ETF Product Development

Steve Schoffstall: Our investment team boasts approximately 100 years of experience in mining, with a particular focus on gold and silver. It provides that unique experience, where they're able to not only sit behind a computer and look at spreadsheets and go through different models, but also conduct more than 200 management team meetings a year.

They have a great familiarity with all the companies in which they invest. We also have team members who conduct site visits, which can range from 1 to 30 trips.

James Connor: Steve, thank you for joining us today. You head up ETFs at Sprott Inc., and you and your team have been very busy this year. You've established three new ETF products. Tell us about those.

Steve Schoffstall: The first one we launched this year was the Sprott Silver Miners & Physical Silver ETF (SLVR). This ETF launched back in January. It's a truly innovative approach to what investors previously had access to. It's unique in that it's a pure-play silver miners ETF that becomes extremely important in a market like silver, where, if you look at the 10 largest silver producers, zero of them are primary silver mining companies.

This has significant economic ramifications, such as the fact that if you're mining copper, for example, the price of silver is unlikely to significantly influence your mining decisions. By focusing on silver miners, we feel SLVR is best positioned to provide investors with that exposure to silver. It's also unique in that it's the only ETF with a physical silver allocation. Approximately 17.5% of the allocation is dedicated to physical silver. This provides a well-balanced exposure to silver and the silver mining market.

In February, we launched our first active ETF, the Sprott Active Gold & Silver Miners ETF, ticker GBUG. It's the only active ETF that's focused on gold and silver miners. Those two make up about 95% of the portfolio. There's some ancillary exposure there.

It's principally a gold mining ETF. What it does is it relies on our pedigree as a precious metals and critical materials mining-focused firm. With that, our investment team boasts approximately 100 years of experience in mining, with a particular focus on gold and silver.

It provides that unique experience, where they're able to not only sit behind a computer and review spreadsheets and examine different models, but also conduct more than 200 management team meetings a year. They have a very good familiarity with all the companies in which they're investing.

We also have team members who conduct site visits, typically up to 30 per year. Included on the investment team is an economic geologist who, for approximately two decades, has led teams in exploration and the establishment of mining operations.

We have a unique process and investment team that has performed quite well. We've seen assets now go over $120 million in GBUG. Silver assets and SLVR are approaching a combined value of $500 million. There's a lot of focus on precious metals.

Our most recent launch, back in early September, is the Sprott Active Metals & Miners ETF, ticker METL. It's our second active ETF and the only active ETF focused on a diversified or broad-based mining subset.

You think of a lot of the critical materials, so things like silver, rare earths and copper; a lot of the battery metals and uranium. They're providing exposure to those in an active format. It also has exposure to, or the ability to at least invest in, commodities such as platinum, palladium and steel. It's a little bit more diversified than what you would see out of a critical materials ETF.

This allows the investment team to work with many of the same managers that we have on GBUG. They're able to go through and target, dial up, and dial down exposures to a lot of these different metals, which is very similar to our critical materials ETF, SETM, which launched about two and a half years ago and now has about $200 million in assets.

That's focused specifically on critical materials. Again, it's a pure play strategy. It also provides that broad-based exposure that we've seen advisors have really come to appreciate as a one-ticket solution to critical materials exposure.

James Connor: You mentioned that SLVR is approaching $500 million. Why has that gained so much more interest or so many more assets than GBUG or the gold product?

Steve Schoffstall: I think one reason is a function of when it launched within the market. It was around the time when silver really started to surpass gold in performance and overtake it. I think what's really allowed it to gain a lot more flows relative to existing strategies is the pure-play nature and the physical component that we have.

As we've been able to inform the investing public about the importance of pure-play strategies in silver, investors have demonstrated a clear understanding and have allocated a significant amount of assets to the fund as a result. Consequently, we've seen substantial growth in silver.

James Connor: It's interesting to hear that two of the ETFs have active managers. I thought that was a thing of the past, and everything was passive money now.

Steve Schoffstall: In the ETF space, that's where we're seeing a lot of the launches this year. I believe around 85% of ETF filings and launches in 2025 are actively managed. That's come as a lot of the passive strategies in the easy open pasture have been exhausted. That's one aspect of it. We also have some legacy managers that were a little late to the ETF game, looking to bring their active strategies.

For us, it's about examining the market and understanding who Sprott is as a company, our unique experience and expertise, and how we can deliver better outcomes and more solutions to investors.

While we do have some passively managed gold mining ETFs, we thought an active gold strategy also made sense because it fills a void within the market that happens to also align with our expertise and allows investors who are comfortable with active manager risk to have the outperformance potential that you don't typically get from a passive strategy.

James Connor: Do you think this is going to be an ongoing theme that we're going to see in the coming years? Will there be more money leaving the passive side and moving over to the active side?

Steve Schoffstall: I think it's more so that you're going to see assets continue to leave mutual funds for ETFs. Typically, what you see from an ETF is, in most cases, daily disclosure of holdings for active funds. That's the way the industry is moving from a non-transparent or semi-transparent model.

That's one major aspect. Additionally, ETFs offer significant tax advantages, which are built into their operational structure. That's something we'll continue to see.

In terms of active versus passive, I think it really comes down to investor preference. As investors leave mutual funds, they may become more inclined to invest actively. It makes sense to see the active strategies continue to gather assets relative to passive funds.

James Connor: I'm wondering if the move that you've seen in your silver ETF has a lot to do with the fact that people are waking up to the fact that we have this large deficit in the silver market. What are your thoughts on that?

Steve Schoffstall: That's part of the case. We have about six years of deficits that the silver market's been in. This year is also expected to be year number 7 in that. Another aspect of this is that it's transitioning from a purely precious metal allocation to one that includes both precious and industrial metals.

With that, we have about 60% or so of the demand for silver comes from industrial uses. A significant portion of this comes from semiconductor chips and photovoltaics, including solar panels, as well as various uses for silver, all of which contribute to the energy transition.

As silver use continues to increase, we observe some structural deficits within the market and an inability to increase supply rapidly. We also discussed briefly how the largest producers aren't focused specifically on silver. They have other metals they're mining. All of that paints a positive picture for silver moving forward, as it has grown in acceptance and investor interest as well.

James Connor: Steve, you mentioned the Sprott Critical Materials ETF (SETM), and I find this quite interesting because it's comprised of many different metals, one of which is rare earths, and we keep hearing about how important it is for the U.S. to secure rare earths. Perhaps you could address this, including the names of some of the ETF's components and how it can benefit investors.

Steve Schoffstall: Sprott Critical Materials ETF (SETM) is a one-stop solution for investors who want critical materials exposure. Over the last 18 months or so, we've seen a steady cadence of investor flows coming into the fund. In October, it had a record month for flows. As the geopolitical tensions surrounding critical materials and rare earths begin to unfold, investors are starting to take notice and position their portfolios to capitalize on these developments.

Upon examining SETM's exposure, you will find that approximately 25% is allocated to uranium, and another 23% to 25% is invested in lithium miners. From there, we have copper miners and rare earths. I believe those four metals account for approximately 80% to 82% of the exposure. It is meant to be broad in that case.

What you're seeing is that many investors do not necessarily want to make a call on uranium, copper or rare earths. They understand that numerous moving factors are at play, driving many of these markets higher, particularly as trade wars continue to loom on the horizon and countries seek to reshore production away from China. It's really setting up a very positive landscape for mining companies to see not only private investment, but also public investment coming from the U.S. government and other governments.

One of the developments we've observed over the last four or five months is the U.S. government acquiring equity stakes in some of these companies. MP Materials and Lithium Americas are companies that mine lithium or rare earths, and they're looking to expand domestic production. Another company, Trilogy Metals, has some resources for copper in Alaska. We see the government stepping in to help build a road and get those resources online.

It's this general theme of reshoring many of these supply chains away from China that we're seeing not only public and private investment come into the landscape, but individual investors and advisers are also taking notice.

James Connor: You raise a very good point about the volatility of various metals because diversification is very important. If you look at uranium in 2025, it's more or less flat. Lithium was just ripping two or three years ago. How would you describe lithium? Is this consolidating now? Are we getting ready for another big move?

Steve Schoffstall: We've seen a rebound in lithium prices since about June. As a result, the miners have rebounded quite well. We're starting to see more interest in lithium miners, whether it's from journalists writing about them or investors putting money to work in lithium mining stocks.

We also have LITP, our Sprott Lithium Miners ETF, which is starting to see more investor interest in lithium that we didn't see six or eight months ago. One of the interesting aspects of lithium is that, as the story for EVs, particularly in the U.S., began to slow down, hyperscalers and AI data centers started to take over. They are now beginning to include lithium-ion batteries as a backup power source in many of these large data centers.

The market remains highly fluid, and we continue to see significant interest. It's also a market where we're seeing large oil producers, such as Exxon, start to move into the market and produce lithium, which they can often do alongside oil production. It's a two-for-one from that standpoint.

We believe there is still considerable opportunity in lithium mining companies. The high prices we saw back in 2022 are still a way off. Over the longer term, we think there's still significant upside for lithium and lithium miners.

James Connor: I'm sure the fact that the U.S. government got involved in Lithium Americas has also helped the sector.

Steve Schoffstall: It has. That acted as a catalyst, not only for lithium but also for rare earths, copper and other metals. We've seen, as these new announcements have been made, that many of these metals have benefited.

I think it shows that, looking back a year or so, the lithium market was in decline and hadn't yet reached its bottom. Lithium is a critical material, and although a significant amount of production originates from China, the U.S. and its allies are seeking to reshore lithium. That's providing some investment that wasn't necessarily readily apparent within the last 24 months or so.

James Connor: Steve, you had a very busy 2025. You launched three new products. What about 2026? I'm sure you have a few things lined up.

Steve Schoffstall: There's always a pipeline that we're working on, and for us, we like to stay in our lane. Thinking about metals and mining, and where we can lend our expertise to that. Typically, when we go through the product development process, it's a very thoughtful process. We're not looking to throw a bunch of strategies at the market and hope one sticks. We're launching products that we believe have very favorable long-term outlooks.

That's why we've seen our critical materials suite grow quite substantially. We now have a total of 12 ETFs across precious metals and critical materials that we have launched over the past three years. That's really been a focus of ours. We identify long-term trends, examine the market and ask, “What's available to investors?” If a strategy is available that's similar to what we're considering, is there a way we can incorporate a significant improvement?

The way we've approached product development across our suite, particularly in our pure-play strategies, is an area where we've been able to add significant value.

Probably the single biggest benefit this offers investors is that it significantly reduces the unintended exposures that can occur when you start investing in some of these other strategies, which may not have the same expertise that we bring to the table.

As it relates to our index, the process we've employed over the last few launches involves working closely with Nasdaq, with whom we're involved in the creation of new indexes.

Additionally, many of these indexes employ a semiannual index rebalance, and we're involved in selecting the investible universe for that purpose. Nasdaq will then apply the index rules. It's a way for us to stay engaged in the market and ensure that our expertise is reflected in the indexes and the new products we bring to market.

James Connor: This has been a great overview, and I want to thank you very much for sharing your thoughts on Sprott ETFs and how they can benefit investors. Another part of your job is educating investors on why they should invest in precious metals, base metals, uranium, or lithium. You and your team do a great job of producing research and content. If someone wants to read that content, where can they go?

Steve Schoffstall: The easiest place would be to go to sprottetfs.com. We have an insights tab there. You can click on that. It contains many of our monthly commentaries. Covering many of the markets we discussed, you can access them directly. It's not behind a paywall. You don't have to sign up for it. You can also be added to our mailing list and receive it in your inbox every month.

James Connor: It's amazing how many people are putting up a paywall, and I don't know why because there's so much free content out there, including yours.

Steve Schoffstall: There is. We believe that an informed investing public is beneficial not only for the ETF industry but also for the critical materials sector.

James Connor: Steve, once again, thank you.

Steve Schoffstall: Thanks.