You are now leaving Sprott.com and entering a linked website. Sprott has partnered with ALPS in offering the Sprott Gold Miners ETF. For fact sheets, marketing materials, prospectuses, performance, expense information and other details about the ETF, you will be directed to the ALPS/Sprott website at www.SprottETFs.comContinue to Sprott Exchange Traded Funds
In October the fund posted a return of -9.3% compared to the benchmark which returned -9.2%. The fund is currently weighted as follows:
• 46% Precious metal equities
• 33% Energy equities
• 10% Base metal equities
• 4% Other equities
• 5% Uranium
• 2% Cash
The Canadian energy sector sold off significantly in October as a result of a 10+% decline in crude prices and an increase in Canadian oil price differentials. This impacted the portfolio negatively (attributed -6.05% in October) despite the fact Canadian energy equity valuations remain compelling. Outside of energy, the performance of other resource equities were relatively muted. Generally, investor interest in resource equities, particularly small cap resource equities, continues to be anemic.
2018 Flow-Through Update
At the end of October, the fund was 100% invested. 75% had been invested in mining companies, of which 56% had been allocated to gold mining equities while base metal and uranium equities represent the balance. The other 25% has been invested in Energy companies. The portfolio consists of 38 companies with a weighted average market capitalization of $1.4B.
2018-II Flow-Through Update
At the end of October, the fund was 68% invested. 61% had been invested in mining companies, of which 36% had been allocated to gold mining equities while base metal and uranium equities represent the balance. The other 7% has been invested in Energy companies. The portfolio currently consists of 17 companies with a weighted average market capitalization of $140M.
2017 Flow-Through Update (not changed from last month)
The 2017 funds have posted negative absolute performance since inception. However, considering the nature of the product the only meaningful measure of performance is on an after-tax basis. After-tax return figures are not calculated until the fund is terminated. Many investors incorrectly evaluate the performance of the fund in the context of the initial $25/unit. It is critical that clients understand how impactful the tax benefits are to the per unit economics. As disclosed in the prospectus the breakeven point on an after-tax basis for an Ontario investor taxed at the highest marginal rate is less than $15/unit. The prospectus calculation assumes the fund does not receive investment tax credits that are typically renounced when purchasing flow-through shares from mining companies. These credits drive down the after-tax cost even further. For example, the Sprott 2016-II Flow-Through Limited Partnership breakeven point for an Ontario investor taxed at the highest marginal rate was approximately $12.81/unit. In this particular case, a positive after-tax return was generated on a terminal unit value above $12.81/unit, which compares to the initial unit price of $25/unit.
Jason Mayer, CFA, MBA
1 All returns and fund details are a) based on Series F shares; b) net of fees; c) annualized if period is greater than one year; d) as at October 31, 2018; e) 2011 annual returns are from 10/17/11 to 12/31/11.
The Fund is generally exposed to the following risks. See the prospectus of the Fund for a description of these risks: capital gains risk; class risk; commodity risk; concentration risk; currency risk; derivatives risk; exchange traded funds risk; foreign investment risk; inflation risk; liquidity risk; market risk; regulatory risk; securities lending, repurchase and reverse repurchase transactions risk; series risk; short selling risk; small capitalization natural resource company risk; small company risk; tax risk; uninsured losses risk.
Ninepoint Partners LP is the investment manager to a number of funds (collectively, the “Funds”). Commissions, trailing commissions, management fees, performance fees (if any), and other expenses all may be associated with investing in the Funds. Please read the prospectus carefully before investing. The indicated rates of return for [series A/class A][units/shares] of the Funds for the period ended [date] are based on the historical annual compounded total returns including changes in [unit/share] value and reinvestment of all distributions or dividends and do not take into account sales, redemption, distribution or optional charges or income taxes payable by any securityholder that would have reduced returns. Mutual funds are not guaranteed, their values change frequently and past performance may not be repeated. This communication does not constitute an offer to sell or solicitation to purchase securities of the Funds.
The information contained herein does not constitute an offer or solicitation by anyone in the United States or in any other jurisdiction in which such an offer or solicitation is not authorized or to any person to whom it is unlawful to make such an offer or solicitation. Prospective investors who are not resident in Canada should contact their financial advisor to determine whether securities of the Funds may be lawfully sold in their jurisdiction.
The opinions, estimates and projections (“information”) contained within this report are solely those of Ninepoint Partners LP and are subject to change without notice. Ninepoint Partners LP makes every effort to ensure that the information has been derived from sources believed to be reliable and accurate. However, Ninepoint Partners LP assumes no responsibility for any losses or damages, whether direct or indirect, which arise out of the use of this information. Ninepoint Partners LP is not under any obligation to update or keep current the information contained herein. The information should not be regarded by recipients as a substitute for the exercise of their own judgment. Please contact your own personal advisor on your particular circumstances. Views expressed regarding a particular company, security, industry or market sector should not be considered an indication of trading intent of any investment funds managed by Ninepoint Partners LP. Any reference to a particular company is for illustrative purposes only and should not to be considered as investment advice or a recommendation to buy or sell nor should it be considered as an indication of how the portfolio of any investment fund managed by Ninepoint Partners LP is or will be invested. Ninepoint Partners LP and/or its affiliates may collectively beneficially own/control 1% or more of any class of the equity securities of the issuers mentioned in this report. Ninepoint Partners LP and/or its affiliates may hold short position in any class of the equity securities of the issuers mentioned in this report. During the preceding 12 months, Ninepoint Partners LP and/or its affiliates may have received remuneration other than normal course investment advisory or trade execution services from the issuers mentioned in this report.