Precious metals are rare, and their higher relative values are driven by rarity, industrial processe...
Sprott: A "Toll Collector" in Gold
08/10/2020 5:00 am EST
Precious metals have recently hit yet another all-time high as investors up their stakes in safe haven investments, asserts Ian Wyatt, growth stock expert and editor of Million Dollar Portfolio.
Sprott (SII) is the largest natural resource asset manager in the world, but it doesn’t actually produce anything. It manages physical gold and silver funds which are available to investors around the world, allowing them to buy ownership interests in stockpiles of actual precious metals.
It also acts as venture capital, pooling investor money to make loans to miners who actually produce the precious metals. Basically, it’s the perfect middleman.
Sprott is the investment arm of Canadian billionaire Eric Sprott, who made his fortune in the resources industry. His not intimately involved with running the asset manager anymore, serving as chairman emeritus, but he has imbued the investment team there with his knowledge and philosophy. That’s played out well, both for the company and its investors.
There’s nothing terribly sexy about what Sprott does. It runs bullion trusts and other investment funds and gets paid management fees. Right now, it has nearly $11 billion in assets under management and made nearly $100 million for running them.
It also collects what amounts to interest on the loans its makes, typically approaching 20%, and it is working toward having a portfolio worth nearly $1 billion worth of loans — secured by mines with ore in the ground — by the end of this year. That makes a lot of sense, since Sprott is basically making the same calculation I am.
Folks are understandably running into gold and silver, and Sprott has the expertise and resources to profit from that, without taking on the risk of actually digging it up itself.
Sprott’s management also understands that commodity demand will, sooner rather than later, recover. Now’s the time to buy. That’s especially true since it essentially acts as a toll collector, getting paid a percentage of assets under management. Sprott is a low-risk way to gain exposure to precious metals and other resources.
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