Sprott Inc. (SII) Earnings Call Transcript & Summary

Good morning, everyone, and thank you for joining us today for the Sprott investor webcast. My name is Glen Williams, and I'm the Head of Investor Relations for Sprott. Before we begin, I'd ask you to turn your attention to the advisories on Slides 2 and 3. On behalf of the speakers that follow, listeners are cautioned that today's presentation and the responses to questions may contain forward-looking information and forward-looking statements within the meaning of Applicable Canadian and U.S. Securities Law. Forward-looking statements involve risks and uncertainties, and undue reliance should not be placed on such statements. Certain material factors or assumptions are implied in making forward-looking statements, and actual results may differ materially from those expressed or implied in such statements. For additional information about factors that may cause actual results to differ materially from expectations and about material factors or assumptions applied in making forward-looking statements, please consult Sprott's filings with the Canadian and U.S. securities regulators. And now to the presentation. We have 4 speakers today: Peter Grosskopf, CEO of Sprott; Whitney George, President of Sprott and CEO of Sprott USA; John Ciampaglia, CEO of Sprott Asset Management; and Kevin Hibbert, CFO of Sprott. [Operator Instructions] With that, I'll turn it over to Peter to kick things off.

Thanks, Glen. I'd like to welcome everyone to our first Investor Day. We have a real cross section of interest here with us today. We have some of our fund and trust unitholders and clients. We have some of our private clients who are interested in a variety of minerals. We have shareholders in both our historical Canadian listed shares and a new constituency of those who are interested and attracted to us by our recent New York Stock Exchange listing. The purpose of today's call is to introduce you to how we see our company currently and its main products and services; to meet some of the executive team, who Glenn has already introduced; and to provide an update of the most recent views that we have on the market and some of the opportunities we plan on targeting. At Sprott, our mission is to offer investors a unique one-stop shop for precious metals and mining strategies. We believe that investors prefer the choice of approach to the sector whether they want to invest in bullion or equities, whether they prefer public or private assets and whether they prefer managed products to direct or specific investments. This is a tough sector at times. It can be illiquid, and this volatility and illiquidity can also create incredible opportunities. I think it also speaks to the need for expert advice in the sector. And on that subject, what Sprott is, is a collective DNA of very experienced precious metal talent. At Sprott, we have had the benefit of the service of such renowned investors in the sector as Eric Sprott, Rick Rule, John Hathaway and Whitney George. And we built that in at culture to become a go-to place, both for the talent and for the clients that want to exploit and invest in the sector. We also have built a very deep technical know-how. And our engineers and our geologists are fully trained and finding the best opportunities and also telling us some of the risks that lie with those opportunities. The last thing I'll say about the company itself taken as a whole is that we have a lot of synergies between our divisions that continue to build. For instance, we have relationships with companies in the sector and the ability to leverage those into opportunities and knowledge. We have clients across the firm on the investor side that participate in various of the divisions and strategies. And then we have a platform, which is led by an experienced group of best-in-class executives, operating our legal, operations, compliance and increasingly, our ESG focus. I'll turn now to maybe some comments about the sector itself. First of all, this is a growth market. It is a huge market, the precious metals industry, and some of these slides will highlight the size of the market, over $10 trillion. There is no shortage of things to do at any given time. All of our divisions are growing in this market, and I can say that there is a lot of untapped potential as well. So in addition to the $10 trillion of overall gold value, I would say, of that, roughly $3 trillion is investable gold being bullion and equities. We have all of the gold and other mining equities to look at. So diversified miners are probably $1 billion market sector on their own, and then we have the other mineral sectors that are highlighted there. So we've got a lot of things we can do with this business within a large, growing and attractive market. Just to touch on our gold views for a second and update those. The measures that we most -- we watch most closely are fairly high level. We think, on the one side, whether we're in a period of austerity, sound budgets and real economic growth; and on the other hand, the indicators that we watch are central bank balance sheets, government budget deficits and M2 growth. And from a very big picture point of view, recent developments have been that all of those statistics are jumping off the top right-hand corner of the page. So we believe we're in an excellent period for alternative currencies. And really, what gold does in this environment is, it provides a hedge and portfolio insurance from other financial assets. They're all increasingly correlated to Central Bank's actions. We don't think that trend is going away anytime soon, and we believe that more and more investors are seeking gold as part of their portfolios and turning to the services of our firm as to how to go about that. I think that I can now turn it over to -- oh, we've got one more slide here, sorry. We've got one slide up here on ESG, which is increasingly important to our business right across its entirety. So mining and many of the minerals that are currently mined are crucial investments for sustainable industry. I think with batteries and other high-tech industries that are now being used to grow the grid in an environmentally sensitive and appropriate way. Minerals are crucial to this growth, and the mining industry itself has had a 30 to 40-year track record of improving its practices, but that is still an area that we look at across our entire system. And we have the right people to make these kinds of assessments as to whether our mining investments and the investments of our clients meet these criteria. So it's a crucial part of our business right from the bottom to the top. And it's also an excellent opportunity for many of the minerals that we cover, the battery minerals, uranium, copper to be used in the more sustainable environmental practices that we have going forward. The history of Sprott is that we have always been contrarian, we've always been innovative, and we've always aligned ourselves with our clients. That's, in fact, our model. And we've been a product innovator. Starting in the year 2008 and '09, we -- we're always looking for the best way to invest in the sector for our clients. We came up with physical trusts as being the best single way that we could think of to hold those metals, and we continue to innovate. So we're not afraid of being ahead of the curve. Our culture is to be contrarian, and we've also used that to look outside the firm towards consolidation opportunities. So we do have a very diversified client base. We have retail investors, we have institutions, and we also cater to corporations in the sector. And I think that this consolidation can easily accommodate other products that we find to be closely aligned with our franchise. So we started in 2016 with a major acquisition of the Central Gold Trust. And last year, a highlight for us was when we acquired the Tocqueville Gold Strategies, and John Hathaway and his team perfect fit with us, great U.S. client base. And I think we've shown that we can continue to consolidate tuck-in opportunities in our sector, and we will continue to look at those. So with that, I'll turn it over to Whitney to talk about some of the investment strategies and team.

Actually, it's John Ciampaglia. I'd like to welcome everybody to the webcast. Thank you for sharing your valuable time with us. I'm the CEO of Sprott Asset Management, which is the entity that manages our public investment funds and strategies. And I have to say, in a world of everything becoming mega sized and supermarket like in the asset management business, Sprott offer is a very different value proposition to investors. Our unique focus on precious metals and mining provide you with unparalleled expert -- expertise and insights. This expertise has been earned from a long history investing in the sector over many market cycles. We don't simply switch to another asset class or sector when precious metals fall out of favor. We are committed to the category, while others often shift away or close down their funds. I'll start by talking about our physical bullion franchise because it competes in a very large global market that Peter referenced earlier, and it accounts for the largest percentage of our assets under management. 2020 was a breakout year for our physical bullion business. Precious metals enjoyed very strong returns as investors were looking for safe heaven assets caused by the turmoil, economic turmoil caused by COVID-19. Gold was really the primary beneficiary last year where billions of dollars shifted to safe heaven assets like gold and treasuries. However, silver was the star performer in 2020 with a gain of almost 50%. The Sprott Physical Bullion Trusts have established themselves as high-value alternatives to competitor offerings around the world. And it's satisfying to see that a growing class of investors and realize that not all precious metals funds are created easily. I guess it all starts with physical metal. Our funds are 100% backed by physical metal, there are no exceptions. Our trusts do not hold any form of paper metal nor do we hold unallocated metal, lease out our metal, borrow metal from bullion banks, government agencies and central banks. This is important to many precious metal investors. When we acquire metal, our storage custodians take physical delivery. We don't simply make a journal entry to change the name of the owner of the bars and a vault. This is very important. Through our partnership with the Royal Canadian Mint, we believe our trusts offer investors with the most trusted counterparty for precious metal storage. Another important feature is the right to redeem for physical metal. We offer this right because we have the ounces of allocated metal to back every unit of each of our trusts. And lastly, for noncorporate investors in the U.S., our bullion trust provides the potential for preferential tax treatment. And if you like to learn more about this, please visit broad.com and look for our tax guide. Moving to the next slide. You will see that we have a full suite of physical bullion funds. We also offer 2 NYSE-listed gold mining ETFs. All of our bullion trust enjoyed very strong growth last year, and that has helped to attract a wider audience of investors. And this network effect has led to greater average trading volume and liquidity, which always begets more liquidity. Moving to the next slide. Our AUM was up 80% in 2020 across this product suite, and net sales were $2.8 billion for the year. More recently, our Sprott Physical Silver Trust, ticker PSLV, has become a focal point and provides a strong proof point of how these superior fund features have positioned us to take market share from larger sized funds in the marketplace. We've seen a sharp spike in silver demand in 2021, which has led to shortages in coins and bars and caused the premiums to the spot silver price to increase to extreme levels. For example, a 1-ounce silver coin can be selling for as much as a 50% premium to the spot silver price at many dealers right now. In response to these high premiums, investors are looking for physical silver alternatives and PSLV has become one of the key beneficiaries. PSLV is the top-selling silver fund in the world this year, helping to propel our overall year-to-date sales across the 4 bullion funds to $1.25 billion. I will close my remarks with a few thoughts. Our bullion trust provides Sprott with a powerful growth engine. The trusts are highly scalable and are being recognized by the marketplace for their unique attributes, and we are actively exploring other ideas where we can provide funds with compelling competitive advantages or to meet evolving investor needs in the marketplace. If you'd like more information on the funds, I would encourage you to visit sprott.com, where we provide a lot of educational content and insights or e-mail us at [email protected]. And thank you for your time. I will now pass it over to my partner and our CIO, Whitney George.

Thank you, John. So I am a long-term value investor that arrived at Sprott a little over 6 years ago, believing that there was a tremendous opportunity in the sector during a bear market. As Peter mentioned, I am contrarian. I love the innovation that goes on in this organization, and we are aligned, both as shareholders and in many cases, the largest owners of the products that we offer. And I'm very pleased to talk a little bit about our managed equity strategy. I think that's sort of the core root of Sprott, the Sprott brand. Eric Sprott, while he is now an independent investor and not involved the day-to-day operations, continues to promote the brand name globally. While we have -- he has never invested for a lot of people outside of Canada, certainly, his engagement, involvement and entrepreneurial ship is well-known globally. And we are in the process of capitalizing on that brand. Currently, we have about $2.8 billion under management. We did struggle through a bear market, but remained, for the most part, with our team in Toronto intact. And then we're able to build on top of that by reattracting former talent, portfolio managers and strategists like Neil Adshead and Paul Wong back to the organization. And then capped off our -- I think our expansion or positioning with the acquisition of John Hathaway and the gross business at Tocqueville with their team and their larger scalable asset base. So I think we're very, very well positioned now. I think we are an undisputed leader in terms of human capital and talent. And certainly, in terms of experience in our sector, we have grown as others have retreated. Many former mining and equity funds have been folded into sort of larger resource kinds of products. And so I think we are now the go-to organization when it comes to managed equity solutions. We have a team approach, and the team is broad. As you can see, I don't think anybody can really come close. And it's not just the portfolio managers, analysts and traders that you see here, but it's the entire resource -- all the resources at Sprott, which includes the diligence capabilities of our lending portfolio managers. It includes geologists, technical experts that work both for the lending team as well as Sprott Capital Partners. And so we have resources for our portfolio managers that are clearly unmatched by any other portfolio managers in our space. We've also added people from within the organization in different parts to our team, including an economic geologist Justin Holman, who, again, just add to our capabilities in terms of finding the best opportunities and avoiding the many risks that are inherent in investing in gold mining stocks. And finally, we have John Hathaway and Doug Groh bring long-term relationships with issuers as patient capital. I'd say, friendly activist that give us, I think, some advantages that those that we compete with cannot match. The next slide talks a little bit about our managed strategies. We offer a wide range of strategies. We are committed to being flexible and providing new solutions. We have a flagship equity neutral fund that was formerly the Tocqueville Gold Fund, managed by John Hathaway, Doug Groh and the team. We have SMAs that we create for our high net worth retail investors to specialize in gold mining and more recently, silver mining activities. We have clearly plenty of capacity to grow. We have institutional products, which include sub advisory relationships in jurisdictions where we don't have strong distribution such as Nine Point in Canada and our UCITs trust in Europe. And some new relationships, including one in Australia, so that people seek us out as advisers and managers where they're seeking best-in-class or have distribution, but require the management expertise. And finally, we have some highly specialized partnerships for high net worth clients, again, where we're the largest investors. One includes a joint -- initially joint venture with John Hathaway when he was at Tocqueville, but he is now at the Hathaway Special Situations fund that seeks investments that will capitalize on the merger acquisition and other situations that occur in our space. We launched over a year ago, 1.5 years ago, a drill-driven alpha fund managed by Neil Adshead. So we are investing at all cap sizes within our universe and at all parts of the capital structure. We have -- we had very strong early performance in these partnerships, and they are capable of generating outsized performance fees for us. So in summary, we have the capacity to grow. The market has yet to come to find the equity gold mining equities, the way they have the physical products, but I think we're very well positioned. For when that occurs, and I suspect that's going to occur before too long. And with that, I would like to turn it back to Peter to talk a little bit about our private strategies.

Thank you, Whitney. Our private strategies comprise 2 flagship and growing funds: One in lending, where we provide senior secured loans with upside participation to mining projects; and one that manages royalties and streams, which are longer-term investments benefiting from a contractual revenue stream from mining projects over the life of the project. This is a business where we had a large balance sheet investment initially. So those of you who followed us for 10 years know that we had the largest portion of our balance sheet invested in those loans, and we made very good margins. We've produced good returns for investors. So increasingly, this is a quadrant of the market where institutions are seeking out investments, and we have a growing institutional client base. Both the strategies are growing in terms of the number of clients and their assets under management. And I think as you watch us going forward, this is a pretty stable business, one that will produce better and growing returns for our shareholders going forward. And it's a bit -- we think we can grow into the couple of billion, $2 billion to $4 billion range over time. And it's just a steady with returns that are attractive to those private investors. On the next page, we touch upon our brokerage business. This really highlights, again, what we've mentioned as the breadth of who we can service. So in this division, we service both product clients and outside institutions and corporate clients. It's an attractive business because it allows us to seed investments and also seed new funds. The retail component of brokerage is slowly converting its asset base from assets under administration to assets under management, and the institutional portion of the business produces very high returns on capital. So for us, it's a key strategic business for the overall firm as a whole. I'd like to turn it over to Kevin Hibbert, our Chief Financial Officer, to run a couple of highlights on the financial side.

Thanks, Peter, and good morning, everyone. I'm going to limit my presentation to a simple page flip through these slides since most of them are pretty self-explanatory. So starting on Slide 21. What you see here is a brief summary of the key performance metrics that we, as a management team, pay particular attention to over 1 in 5-year time periods. These results are both compelling and speak for themselves, while Slide 22 gets into specific details around how we got to this point by attempting to break down the sources of earnings growth and operating margin expansion across the company since 2015. Specifically, Slide 22 shows that about 70% of our earnings lift from 2015 levels, which was our historic low as a publicly traded company, was attributable to the various organic and inorganic initiatives that we, as the new management team, implemented over the last 5 years. 25% of our earnings lift from 2015 came from market value appreciation, asset inflows and increased transaction levels in our legacy businesses. And finally, about 5% of our earnings lift from 2015 came from business process improvements, our cost containment program and our overall commitment to sustainable operating efficiencies in our corporate segment. Slides 23 and 24 show the significant asset growth, earnings growth and operating margin expansion we've enjoyed over the last half decade that has contributed to our stock performance over the last 3 years, in particular, being tops among TSX-listed financial institutions, resulting in our company being the only TSX-listed FI being included in the TSX30 last year. Slide 25 shows our strong financial position and liquidity profile, which we continue to expect to expand over the next few years. Our financial and liquidity position should give us a solid footing through various market cycles and also enable us to remain flexible as it relates to how we fund future organic and inorganic growth opportunities for our shareholders. And finally, on Slide 26, you'll see the simple analysis of our fee-based business EBITDA sensitivity to a 10% increase in average AUM. Those businesses account for about 86% of business segment EBITDA and as AUM increases, the earnings impact is actually slightly higher than the average AUM increase itself, demonstrating the operating leverage we have in our business model. And this is largely due to the relatively low fixed costs and overheads attributable to our operating segments. Conversely, what is not shown here is the fact that our total consolidated earnings sensitivity to AUM movements is actually lower to the downside than it is to the upside since our brokerage segment accounts for about 14% of our total consolidated earnings and is not correlated to average AUM movements. Additionally, our lending segment can actually perform better in times of depressed metals prices and weak equity markets as the arena for equity financing and bank debt fees is up for our clients, limiting the amount of financial alternatives or financing alternatives through our offerings. So clearly, we have a nice healthy mix of businesses that despite being a healthy mix, continue to be focused and on strategy. So that's it from my perspective. I'll turn things back over to Peter.

Thank you, Kevin. So just in conclusion, I would like to address these last couple of pages. We are really proud of what we've built here, and we do think of it as one of the best ways to gain exposure to gold. In fact, that's what we all have done with a substantial portion of our personal portfolios. The way we look at our company is as a high margin, low capital risk business, earning a royalty from a growing gold business. We have significant upside to gold in 4 ways: first, directly from the gold price; second, through our net sales flows and sales into products; thirdly, from performance fees that we can generate from managing our funds or certain of our funds; and fourthly, through new products and innovations that we have brought to the sector. While at the same time, we have protected the downside through a strong dividend and untapped and strong balance sheet, and as mentioned, large employee ownership. So we believe that we're a preferred way to play the gold sector, and we'd encourage you to take a look at it on that basis. And then the last page, just looking at some of our growth opportunities. Wanted to highlight again that our culture and our history are what underpin everything that we contemplate, and that we're constantly investing in growth. We've been an innovator, and you can see those investments occurring over multiple years. We are hiring additional sales coverage to handle deeper penetration into the U.S. market. We do have Ed Coyne on the phone for questions afterwards, our Head of Sales. And secondly, we're investing in new geographies, so where we haven't historically had a presence. For instance, Australia and Europe are 2 areas that we've been opening up in the last couple of years. And then we're still looking at tuck-in acquisitions. There are opportunities for highly talented teams to join our organization. And occasionally, other specialists in our sector that have specific client bases or products that we think would be a good fit. So there are still some opportunities for growth through acquisition. And then lastly, new strategies. We're constantly looking at ways to grow our franchise within minerals. So John already talked about how we're looking at other minerals in the sector that could be strategic, where our products could play an important role, we think, in introducing those commodities or minerals to new investors. And then we've also been investing in digital gold. And we do think digital gold is coming. We think that gold is ideally suited to be converted through blockchain to be transported electronically. And we think that will be an exciting opportunity in the future. That concludes my remarks and our remarks for today. So I'll pass it back to Glen, and we can handle some questions as they come in.

Thanks, Peter. We've got a number of questions submitted, and I'd encourage anyone who hasn't posed a question yet to submit it through the box on the left-hand side of your screen. We'll handle a number of them right now and anything that we can't get to today, we'll get back to you in the coming days. First question we have is from Steve Wild at Morgan Stanley. I think this is a question for Whitney. Whitney, maybe you could touch on what has been the historical relationship between interest rates, real interest rates and gold prices.

Thank you, Glen. Sure. So real rates are probably the most important factor overtime for gold prices, particularly negative real rates i.e., nominal rates less inflation. It's a very high negative correlation. Since 2009, it's been about 70%, but the relationship goes all the way back to Bretton Woods. So it's not something new. In fact, hard to get information prior to '97 when the 10-year tips were created, which are yield protected governments. But the squared since '97 to tips is a little north of 85%. So I don't believe there is a stronger factor out there for gold pricing than where real rates are.

Great. Thanks, Whitney. The next question is for Kevin. This comes from Danny Pellegrini. Kevin, the question is, if we could speak a little bit about Sprott's plans regarding share buybacks and the dividend, and how we think about those balancing those 2 programs.

Sure. Sure. Thanks for that question. Generally speaking, when it comes to the question of reinvesting capital versus returning it to our shareholders in the form of buybacks or dividend increases, we take a fairly strategic and opportunistic approach to that. Given to Peter's point earlier in the presentation, there continues to be several on strategy, organic and inorganic opportunities in the marketplace that our shareholders would expect us to take advantage of for their benefit rather than simply returning their capital to them. So that said, we don't necessarily see it as an either/or decision to return capital versus reinvest it, and you saw that last year when we closed on the Tocqueville acquisition in January, 2020, which added significant accretion to earnings and cash flows. But we also engaged in the stock buyback last spring to take advantage of a short-term pullback in our stock price. The stock prices since more than doubled from the price we bought the shares back at last year, and then we finished the year with an 8.7% dividend increase. So all options continue to be on the table, and your management team continues to monitor them closely. And we'll take advantages, as I said earlier, strategically and opportunistically to continue to add value to shareholders, whether it be through in-house means or through returning it to our shareholders in the form of buybacks and dividends.

Great. Thanks, Kevin. That's very helpful. The next question is for John Ciampaglia. And this, John, is a question that we received a few times. A number of people have asked how if PSLV, the Sprott Physical Silver Trust is a close-end fund, how is it that it's able to issue new shares into the market?

Sure. Okay. That's a great question. As most people know, closed-end funds do not have the ability to grow once they do their initial issuance. So it's a little confusing in the marketplace. Because our trusts are structured a little differently because we have this physical redemption mechanism, it allows the fund to trade very closely to their net asset values, which isn't always the case in the traditional close-end fund. With this close tracking, it does provide us with opportunities to issue shares, new shares in the marketplace on a nondilutive basis. And we have a basic shareholder protection feature built in each of our trust so that we cannot issue shares on a nondilutive basis. We have something in place called an after-market offering, whereby we have to financial institutions, Cantor Fitzgerald and Virtu, who act as participants in the program. And when they see investor demand for new shares of the marketplace, we are able to meet that demand by issuing shares from treasury on a daily basis. What that is -- it's very important to do that to manage the price and net asset value. What we find is, investors want the price of the trust to closely track the underlying spot price of the metal, and we try to meet those surges in demand with a share issuance so that investors are essentially not overpaying for silver, which we see is happening right now with coin at very high premiums, as I mentioned, over 50%. For example, the silver trust in the last 14-odd months, has been able to acquire just over 70 million ounces of physical silver to meet that buying interest that we've seen in the marketplace and to try to keep its market price closely in line with its underlying net asset value.

Great. Thanks, John. The next question is -- we'll pass this one to you, Peter. It's from Gary Ho at Desjardins. You mentioned innovation a few times during the presentation. And perhaps, you can give us a glimpse into into what you're referring to in terms of some of the areas we're looking at. And whether that's in product or others?

Well, I think it was actually John that touched on it, which is that we're looking at ways of taking our product structures to additional minerals. So those would be battery metals. Those would be specialty minerals or uranium. I think that we have a very engaged client base in all those areas, and we've been looking at it for a long time. So hopefully, we'll end on something that works and expands our franchise to something that we know a lot about. The second way would be that we do think that the gold industry is going to get its act together on digital gold, and we are still optimizing the best way for Sprott to participate. So we don't know yet whether that would be a token or an exchange or web-based customer infrastructure, but in some way or another, we'd like to be there. And we do think it's going to happen. So that's another interesting development, and we have been spending a considerable amount of time investing in that sector and knowing which way to turn next. So those will be 2 good examples.

Great. Thanks, Peter. And I'll stick with you for a second and then just follow-up with another question that we have received a few times. Obviously, it's topical right now, but a number of the participants have asked what our views are on bitcoin? How it is affecting -- the performance of bitcoin is affecting the price of gold?

Well, it's interesting. Bitcoin is -- shares a lot of the same philosophies with gold. And as such, the investor base is making the same kind of statement in terms of meeting an alternative currency or ballast in their portfolios against those currencies that are controlled by governments. I would liken bitcoin and gold to being 2 very large mutual funds. When the sector is attracting assets, I think it's a good thing for both of them. So yes, they're competitive at the margin for additional liquidity, but they're also driven by the same inflows. So we're actually fairly delighted by how much interest, in market cap, bitcoin has gained. I think some of it is at the expense of gold. I don't think you can deny that, but gold is a much more stable, proven, time-honored and larger market. And as I mentioned, I think there is no reason why gold can't adapt and take on some of these technological edges to increase its acceptability in the investor universe. So stay tuned on that one. But I think that the flow into alternative currencies is strong and getting stronger.

Great. Thanks, Peter. So over to Whitney for this next question. Whitney, we have a participant asking, the performance of our active strategies has been good in 2020 and into 2021. But the sales haven't really returned yet, the flows aren't coming into the category. Could you comment on that a little bit? And when you expect that to change?

Sure. Thanks, Glenn. Well, I guess you're asking somebody who is a long-term value investor that believes in active management. And so waiting for [indiscernible] is, I guess, something I've become accustomed to because it's been about 10 years. But I do think we saw some shifting going on, starting in November with the arrival of vaccinations and things like that, and the market does seem to be shifting. It was a good year last year for the miners. We have been in a 7- or 8-month kind of quiet period here, having achieved new highs in the underlying metal prices. What I can tell you is, the fundamentals of the underlying companies have never been stronger. They've never had better balance sheets. They've never had more free cash flow even at current commodity prices. They are raising their dividends. They're buying back their shares. So to the extent that the world cares about fundamentals, I don't think our time is that far off. On top of that, their earnings surprises. So there are many of the factors that have traditionally driven quant strategies into various sectors are right there -- here and now. And I think that continues this year, irrespective of mining of metal prices because you had the drag of effects of COVID last year in terms of hampering operations. So not only are metal prices strong. Maybe not as strong as they were, but certainly, we expect, ultimately, they will be much stronger and hit new highs. But even at today's prices, you have very strong comparisons built in, and it's really just a matter of the market shifting. Certainly, it's shifting to more -- the market in general is shifting more towards value ideas, more towards industrials materials. And of course, that's where the mining sector lies. So I think, a, the equities have held up actually really quite well during this correction in the commodity prices. All of the fundamentals that got us north of 2,000 are still in place, if not more so today. So I don't think it's going to take a whole lot longer before we're going to capture some interest in our sector and in our funds.

Great. Thanks, Whitney. Next question is for John. John, you mentioned in your remarks how our physical trust products are highly differentiated and maybe you could elaborate that a little bit, and perhaps, touch on why you think that the trusts have been successful in taking market share away from some of the larger incumbents in the space throughout 2020 and into 2021?

Sure. Yes, I think it really comes down to 4 different factors: One, 100% backed by physical metal. That's completely allocated and segregated. This is an important feature for more risk-averse investors. The right to redeem for physical metal, obviously to minimum amounts for each fund, it does really reinforce the idea that the metal is all there, and it allows us to have this arbitrage mechanism to keep the funds closely aligned between their net asset values and the market prices. Third, the counterparty risk. We think the Royal Canadian Mint is probably the lowest risk counterparty in the world to store your metals with. It's a crown corporation of the Federal Government of Canada. The government backs the Crown Corp., and we can't think of a better counterparty to store your metals with than the Royal Canadian Mint. And then lastly, I touched on this, but for certain U.S. noncorporate investors. Our funds are not taxed as collectibles, and this is one of the most misunderstood aspects of precious metals in the U.S., they are taxed as collectibles. They're not subject to capital gains. Tax and collectables are taxed at 28%. And our Trust, if you hold them for over a year and you make a qualifying election, which is basically a simple form you fill out with your tax returning to your IRS Form 86(21), you could have your gain treated as a capital gain, which, depending on your personal circumstance, either be 15% or 20%, which provides a nice tax savings relative to the collectibles tax of 28%. And as I mentioned, we have a great tax guide and tools on our website to explain that in greater detail for investors.

Thanks, John. I think we have time for one more question. So Peter, I'll come back to you with this closing question. Just looking out at the next 12 to 24 months, what would you say is the biggest growth opportunity for Sprott over this time period?

Oh, boy, that's a tough one to answer. So if you take a look at the overall sector, it is, let's say, at least $3 billion of investable -- $3 trillion, sorry, of investable gold. I mean our products and our strategies themselves just the way they're configured today, if they perform, and if they do a good job for investors, I would have to say organic growth just as much as I've talked about, other opportunities and digital goals. Look, what we have right now, if this sector continues to grow like it's growing, has still a very strong potential to add assets and to add clients. So I'm happy with the cards we have, and I think that's probably our best opportunity is just to keep it getting the word out, and obviously, to keep performing.

Great. Thanks, Peter.

Peter, I'd like to add to that.

Sure.

This is Whitney. I think what is also interesting is even though our headquarters are in Toronto, we are pretty much a 90% U.S. kind of base company in terms of where our clients are, where our products are offered. And the U.S. is probably the most underinvested place on the planet when it comes to precious metals. So I think we are -- now that we're on the New York Stock Exchange, and we report in U.S. dollars, the opportunity for investors to discover the diversifying qualities of gold, the opportunities in mining here in the U.S., way out strips other regions in the world where gold has been a fairly permanent part of the investment portfolios. So I think that's a big opportunity for us.

Great point. Thanks, Whitney. I think that sums it up very nicely. So that's all the time we have for today. But I'd like to assure everyone that has submitted questions that we haven't got to, we will respond to them either by call or e-mail over the next couple of days. On this final slide here, you can see my contact information. So if you're interested in a one-on-one conversation with any member of the management team or anyone else at Sprott, I would encourage you to reach out. The slides from the presentation will be available on our website as well as a playback of the webcast, and those should be posted later today or tomorrow morning. So that ends our presentation today. On behalf of the whole team, I'd like to thank you for your interest and your attention, and we look forward to speaking to you individually and through other forums like this in the future. Thanks very much.