. Well, maybe I'll take the first part of the question then. So our immediate focus is going to be in growing our gold business. We just feel that there is so much potential short term, the attitude that we're getting from our clients and potential clients is that they're very engaged in looking at more business. And I would say, we don't need anything in the gold area to really go add some growth now. We just need to execute and be focused on using our relationships to bring in new clients. That said, I think that our company is well poised to consider additional opportunities next year. The commodity area has, as you know, become very unpopular.

And similar to the gold area, where there's just teams that have no capacity for growth on their own, we will see global opportunities for tuck-ins. And we will also see other areas that are closely related to gold, where there are teams that just don't have the capacity to raise capital for their products. And like the Tocqueville deal, we've really made this team a partner in our business. We're not just giving them a check to walk away or take client transition. We're bringing them in to grow. And as Whitney said, couldn't be more pleased to go through the maximum in that transaction. So we wanted to keep with that style of partnership. And I think we will have more opportunities next year. So we're not, like -- look, we look at a half a dozen deals per quarter and very few of them are a fit in the end. Some of them are like product tack-ons, some of them are tuck-unders and some of them are new areas. So it's a pretty busy corporate development business right now.

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Kevin Lloyd Hibbert, Sprott Inc. - Senior MD, CFO & Co-Head of the Enterprise Shared Services [8]

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And just, Gary, on the capital side. Page 14 of our MD&A, we show investable capital. It's steady at about $200 million. I think we'll probably remain at that level for the foreseeable future, with the majority of that about 60% invested in a variety of co-investment strategies across our different fund products. So I would say our investable capital, be probably, as I mentioned in the previous quarters, would not be expecting to deploy an awful lot of that on any future ideas we may have. Rather, we'll have a small portion of that being deployed with the rest being covered by our credit facility, which we note is for -- specifically for future investment ideas, such as what you saw at the other day with the Tocqueville.

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Gary Ho, Desjardins Securities Inc., Research Division - Analyst [9]

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Okay. That's helpful. And then just very last question, just for clarification. Going back to Slide 9 here. If I look at your last column here, excluding the acquisition so at that $11.1 billion. So assets are up 4.5% since Q2, and I assume, roughly $100 million coming from net inflows. Is that how I should interpret that chart there?

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Kevin Lloyd Hibbert, Sprott Inc. - Senior MD, CFO & Co-Head of the Enterprise Shared Services [10]

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Yes. That sounds about right. I can't give you right to the penny there, but that's approximately what we've experienced, about $80 million or $85 million in just those 2 funds. So between market appreciation and the metals prices and inflows, we've had a pretty good lift, about $500 million. So we're excited about the (inaudible) next quarter.

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Operator [11]

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And our next question comes from Nik Priebe with BMO Capital Markets.

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Nikolaus Priebe, BMO Capital Markets Equity Research - Analyst [12]

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I just want to ask a few questions. I think most of my questions on the Tocqueville acquisition have been asked. I just wanted to ask a few on the -- some of the segmented results. I did see there was about a $3 million charge or so on some nonrecurring professional fees and transaction costs in the quarter. Kevin, I was just wondering if you could help kind of break out what they're related to.

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Kevin Lloyd Hibbert, Sprott Inc. - Senior MD, CFO & Co-Head of the Enterprise Shared Services [13]

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Yes. So obviously, Nik, we just did this transaction. So a lot of the professional fees and transaction costs relate to this transaction and a few other things that we've got on the go in the background.

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Nikolaus Priebe, BMO Capital Markets Equity Research - Analyst [14]

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Okay. And then I just -- so obviously, there's been a lot of momentum here in precious metals, the last few months, very strong quarter in the second quarter. But commissions from the brokerage segment were kind of flat sequentially. Now I think gold really started to gain some momentum in the last month of the second quarter. So I was just wondering if you could give us some color on how you're seeing the pipeline of equities since activity started to build in that brokerage segment? And if we should kind of expect a better earnings contribution from that segment in the second half of this year?

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Peter F. Grosskopf, Sprott Inc. - CEO & Director [15]

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Yes. It's a good point. There is a bit of a lag, obviously, from generating deal flow to seeing it occur in the financial statements. The first quarter was probably the slowest, quietest, completely mortifying quarter that I've seen in the precious metal business since there were a couple of other points like that end of 2015 beginning of 2000. So it was absolutely dead. The activity started to pick up late second quarter. And right now, it is all hands on deck. So it's going to be a lot busier, a lot more active and a lot better results in the back half of the year.

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Nikolaus Priebe, BMO Capital Markets Equity Research - Analyst [16]

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Okay. And then just one last one for me. I did notice in the lending segment, I'm just looking at interest income generated in that segment looks higher on a sequential basis, despite the on-balance sheet loans were pretty stable quarter-over-quarter, and you did experience some repayments in the private lending LP. So can I infer that there was a bit of incremental interest income recognized in that figure associated with some of the early repayments?

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Kevin Lloyd Hibbert, Sprott Inc. - Senior MD, CFO & Co-Head of the Enterprise Shared Services [17]

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No. There's 2 -- if you look on that -- I think you're talking about Page 16. You look there's a little footnote beside the interest income line that explains there's 2 components of the interest income. There's the -- to your point, the interest income on the on-balance sheet loans, which is running down. But then we also have the investment income from the co-investments we make. So there's essentially interest income that's also being earned in the LPs. And as a co-investor in them, we're entitled to that interest income. So what's been happening there is that because we've been deploying more capital into the LPs since last year, there's more AUM that is generating interest income for us over that period. So that's more than offsetting, at least at this time, the drop-off in interest income from the on-balance sheet loans.

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Operator [18]

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And our next question comes from Graham Ryding with TD Securities.

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Graham Ryding, TD Securities Equity Research - Research Analyst of Financial Services [19]

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Just a couple for me. The distributions from your resource lending LP. It sounds like that's clients, sort of, give you -- clients who give all your lending money to is repaying. Is -- what's your outlook there? Is this something that you expect to continue? Or was this more of a one-off event in the quarter?

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Peter F. Grosskopf, Sprott Inc. - CEO & Director [20]

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Well, it's a constant process in lending. The -- and it's very difficult to forecast from quarter-to-quarter. The reality is that, that business is on a slow growth track, maybe not even slow but a decent growth track. But from quarter-to-quarter, if you get an early repayment, your AUM can dip, and then the next quarter, if you get a lot of deployments, your AUM can spike fairly quickly. So it's very tough to call from quarter-to-quarter. The other irritating factor is that when you get early repayments, you witness spikes in returns. So you get a short-term spike, then you get a drop-off and then you're deploying and you get more growth. The way I think of it as just kind of a -- underlying those dips is a pretty strong but growing business that should get to over $1 billion in AUM as it gets fully deployed.

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Kevin Lloyd Hibbert, Sprott Inc. - Senior MD, CFO & Co-Head of the Enterprise Shared Services [21]

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Yes. And I'll just add to that, Graham, once we get to that critical mass of AUM, and you'll see it's in a footnote 3 of the AUM summary on Page 11. There's about -- in Canadian dollar terms, about CAD 1.25 billion of committed capital, CAD 300 million of which is earned in commitment fees now. And the remainder CAD 950 million is still on the sidelines. So all of -- the majority of that is going to come on stream eventually over time and generate some very compelling returns for shareholders. It's just going to take a little bit more time to get it all deployed. But as Peter said the last quarter, companies are not entering into committed facilities without the intention of drawing on them obviously. So we have a short-term little snag here. But over time, it will be deployed.

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Graham Ryding, TD Securities Equity Research - Research Analyst of Financial Services [22]

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Okay. Understood. And just to be clear, this is being driven by corporate entities that you're lending to, they're sort of repaying these loans back as opposed to -- this is not being driven by institutional investors taking money away? Like, (inaudible) capital, right?

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Peter F. Grosskopf, Sprott Inc. - CEO & Director [23]

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No. That's right. The institutional commitments are growing. So it's short-term borrower repayments whereas there should be long-term borrower growth as others drawdown on their facilities. So what happens is in the mining business, as you can imagine, it's fairly bifurcated. Those companies that do better than expected, they want to pay us off, pay our bonuses. The IRRs on those loans are very high, but the duration is shorter. Then what happens is there's others that experience difficulties, and they drag things out a little bit. But over time, it's that pretty steady growth, you can count on.

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Graham Ryding, TD Securities Equity Research - Research Analyst of Financial Services [24]

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And are you still lending predominantly to energy companies? Or is it more on the mining side?

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Peter F. Grosskopf, Sprott Inc. - CEO & Director [25]

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No. We haven't lent to energy companies in 2 years. We're -- this is all -- mining portfolio is approximately 50% to 60% gold, silver, platinum and pallidum, so precious metals in the 40%, it's quite diversified across the other mining commodities.

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Graham Ryding, TD Securities Equity Research - Research Analyst of Financial Services [26]

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Okay. Got it. And then this environment where it's much stronger precious metals market, is that conducive to more borrowing by corporate entities? Or do they have less of a need for -- to be borrowing in this stronger gold price market?

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Peter F. Grosskopf, Sprott Inc. - CEO & Director [27]

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We always get that question. And it ebbs and flows. Right now, it is flowing. And the reason is because there were a lot of projects that were stalled for a lack of equity support, and those projects are now slowly able to raise equity. And you've seen a few bought deals occur in the sector recently. You've seen some other strategic financings. So as that equity gets applied behind projects of interest, they will be qualified to allow our loans that start to be drawn. So we're actually seeing a pickup in deployment now.

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Graham Ryding, TD Securities Equity Research - Research Analyst of Financial Services [28]

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Okay. That makes sense. And then just my last bit would just be on the exchange-listed products. Just trying to get a bit of insight into what's driving the outflows there? Is it predominantly the central fund that is driving the outflows?

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Kevin Lloyd Hibbert, Sprott Inc. - Senior MD, CFO & Co-Head of the Enterprise Shared Services [29]

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Yes. It is predominantly that fund that's experiencing the outflows. We have seen somewhat of a moderation in the last couple of months. So that's a positive sign. We would like -- we would like the fund, the discounts tighten to NAV, that will take pressure off redemptions. I think, generally, what -- the sequence is, metal prices go up, we get more trading volume, that in balance tightens up the discount and will alleviate the issue. So last month, we had very modest redemptions. This month, we don't have them in yet, but we don't expect any big number as well. So we're optimistic that the issue is self-correcting.

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Operator [30]

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And our next question comes from Geoff Kwan with RBC Capital Markets.

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Geoffrey Kwan, RBC Capital Markets, LLC, Research Division - Analyst [31]

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With the AUM that you would have reported, I guess, even for the August 6, how much of that percentage-wise ballpark even would you say is kind of tied to gold? And then presumably, with the Tocqueville when that closes, like that's pretty much dollar-for-dollar that would add to that exposure?

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Peter F. Grosskopf, Sprott Inc. - CEO & Director [32]

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That's correct. We're predominantly gold, silver. There is some -- there are some other mining commodities in the mix, and there's also a couple of value strategies. But if you took those percentages and added them up, the gold, silver, precious metals would be probably through 90%.

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Geoffrey Kwan, RBC Capital Markets, LLC, Research Division - Analyst [33]

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Okay. So 90%, on all of the precious metals but like would gold be 70% of the total AUM or higher?

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Peter F. Grosskopf, Sprott Inc. - CEO & Director [34]

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Well, vast majority of that 90% is related to gold.

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Kevin Lloyd Hibbert, Sprott Inc. - Senior MD, CFO & Co-Head of the Enterprise Shared Services [35]

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Yes. I would guesstimate about 70% -- 65% gold, 35% silver. Somewhere in the neighborhood.

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Peter F. Grosskopf, Sprott Inc. - CEO & Director [36]

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And that's up to 90%.

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Geoffrey Kwan, RBC Capital Markets, LLC, Research Division - Analyst [37]

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Right. Right, okay. And then on those loan repayments, you've been kind of doing these resource loans for many years, like, was there any -- was this kind of expected? Is it something that was driving it, that was maybe a little bit different than what you've seen in the past?

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Peter F. Grosskopf, Sprott Inc. - CEO & Director [38]

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No, it's the same pattern. The companies that do really well. We had 2 in the quarter, Equinox Gold and Champion Iron that exceeded expectations. And when they exceed expectations, they get a lot of money chasing them, and when they get a lot of money chasing them, we get repaid along with a bonus. I mean, to give you an idea of the quantum, we're lending with bonus somewhere between 12% and 15%. And when they're getting refinanced, they're getting refinanced at 5% to 8%. So there's a big advantage for them and a great business for us.

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Geoffrey Kwan, RBC Capital Markets, LLC, Research Division - Analyst [39]

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Got it. And just one last question I had was the -- your managed equities segments, when I'm looking at the AUM and then just kind of that other categories, how would you kind of describe as the kind of key drivers of, let's call it, the market performance or the investment performance of those funds? I mean, some of the strategies are just a little bit obvious as to what those servers might be. But just generally speaking, how do you kind of describe what makes that trajectory higher and obviously, conversely lower?

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W. Whitney George, Sprott Inc. - President [40]

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This is Whitney George. In our gold-related mutual funds and separate accounts, the performance is very -- we've been very, very strong, high 20s to mid-30s year-to-date. So that, obviously, drives some of it. I manage the closed-end value strategy that's having a very, very solid year, kind of in line with the PSLV. So a high teens return drives assets in a noticeable way there. I would say that generally, there hasn't been a lot of investor interest in investing in the products.

So some of the performance has been offset by modest redemptions. But I think, that's normal for this part of the cycle. There's always a little bit of a, get even an out, kind of reflex that occurs after a prolonged difficult period. Sprott Hathaway Special Situations formed a joint venture. It is performing exceedingly well since January and started 100% in cash in February, which was another strong month and has pretty much caught up to just about any other benchmark that you might want in its first 6 months.

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Operator [41]

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And I am not showing any further questions at this time. I would now like to turn the call back over to Peter Grosskopf for any closing remarks.

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Peter F. Grosskopf, Sprott Inc. - CEO & Director [42]

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Okay. Thank you, operator, and thank you all for joining us today. We look forward to reporting back to you at our next quarter on our progress. And please have a good weekend.

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Operator [43]

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Ladies and gentlemen, thank you for participating in today's conference. This does conclude today's program, and you may all disconnect. Everyone, have a wonderful day.