Sprott Inc.

Good morning, ladies and gentlemen, and thank you for standing by. Welcome to SPROT, Inc.' 's 2025 Second Quarter Results Conference Call. At this time, all participants are in a listen-only mode. Following the presentation, we will conduct a question and answer session. Instructions will be provided at that time for you to queue up for questions. As a reminder, this conference is being recorded today, August 6, 2025. I would now like to hand the conference over to your first speaker today, Mr. Whitney George. Please go ahead.

Good morning, everyone, and thanks for joining us today. I'm starting on slide three. On the call with me today is our CFO, Kevin Hibbert, and John Chapaglia, CEO of Sprott Asset Management. As you can see from slide three, all the turmoil has not aged us a bit. Our 2025 second quarter results were released this morning and are available on our website where you can also find the financial statements and MD&A. Slide four. 2025 continues to be an eventful year. Since the April 2nd Liberation Day tariff announcements, we have witnessed extreme volatility in all markets. A 20% correction in the S&P 500 index followed by a full recovery to new highs in one quarter is extreme. but not unexpected. As I noted in this quarter's letter to shareholders, we expect more of the same going forward. In the short term, we don't know what comes next, and we will avoid making any predictions. Turning now to a report that our assets under management increased by $5 billion in the second quarter to $40 billion. Net sales continue to accelerate during the quarter due to the rising interest in multiple metals. In addition to strong ATLs in our Metals Physical Trust, we also completed two capital raises in the Sprott Physical Uranium Trust, which John will speak to more about in a few minutes. These strategies continue to perform well, delivering strong results in the quarter and over the first half of 2025, and we also benefited from carried interest in performance fees crystallization in our managed equities segment. William Newburry- Earlier this year we launched two new precious metals ETFs and we are very pleased with the early results from these strategies. William Newburry- The Sprott active gold and silver miners ETF our first actively managed ETF and the Sprott silver miners and physical silver ETF. William Newburry- have been two of our most successful ETF launches to date hitting key a UN thresholds more quickly than any of our previous with that i'll pass it over to Kevin for a look at our financial Kevin.

Thanks, Whitney, and good morning, everyone. I'll start on slide 5, which provides a summary of our historical AUM. AUM finished the quarter, as Whitney noted, at $40 billion, up 14% from $35.1 billion as at March 31, 2025, and up 27% from $31.5 billion as at December 31, 2024. On a three- and six-month-ended basis, we benefited from positive market value appreciation across the majority of our fund products and positive net inflows to our physical trusts. Slide six provides a brief look at our three- and six-month earnings. Net income this quarter was $13.5 million, up 1% from $13.4 million over the same three-month period last year, On a year-to-date basis, net income was $25.5 million, up 2% from $24.9 million this time last year. Our flat net income performance was caused by a change in accounting requirements brought on by our new cash-settled stock plan that took effect this year, largely offsetting much of the net income we otherwise generated on market appreciation and flows into our physical trusts. and carried interest and performance fee crystallizations in our managed equity segment. By way of background, cash settled stock plans like the one we implemented this year require the use of mark-to-market and graded vest accounting under IFRS 2, which creates the dual impact of accelerating the amount of vesting that occurs each period and adding market volatility to each vested amount. In our case, at a time when our stock has appreciated 54% in the quarter and 64% on a year-to-date basis. In contrast, last year we had an equity settled stock program that required each vest to be valued at the original grant date fair value on a constant basis over the entire amortization period. Adjusted EBITDA, on the other hand, which excludes quarterly volatility from items such as stock-based compensation, FX volatility and intermittent carried interest and performance fee crystallizations was $25.5 million for the quarter, up 14% from $22.4 million over the same three-month period last year, and was $47.4 million on a year-to-date basis, up 12% from $42.1 million this time last year. Adjusted EBITDA on the quarter and on a year-to-date basis benefited from higher average AUM on market value appreciation and inflows to our precious metals physical trusts. However, offsetting these positives was our finance income being down due to last year's higher syndication fees and our net commissions also being down due to last year's copper trust IPO and higher ATM activity in our physical uranium trust. Finally, slide seven provides a few treasury and balance sheet management highlights, and as you can see there, our cash and liquidity profile remains quite strong. For more information on our revenues, expenses, net income, adjusted EBITDA, and balance sheet metrics, you can refer to the supplemental information section of this presentation, as well as our quarterly MD&A and financial statements filed earlier this morning. With that said, I'll pass things over to John.

Thanks, Kevin. And good morning, everybody. Thanks for joining us. We enjoyed a very strong operating results in the second quarter. As Kevin mentioned, a significant asset growth in our physical trust product suite. A combination of market appreciation and net flows contributed to this growth. Gold, silver, platinum, palladium, and uranium were all solid performers in the quarter. AUM was $31 billion as of August 1st, which represents an all-time high for the physical trust product suite. As the funds continue to grow in size, they benefit from an important scale effect, which drives liquidity, which in turn begets liquidity. This is critical in order to attract more institutional capital as they begin to reallocate to the metal sector. Next slide, please. We enjoyed our strongest sales quarter in the past three years, driven by renewed interest, as we said, in multiple metals. Our business tends to produce the best results when multiple metals are working at the same time. As we discussed in previous quarters, metals like silver are finally experiencing a catch-up trade with gold. Silver remains undervalued relative to gold and is still well off its 2011 high. Since the beginning of 2021, our physical silver trust has captured over 100% of net flows amongst U.S. listed peers, allowing us to grow our market share of assets meaningfully. Shifting over to uranium, our uranium trust completed two novel capital raises, which were well supported by institutional investors. With the proceeds, SPUD has accumulated another 2 million pounds of uranium bringing our overall stockpile to 68.4 million pounds. And since the inception of SPOT four years ago, we have now purchased a total of 50 million pounds of uranium. Moving to slide 10, shifting to our suite of ETFs. We've seen a nice recovery in AUM since the market lows in early April. Assets have rebounded to 3 billion. We have been extremely pleased with the initial market reception for our two latest ETF launches, the Sprott Silver Miners and Physical Silver ETF. Thicker SLVR is off to a very strong start with assets, approximately $170 million. And just for context, there are so many new ETFs coming to market. New ETFs in their first year of life attract somewhere around $5 million, just to put it into context. Our first actively managed ETF, the Sprott Active Gold and Silver Miners ETF, is also gaining traction and is approaching $50 million. We believe there are strong opportunities to grow our market share with both of these new ETFs, and obviously they are very scalable. Moving to slide 11 to talk about ETF flows. Overall, it was a solid quarter despite mixed results by product type. The precious metals mining ETFs are driving most of the flows while the uranium mining ETFs have been under some redemption pressure of late. We attribute this to some investors shifting to the downstream segment of the nuclear energy sector as more market participants understand that we are entering another nuclear renaissance period. We expect this to be transitory as the price of uranium still remains quite low in our opinion. And the uranium mining stocks represent good value to capture that upside. And with that, I'm going to pass it over to Whitney.

Thank you, John. We'll move now to slide 12 for a look at our managed equity segment. As I mentioned in my opening remarks, our managed equity strategies have performed well this year. Our flagship gold equity fund was up 15.5% during the quarter and has gained 46% year-to-date. However, flows continue to lag performance, and we reported $61 million in net redemptions during the quarter and $81 million on a year-to-date basis. One of the reasons we launched Sprott's Active Gold and Silver Miners ETF was to capitalize on investors' current preference for ETFs over mutual funds. GBUG allows strengths of our investment team in an active strategy within an ETF wrapper, which is more transparent and tax-efficient for investors. We are pleased with the early response to this new strategy, which actually yesterday just surpassed 50 million in AUM. Looking ahead, we expect to launch at least one additional active ETF before the end of 2025. I'll turn now to the private strategies on slide 13. Private strategies AUM was 2.1 billion, down slightly from March 31st, 2025. The decline reflects a net decrease in investments quarter over quarter, new investments, less distributions to our partners across the lending and streaming and royalty segments. The team continues to assess new investment opportunities for Lending Fund 3 and is actively monitoring our streaming and royalty portfolio investments. Slide 14. To recap, we're pleased with our results over the first half of 2025. AUM has increased. 8.5 billion year to date, driven by rising metal prices, as well as 1.6 billion in net sales. Metal markets are experiencing a new kind of scarcity, which is placing upward pressure on prices. The global trade and inventory system for some metals is starting to break down due to geopolitical tensions, protectionist trade policies, and resource nationalism. The result is a greater volatility in spreads, higher regional price differences, and a long-term premium on strategically essential metals. Gold has set a new series of record prices out to a 12-year high, and platinum was recently at its highest level in 10 years. Prices may stay elevated even without significant changes in traditional supply-demand metrics because it's become harder for metals to flow freely around the world. At Sprott, we're fortunate to be extremely well-positioned to create value for our clients and our shareholders with an asset base divided between precious metals and critical materials investments. We look forward to reporting to you on our progress in the quarters ahead. That concludes our remarks for today's call, and I'll now turn it over to the operator for some Q&A. Operator?

Thank you. At this time, we will conduct the question and answer session. To ask a question, you will need to press star 1-1 on your telephone and wait for your name to be announced. To withdraw your question, please press star 1-1 again. Please stand by.

Our first question comes from Matt Lee from CG.

Please go ahead.

Hey, morning, guys. Thanks for taking my question. Maybe starting with the housekeeping one, can I just ask you how you determine market value changes in private strategies? Like, is it that market-to-market, or is it recognizing the underlying investment future maturity?

Hey, Matt, it's Kevin here. Good question. So the accounting requires, because they're loans, we have to use pull-to-par accounting. So it's basically amortized cost, but we also believe that amortized cost is a reasonable proxy for market.

But some of them have like equity components, right, in the private strategies. And inevitably, you know, if it's gold-related and given how well the gold market's done, In theory, there's some market appreciation that's not captured in that market value change.

When you're dealing with those types of equity kickers, those equity kickers actually come out and then you have the pull-to-par accounting that'll get you back up to that ultimate amortized cost value. So in times like this, to your point, where the market value has gone up a fair bit, you will see some of that, but the equity kickers tend to make up a relatively smaller portion of the overall value of those loans. I got it. That's helpful.

And then maybe can you just give us an idea of what you're seeing in the uranium market in general? You know, spot market does seem to have pulled back a bit in the last month. But, you know, if you read the news, U.S. executive orders, international demand both seem to point towards kind of an upswing. Is that kind of what you mean when you're saying there's going to be a nuclear renaissance on the way?

Yeah. Hey, Matt, it's John. Yeah, sure. I'd love to pick up on that. Yeah, I think it's fair to say that there's been kind of a disconnect between the physical uranium market and the overwhelming shift of energy policy support back to nuclear energy over the last three years. Most of that disconnect has been in the last 12 months and it's been related to largely uncertainty around obviously the incoming administration. It was also in part to the price of uranium jumping very sharply in 2023 and early 2024, which I think made some utilities cautious about chasing the price. Now that we have some clarity in terms of the Trump administration's position with the four executive orders, which were incredibly holistic and beneficial for the sector, as well as clarity on tariffs, which were not applied to uranium products or related fuel services, I think we're really set up right now for utilities to come back to market And I'll just share a quick stat with you, which I think is very important. You know, the industry basically operates through long-term purchase agreements. And to August the 4th year to date, the industry has signed a grand total of 30 million pounds of contracts for future delivery. That's about one third of replacement rates so far year to date. So it really signals that utilities have not been actively buying. They've been on the sidelines because of all the distraction and noise. But we just yesterday got an early sign that a Korean utility came to market through a public RFP process for almost 9 million pounds of uranium that they're looking for. And we're now moving into the seasonal start of the contracting cycle, which starts with the World Nuclear Association conference, which is going to start the first week of September. We think that the utilities are finally starting to emerge from their hibernation, and the price and the term market and the spot market should respond accordingly to that.

Okay, that's very helpful. Thanks for the robust answer.

Thank you.

Our next question comes from Etienne Ricard from BMO Capital Markets. Please go ahead.

Thank you, and good morning. I'd like to cover copper. The physical trust is trading at quite a discount to NAV. I'm curious, what do you think needs to happen for this discount to narrow? And more broadly, how is the volatility to trade policies impacting demand for the copper trust?

Yeah, hi, Janice, John. I'll cover that. Well, the most notable thing about the copper market, um, which I'll start with is obviously been, uh, up until a few days ago, the dislocation between CME, uh, and LME prices. And, and that was obviously due to uncertainty and, and tariff threats were CME prices, meaning copper stored in the U S warehouse was, was trading about 30% higher than copper sitting in a European warehouse that obviously is unwound since, uh, in the last few days as tariffs were not applied as broadly as considered. So that dislocation between the two markets is now unwound. That has obviously created a lot of uncertainty and a lot of stress for traders and users. With respect to the Copper Trust, yes, we acknowledge it is trading at a discount that we're clearly not happy with. It's approximately 20% discount, which is a real anomaly and outlier relative to our other funds. One of the initiatives that is underway right now is that we have filed with the New York Stock Exchange an application to the SEC to duly list the vehicle. And part of the dual listing would envision a more robust and flexible redemption option. And that physical redemption and cash redemption option, if approved, would, in our opinion and our experience, act as a very powerful incentive to close that discount to NAV. So we are obviously still in kind of a quiet period with the SEC, but that is our best effort to address the product and help to to tighten that discount we have had an institution that has been under some stress that has been selling shares that has also i think exacerbated the situation thank you john um and and the question may be for kevin um on operating expenses can you remind us what incremental margins uh sprott could achieve given the uh

the rising net flows.

Sorry, I don't understand the question.

Well, so currently you're generating about 60% adjusted EBITDA margins. How do you think about incremental margins as you raise more AUM?

Okay. Okay, got you. Okay. Thanks for that. Well, you know, I think one of the things that can can help you or any analyst or investor looking at the story to get a sense of what's left as far as margin expansion opportunities. As the earnings base grows and to the extent that that growth is coming primarily from our exchange listed product segment, what'll just happen is you'll see a greater proportion of that business making up the consolidated results. And if you just look at the margins of that business, it's a little north of 80%. So, in other words, as that business continues to grow and make up a bigger proportion of our overall consolidated results, you should see that 60% margin climbing higher. In theory, In theory, if the exchange-listed products segment made up a significantly bigger portion of the overall business, then you'd see the number getting closer to that 80% number there. But as Whitney's mentioned, over the last few quarters, we do reinvest in the business to continue to achieve that growth. And so that will offset that climb a fair bit as well. So basically, if there was a high end, you're probably looking at somewhere a little closer to where the exchange listed business is right now, which is I think it's page 14 of the shareholders report. And then the low end would be to the extent the managed equities business became a bigger portion since that's the lower margin segment that we'd have.

I'd add to that we would like to grow the lower margin businesses because they carry higher fees on AUM. Yes. So we would trade off margin expansion for absolute net income growth for sure. But, you know, we've been blessed by, you know, having these physical trusts, you know, do very well. And it's certainly our hope that other divisions, you know, catch up at some point.

And then sorry to pile on with that, but that was another good point on Whitney's end, that those businesses are also where all the carry and performance fees come from.

Okay, thank you very much.

Thank you. Our next question comes from Graham Writing from TD Securities. Please go ahead.

Hi, good morning. Maybe I could start on that carried interest performance fees. Can you just give us some color on like maybe what the contribution was in the quarter from I think there was one fund that was sort of in a wind-up, and then there was also some contribution from your active mining equities fund. Can you maybe give us some color on the mix?

Yeah, sure. It's Kevin here, Graham. How's it going? So I'd say probably roughly about 65%-ish, 65% to 70%-ish would have come from that legacy exploration LP, and the rest would have come from our resource exploration and development active equity fund.

Okay. And then on that, it looked like the payout or the compensation payout was quite low relative to the, I think, $15 million in total carried interest performance fees. Any reason why that was so low?

Yeah, so because the majority of it was from that legacy LP, when we reimagined and restructured the business and exited those areas, we were left with those exploration LPs that we're now harvesting for cash and in the process of closing down. So the folks that would have otherwise had a bigger claim on that legacy on that P&L are no longer here. So we're in the enviable position of retaining it for our shareholders. And that's pretty much the reason.

Yeah, okay, that makes sense. And then my last question on this theme is just, can you give us any sort of color on sort of outlook, maybe multi-year or next year, how you're thinking about, you know, the outlook for carried interest to performance fees? Because if I look historically, You know, I think you're averaging about 3% of your net fees would come from carried interest or performance fees, but this quarter was obviously a big outlier. So it doesn't feel like we should be using this as a run rate. It can give us any sort of color or what your expectations are.

Do you want me to take that, Kevin?

Yeah, sure, Whitney.

So generating performance fees carried interest in the second quarter is a bit unusual. We have one small fund. It's an exploration partners fund that crystallizes performance fees semi-annually, but most of our funds in managed equities calculate them and get them at year end. So that's kind of the timing of when most of these come. And then, of course, there is a lending franchise And those are long-term partnerships, and we earn those fees at the end of those partnerships. So, our lending fund, too, will wind up sometime, you know, maybe late next year, and that's when those lumpy performance or carried interest would show up. But I think it would be very hard. I certainly wouldn't try and model them in, you know, on a long-term basis.

Okay, understood.

And then my last question, if I could be a bit greedy here, just flows quarter to date. It looks like I'm estimating about 100 million or just north of 100 million. Does that sound right?

I know, John, do you want to take that?

Yeah, I don't have the number in front of me. You know, I think it's fair to say that with heightened volatility in metals markets, which is what we've been experiencing obviously for the last few months, that does put us in a stronger position to issue new equity because of the requirement we need to achieve, which is issued above NAF. So that volatility, while markets and traders don't like it, it's actually positive for our business. And we have seen, you know, pretty consistent sales. And it seems as though, you know, platinum carries the baton for a few weeks and then it goes to silver and then it goes to gold. And I think that's what's really helped our business is that we've had multiple metals kind of pulling the load and contributing here. So I think that's why we've had such good sales in the last four months or so. Okay, great.

And just remind me, Graham, you were saying, what number did you say, Graham? You said 100 you have, roughly?

Yeah, for your exchange-listed products, I had just over 100 million quartered, like, basically through July.

Yeah, we're probably a little higher than that.

On the other hand, we have had redemptions in some of our ETFs, particularly uranium ETFs. So, you know, that's a little bit of an offset that might bring you down a bit.

Okay. Yeah. So, with the offset that Whitney – sorry. I was just going to say, Graham, with the offsets Whitney talked about and what you're probably missing, you probably want to be a little closer to 150. Okay.

Sounds good.

Thank you.

Our next question comes from Mike Kozak from Cantor Fitzgerald. Please go ahead.

Good morning, Whitney, John, and Kevin. Two questions for me. The first one may be just at a higher level. John, you alluded to it just now, but you have multiple metals firing on all cylinders. Gold at all-time highs. Silver, I think, made a 14-year high a couple weeks ago. And then you guys reported a very nice cash build in the second quarter, I believe about $20 million in free cash flow in Q2. How do you think at the corporate level about the dividend policy? Would you ever consider a special dividend when you have multiple metals running like this?

We've brought that up with a lot of our shareholders. Most of them don't like special dividends. I've always thought that if it, you know, particularly when we've got performance fees or carried interest or one-off kind of windfalls that, you know, that might be a way to distribute to shareholders. But I think, you know, the current thinking is that we're going to continue to maintain a high payout, you know, on our earnings. And if things persist and continue to grow, certainly you should expect the dividend to grow. we are coming into kind of a difficult period for markets in general. And so we remain committed to buying shares back opportunistically. And, you know, there are always a few items, you know, worth looking at, you know, in the acquisition area, but none significant, I would say at this point.

Okay, thanks. And then my second question, and John, you kind of mentioned on the call, and I would agree with you that the you know, rightly or wrongly, the interest in the last couple months has been elsewhere in the nuclear fuel cycle, specifically with the, you know, conversion enrichment, some of the SMR tech companies. My question is, you know, would you consider an ETF that tracks that section of the fuel cycle? I certainly think it would be well-received in the current market conditions.

Yeah. Hi, Mike. Nice to chat. Yeah, look, I mean, we're obviously – Very opportunistic and innovative it's brought. I think our track record confirms that. And we're always looking for new ideas. We have strict criteria around what we will do and not do. ETFs are very crowded. So the last thing we want to do is to create another Me Too product. But we do acknowledge that interest in the space has shifted somewhat. Some of those stocks have gotten way ahead of themselves. So, you know, we have to be kind of mindful of what people are chasing. But yeah, we're always open to different ideas. But we don't also want to stray out of our lane, which I think has been very helpful. And it allows us to really build on our core strengths and our competitive advantages.

Yeah, if we could find a way to make something better that brings our mining expertise to bear, that's certainly something we'd look at. But again, we want to be focused on what we think we're best at, and that's in metals and mining.

Okay, very good. Thanks. That's it for me. I'll turn it back.

Thank you. As a reminder, to ask a question, you will need to press star 11 on your telephone.

Please stand by.

Okay, I'm showing no further questions at this time. This concludes the question and answer session. I would now like to turn it back to Whitney George for closing remarks.

Whitney George Thank you everyone for participating in this call. We appreciate your interest in SPROT and look forward to speaking to you again after our third quarter results. Have a great day.

Thank you for your participation in today's conference. This does conclude the program, and you may now disconnect.