Important Message

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.com

Continue to Sprott Exchange Traded Funds

Ninepoint Silver Equities Class

October 2018 Commentary

The Ninepoint Silver Equities Class declined 2.1% (Series F) in the month of October while the MSCI Silver Select declined 3.38%. During the month of October, the S&P 500 and the Nasdaq Composite both declined by 6.84% and 9.2% respectively. Fixed income instruments did not do much better as yields rose and the investor risk appetite declined. The TLT ETF, which holds long-duration US treasuries sold off 2.43% and the HYG ETF which holds high yield securities declined 1.98% during the month. October will likely mark an inflection point across several asset classes as both equities and bonds have come under pressure while volatility has persisted. Investors who have grown accustomed to steady returns from their equity portfolio have not faced this scenario in a very long time.

The amount of negativity towards both silver, gold and precious metals equities heading into the month of October was nothing short of historic. The speculative short interest in gold futures was at an all-time high. The speculative short interest in silver was also at an all-time high. Net speculative interest in both silver and gold futures were negative – something we have not seen since the bull market in precious metals began in 2001. The value of precious metals miners has suffered terribly as gold receded from its 2011 high. The combined market cap of all precious metals companies in the world at the end of October 2018 was ~$265B USD. To put this into context, Bank of America’s market cap alone is $270B and Uber, the loss making ride-sharing app is hoping to come public at a valuation of $120B.

Bull markets are born out of bottoms marked by extreme pessimism. The precious metals industry, which has drawn the ire of many investors due to repeated missteps, appears willing to change. The recently announced merger of Barrick and Randgold will create the largest precious metals miner in the world, with a focus on generating high returns on invested capital. This will come as music to investor’s ears. Similarly, we are seeing more and more producers choose to focus on mining high margin ounces with a focus on investor profitability versus seeking growth for growth’s sake. We are likely witnessing a watershed moment in precious metals investing.

Contributors and Detractors:

The top three contributors to the fund performance in the month of October were SSR Mining, Silvercrest Metals and Dundee Precious Metals. SSR Mining reported strong Q3 production results out of Marigold and Seabee in October. This helped propel SSR Mining’s shares up by 14.87%. The company now expects to meet or exceed its 2018 guidance. Silvercrest Metals ended the month of October up 8.28% on the back of ongoing exploration success and investor enthusiasm. Towards the end of September, Silvercrest announced an updated resource of 87M oz silver equivalent at their high-grade Las Chispas project, surpassing expectations. Dundee Precious Metals gained 13.15% in the month of October on the back of strong Q3 results. Dundee’s operations at Chelopech and Tsumeb have continued to impress investors. The company is on track to meet its recently increased 2018 guidance.

The top three detractors in the fund were Wheaton Precious Metals, Industrias Penoles and Excellon Resources. Wheaton Precious Metals, which is the largest holding in the fund declined by 4.24% during October as the ongoing tax-related uncertainty with the CRA continued to drag on. Penoles declined 13.39% in the month of October as low silver prices continued to drag on the company’s profitability. Excellon Resources declined 23.95% in the month of October as its Q3 results failed to impress investors. Production at its Platosa mine was significantly below expectations. The company has stated that production levels will improve going forward as a result of various improvements which have been implemented at the operation.

Maria Smirnova
Senior Portfolio Manager

 

 

Compounded Returns¹

1M YTD 3M 6M 1YR 3YR 5YR Inception
Fund -2.1% -23.8% -16.6% -20.7% -23.3% 6.2% -2.6% -10.8%
Index -3.4% -23.6% -17.5% -22.8% -22.7% 8.9% -2.5% -11.7%

1 All returns and fund details are a) based on Series F units; b) net of fees; c) annualized if period is greater than one year; d) as at October 31, 2018; e) 2012 annual returns are from 02/28/12 to 12/31/12. The index is 100% MSCI ACWI Select Silver Miners IMI (CAD) Index and is computed by Ninepoint Partners LP based on publicly available index information.

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; cybersecurity risk; derivatives risk; exchange traded funds risk; foreign investment risk; inflation risk; liquidity risk; market risk; securities lending, repurchase and reverse repurchase transactions risk; series risk; short selling risk; small capitalization natural resource company risk; substantial shareholder risk; tax risk; uninsured losses risk.

Ninepoint Partners LP is the investment manager to the Ninepoint Funds (collectively, the “Funds”). Commissions, trailing commissions, management fees, performance fees (if any), other charges and expenses all may be associated with mutual fund investments. Please read the prospectus carefully before investing. The indicated rate of return for series F units of the Fund for the period ended October 31, 2018 is based on the historical annual compounded total return including changes in unit value and reinvestment of all distributions and does not take into account sales, redemption, distribution or optional charges or income taxes payable by any unitholder that would have reduced returns. Mutual funds are not guaranteed, their values change frequently and past performance may not be repeated. 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 Fund 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 makes every effort to ensure that the information has been derived from sources believed to be reliable and accurate. However, Ninepoint Partners assumes no responsibility for any losses or damages, whether direct or indirect, which arise out of the use of this information. Ninepoint Partners 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. 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 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.

Ninepoint Partners LP: Toll Free: 1.866.299.9906. DEALER SERVICES: RBC Investor & Treasury Services: Tel: 416.955.5885; Toll Free: 1.877.874.0899