Sprott Asset Management's Director Of ETFs Talks To Benzinga About Why Gold Miners Are Shining Bright These Days

By Meg Flippin Benzinga

To say gold is shining bright would be an understatement, with the spot price for gold up nearly 50% this year. Over the past five years, gold is 122% higher. For good reasons. Amid currency debasement, geopolitical instability, economic uncertainty and falling interest rates, investors have looked to gold as a safe haven, said Steve Schoffstall, Director, ETF Product Management at Sprott Asset Management. "Investors have flocked to gold," said Schoffstall in an interview with Benzinga. About 13.5 billion ounces of gold have been purchased by global investment funds alone, he said.  

Another driver of record gold prices is central banks, which Schoffstall said have been actively purchasing gold. The money manager pointed to China as one example. He said Beijing has purchased gold each month for the past ten months. "Countries view gold as a way to get around economic sanctions," said Schoffstall. 

Sprott: Why Gold Miners Are Shining Bright These Days

Gold Miners In Focus 

That interest in gold is good news for Sprott Asset Management, since precious metals and critical materials are sweet spots for the global asset manager. It runs three gold ETFs – the Sprott Gold Miners ETF (ARCA: SGDM), the Sprott Junior Gold Miners ETF (ARCA: SGDJ) and the Sprott Active Gold & Silver Miners ETF (NASDAQ: GBUG), all of which are focused on mining companies. 

Take the Sprott Gold Miners ETF for starters. The fund, which has about $124 million in assets under management, is a passive-based index ETF with a twist. It not only matches an index but also looks for companies that have other positive characteristics including revenue growth, good long-term debt to equity and free cash flow yield, said Schoffstall, noting those characteristics are used in the weighting process. 

The Sprott Junior Gold Miners ETF is an index fund that is focused on development and exploration companies with market capitalization between $200 million and $2 billion. The index emphasizes junior gold producers with strong revenue growth and stock price momentum, said the money manager. It has $291 million under management. The price momentum of the company helps determine the weight in the fund, noted Schoffstall. 

Active Gold & Silver Miners ETF Getting Love 

The newest ETF in the lineup, and the one Schoffstall said he is most excited about, is the Sprott Active Gold & Silver Miners ETF, which Sprott launched in February and has already reached $100 million under management. 

"It is the only actively managed gold miner ETF on the market," said Schoffstall. "What this fund really does is allow us to leverage our management team's over a century of experience in the gold mining space." 

The investment team adheres to the old-school principles of actively managing a fund, says Schoffstall, which means the investment team holds over 200 meetings a year, travels to over 40 countries and visits about 30 individual mining sites. This gives them an opportunity to not only understand the operations of the company but to talk to all the different employees within the organization, he said. 

Room To Go 

Despite the rally in gold prices, investors have been shy when it comes to miners, which Schoffstall attributed to a "hangover effect" from the previous bull market in gold. During the last gold run, miners were freewheeling with their cash which set them up for disaster when the markets sank. This time is different. Schoffstall said miners are being much more intentional with their new projects and are paying attention to their financial stability. 

Investors are rewarding that newfound discipline, sending gold mining stocks higher than physical gold. But at the same time, gold mining ETFs are seeing billions of dollars of outflows. Schoffstall says that dichotomy means there's more room for the gold mining market to run.

"Investors haven't moved en masse to gold mining," says Schoffstall, noting there's been about $4.3 billion in gold mining ETF outflows this year. "In our view, the gold mining trade isn't a crowded trade at this point."

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