NIKL Frequently Asked Questions (FAQs)


NIKL Launch of Sprott Nickel Miners ETF (Nasdaq: NIKL)

On March 22, 2023, Sprott Asset Management announced the launch of Sprott Nickel Miners ETF (Nasdaq: NIKL). This exchange traded fund (ETF) joins the five others in the Sprott Energy Transition Suite: Sprott Energy Transition Materials ETF (Nasdaq: SETM)Sprott Lithium Miners ETF (Nasdaq: LITP), Sprott Uranium Miners ETF (Nasdaq: URNM), Sprott Junior Uranium Miners ETF (Nasdaq: URNJ) and Sprott Junior Copper Miners ETF (Nasdaq: COPJ).

Please Note: This FAQ is not wholly inclusive of all relevant information. Investors should consult the prospectus for more information, or please reach out to your Sprott representative at 888.622.1813 or energytransition@sprott.com for answers to additional questions.

1

How can I invest in the Sprott Nickel Miners ETF?

The Sprott Nickel Miners ETF is listed on Nasdaq® under the symbol “NIKL.” Investors can purchase NIKL in a brokerage account or by contacting their financial advisor.

2

What are the Sprott Nickel Miners ETF investment objective and strategy?

The Sprott Nickel Miners ETF (NIKL) seeks to provide investment results that, before fees and expenses, correspond generally to the total return performance of the Nasdaq Sprott Nickel Miners™ Index.

The Nasdaq Sprott Nickel Miners™ Index is designed to track the performance of a selection of global securities in the nickel industry. The Fund will, under normal circumstances, invest at least 80% of its total assets in securities of this Index.

3

What is the energy transition?

The energy transition is a significant global structural change intended to decrease our dependence on fossil fuels in favor of low-carbon and renewable energy. While we believe fossil fuels will likely continue to play a role in our future, substantial global investment and government mandates in favor of low-carbon and renewable energy are driving opportunities in the energy transition industry.

4

What is the Nasdaq Sprott Nickel Miners™ Index’s methodology?

The index combines Sprott’s decades of experience in the mining sector with Nasdaq’s renowned index expertise. To be eligible for inclusion in the Nasdaq Sprott Nickel Miners™ Index (NSNIKL™), a company must meet the requirements that follow.

Eligibility Requirements

    • Be a security listed on an approved exchange
    • A security's issuer must be classified by Sprott as a nickel producer, developer, or explorer
    • Have a free-float market capitalization of at least $30 million ; $25 million for existing constituents
    • The security must have been publicly traded at least three months prior to the reconstitution reference date
    • A security must have a three-month average daily traded value of at least $20,000

Constituent Weighting Process

    • The index is a modified free-float market capitalization-weighted index
    • A theme-adjusted free-float market capitalization is calculated for each constituent
      • Free-float market capitalization is used to weight companies with an intensity score1 greater than 50%
      • Companies with an intensity score of 25% to 50% are given an adjusted market capitalization by multiplying the theme intensity score and its free-float market capitalization, and the company’s weight in the index is determined by its adjusted market capitalization
    • For stocks without revenue or for which revenue is an inappropriate characteristic, the intensity score is given at 50%
    • Constituents’ initial weights are determined by dividing each constituent’s theme-adjusted free-float market value by the aggregate theme-adjusted free-float market value of all constituents
    • Initial weights are adjusted to meet the following constraints:
      • No security’s weight may exceed 24%
      • The aggregate weighting of any remaining companies over 5% of the value of the Index is capped at 25%
      • The weighting of no other individual company may exceed 4.75% or be less than 0.30%
      • In the event the sum of securities weights that have theme intensity scores between 25% to 50% is higher than 15%, the sum of these securities weights is set to 15%
      • At each step, the excess weight is redistributed pro-rata to each index constituent that has not already reached a previous weighting cap

Index Rebalancing

    • The index is rebalanced semi-annually in June and December, effective at the market open on the first trading day following the third Friday
5

Who may want to consider investing in NIKL?

Investors who seek pure-play2 access to nickel through companies that are upstream in the supply chain may want to consider investing in NIKL. Nickel miners may be well positioned to benefit from increased investment in the low-carbon and renewable energy sector.

6

Who will manage the Sprott Nickel Miners ETF?

Sprott Asset Management USA, Inc. is the investment adviser to the Sprott Nickel Miners ETF. ALPS Advisors, Inc. is the sub-adviser, and ALPS Fund Services, Inc. serves as the administrator. ALPS Distributors, Inc. is the Distributor for the Sprott Nickel Miners ETF and is a registered broker-dealer and FINRA Member. Additionally, State Street Bank and Trust Company serves as the custodian and transfer agent.

7

What are the key benefits of investing in the Sprott Nickel Miners ETF?

Increased investment is driving growth in the critical minerals necessary for the energy transition

  • Globally, $1.8 trillion was invested in the energy transition sector in 2023, far exceeding fossil fuel’s supply investment3
    • The electrified transportation sector saw $634 billion of investment3
    • Investment in renewable energy totaled $623 billion3
    • The nuclear energy and electrified heating sectors saw $96 billion in investment in 2023
  • Investments in electric transportation grew by 28% in the United States in 20233

Nickel is a vital component in the lithium-ion batteries used in the growing hybrid and electric vehicle (EV) markets

  • Lithium-ion batteries are favored in hybrid and electric vehicle batteries given that they are long-lasting, charge quickly, and have a high density that allows for more battery in a lighter package
  • Compared with other countries, the United States is lagging in EV usage, but may have reached a tipping point of mass EV adoption4
  • Global sales of EVs doubled in the last two years5, and all net growth in global car sales in 2021 came from EVs4
  • Governments are mandating the sale of EVs as soon as 2035,6 and many major auto manufacturers have plans to go fully electric as soon as 20307

Nickel is becoming an increasingly important part of lithium-ion batteries, and demand for this critical mineral is expected to increase significantly

  • To meet decarbonization goals by 2050, clean energy technologies’ share of total demand for nickel may reach 60-70%8
  • EVs and battery storage are expected to be the largest end-user of nickel by 20408
  • Mining capacity needs to expand to meet the growing demand for nickel. In order to keep up with demand, production may need to increase nearly 128% for nickel, by 2040 relative to 20228
  • Automakers recently discovered that adding more nickel to EV batteries increases their drivable range, and new battery technology may approach 80% nickel9
  • With supply chain security in mind, and soaring EV demand expected, more than a dozen U.S.-based gigafactory (lithium-ion battery factories) projects were announced since 2021, at a cost of more than $40 billion.10 Globally, lithium-ion battery capacity is expected to surge nearly 650% by 2031 relative to 2021.10

The Sprott Nickel Miners ETF is the only ETF to provide pure-play exposure to the nickel mining equities essential to the electric vehicle revolution

  • NIKL’s holdings are pure-play companies with business operations that are focused on the nickel mining sector
  • Companies that are upstream in the supply chain may be well-positioned to benefit from the increased investment in nickel necessary for the clean energy transition
8

What is clean energy?

Clean energy is energy that has zero carbon emissions and comes from renewable and nuclear energy sources. Currently, nations around the world have committed to the Paris Agreement, which is a legally binding international treaty on climate change. It was adopted by 196 Parties at COP21, the United Nations Climate Change Conference, in Paris in December 2015. Its goal is to limit global warming to well below 2.0 degrees Celsius, preferably to 1.5 degrees Celsius, compared to pre-industrial levels. To reach the goal of net-zero by 2050, emissions need to be reduced by 45% by 2030.11

9

What are critical minerals?

Critical minerals are natural materials that are essential to the generation, transmission and storage of clean energy. Sprott focuses on nickel as a major battery metal that is crucial to energy storage and the batteries powering the electric vehicle revolution.

10

How does the Sprott Nickel Miners ETF add value?

  • Currently, investors have limited choice
    NIKL is the only ETF to provide focused exposure to the NIKL miners that supply this critical mineral essential to the transition to cleaner energy.
  • Investing in individual companies that mine nickel poses challenges
    Many mining companies are domiciled in foreign countries, have small market capitalizations, are volatile and may have limited liquidity, making individual equity investing more challenging for some investors. The Sprott Nickel Miners ETF offers investors a convenient vehicle for accessing the miners that supply this critical mineral along, with company diversification.
  • Existing commodity funds have limited exposure to nickel miners
    Most ETFs focused on battery metals provide exposure to companies that are end users of these critical minerals, such as electric vehicle manufacturers or companies that only devote a small portion of their revenue/operations to the acquisition of this critical mineral. Additionally, existing battery metals ETFs often track securities that are involved in the mining of other metals, such as lithium or cobalt.
    What sets NIKL apart is that it is the only ETF focused on nickel miners, and the Index’s comprehensive selection process to identify pure-play companies removes miners of other battery metals that may not be involved in nickel mining. NIKL invests in pure-play companies that are upstream in the supply chain and that may be well-positioned to benefit from the increased investment in this critical mineral necessary for the clean energy transition.
11

Who may be interested in investing in the Sprott Nickel Miners ETF?

We believe the Sprott Nickel Miners ETF has broad appeal to many investors. The following general themes are driving investor interest.

  • Energy transition/clean energy theme
    Major nations have set aggressive decarbonization targets and goals to reduce emissions. Their proposals have begun encouraging investment in electric vehicles and infrastructure, wind and solar energy, and nuclear energy to assist in this effort. We believe that miners of critical minerals should benefit from this clean energy transition as they provide essential materials that are key to reaching decarbonization goals.
  • Energy security and sovereignty
    This issue became a top headline story in 2021 as the cost of energy spiked, which highlighted the vulnerability of relying on other nations to supply energy. Rising geopolitical risks in Europe, given the Russia-Ukraine war, help highlight the energy security that renewable energy can provide.
  • Commodity investors
    Although commodities have spent many years out of favor, investors are returning to them to take advantage of supply shortages due to prolonged under-investment. The fundamentals for nickel are very constructive, with steady growth in demand coupled with a structural supply deficit that can only be addressed with increased investment. Those invested in commodities and related equities should consider focusing on the potential future makeup of such markets, where we believe the energy transition sector will take a far greater market share.
  • Alternative exposure/diversification
    Many mining companies are domiciled in foreign countries, have small market capitalizations, are volatile and may have limited liquidity, potentially limiting their inclusion in major equity indices. Exposure to the pure-play companies in NIKL’s strategy may add exposure to investor portfolios that may otherwise be lacking in traditional equity strategies.
12

Will the Sprott Nickel Miners ETF pay distributions?

The Sprott Nickel Miners ETF expects to declare and distribute all its net investment income, if any, to shareholders as dividends at least annually and on a pro-rata basis. The Fund may distribute such income dividends and capital gain more frequently, if necessary, to reduce or eliminate federal excise or income taxes on the Fund.

 

 

Please reach out to your Sprott representative at 888.622.1813 or energytransition@sprott.com for answers to additional questions.

 

1 The intensity score for stocks with revenue and for which revenue is deemed to be an appropriate characteristic is the percentage of their revenue attributable to the aforementioned strategy of the Index.
2 The term “pure-play” relates directly to the exposure that the fund has to the total universe of investable, publicly listed securities in the investment strategy.
3 Source: Energy Transition Investment Trends 2024, BloombergNEF
4 Source: “U.S. Crosses the Electric-Car Tipping Point for Mass Adoption,” Bloomberg, July 9, 2022
5 Source: Electrified Transport Market Outlook 4Q 2023, BloombergNEF, January 29, 2024. 
6 Source: Reuters, December 8, 2021
7 Source: “Which Brands Are Going Fully Electric and by When?” CarExpert, August 14, 2021
8 Source: “Critical Minerals Market Review”, International Energy Agency (IEA), July 2023. Data shown for Net Zero Emissions Scenario.
9 Source: https://nickelinstitute.org/en/about-nickel-and-its-applications/nickel-in-batteries/
10 Source: https://www.dallasfed.org/research/economics/2022/1011
11 United Nations Climate Change at https://unfccc.int/process-and-meetings/the-paris-agreement/the-paris-agreement.

 

 

Important Disclosures

An investor should consider the investment objectives, risks, charges, and expenses carefully before investing. To obtain a Sprott Nickel Miners ETF Statutory Prospectus, which contains this and other information, visit https://sprottetfs.com/nikl/prospectus, contact your financial professional or call 888.622.1813. Read the Prospectus carefully before investing.

The Fund is not suitable for all investors. Investors in the Fund should be willing to accept a high degree of volatility in the price of the Fund's shares and the possibility of significant losses. An investment in the Fund involves a substantial degree of risk. The Fund is considered non-diversified and can invest a greater portion of assets in securities of individual issuers than a diversified fund. As a result, changes in the market value of a single investment could cause greater fluctuations in share price than would occur in a diversified fund.

Shares are not individually redeemable. Investors buy and sell shares of the Sprott Nickel Miners ETF on a secondary market. Only market makers or "authorized participants" may trade directly with the Fund, typically in blocks of 10,000 shares.

Funds that emphasize investments in small/mid-cap companies will generally experience greater price volatility. Diversification does not eliminate the risk of investment losses. ETFs are considered to have continuous liquidity because they allow an individual to trade throughout the day. A higher portfolio turnover rate may indicate higher transaction costs and may result in higher taxes when Fund shares are held in a taxable account. These costs, which are not reflected in annual fund operating expenses, affect the Fund’s performance.

The Sprott Nickel Miners ETF seeks to provide investment results that, before fees and expenses, generally correspond to the total return performance of the Nasdaq Sprott Nickel Miners™ Index (NSNIKL™).

Nasdaq®, Nasdaq Nickel Miners™ Index, and NSNIKL™ are registered trademarks of Nasdaq, Inc. (which with its affiliates is referred to as the “Corporations”) and are licensed for use by Sprott Asset Management LP. The Product(s) have not been passed on by the Corporations as to their legality or suitability. The Product(s) are not issued, endorsed, sold, or promoted by the Corporations. THE CORPORATIONS MAKE NO WARRANTIES AND BEAR NO LIABILITY WITH RESPECT TO THE PRODUCT(S).

Sprott Asset Management USA, Inc. is the Investment Adviser to the Sprott Nickel Miners ETF. Sprott Asset Management LP is the Sponsor of the Fund. ALPS Distributors, Inc. is the Distributor for the Sprott Nickel Miners ETF and is a registered broker-dealer and FINRA Member.

ALPS Distributors, Inc. is not affiliated with Sprott Asset Management LP.

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