Sprott ETF: Price Stability for Battery Metals

Spotlight on Battery Metals

We’ve been covering the increasing importance of battery metals and their essential role in the global economy and green energy transition. Companies like Sprott are keying into the rising demand and have launched an ETF – the Sprott Uranium Physical Battery Metals Trust.

Sprott announced that a preliminary prospectus for the Trust was filed yesterday and receipted by the securities regulatory authorities of all the Canadian provinces and territories for the IPO of transferable, non-redeemable units at a price of $10 US per unit. The number of units to be sold hasn’t yet been determined.

The Sprott Physical Battery Metals Trust was established to invest and hold substantially all of its assets in physical nickel metal, cobalt metal, and lithium carbonate. Let’s take a quick look at how these respective metals have been doing this year:

Nickel

Nickel futures traded around $21,000 per tonne, close to yearly lows, as rising prices and fear of a recession add pressure to the market. In March, prices hit around $100,000 from the China Tsingshan Holding Group large purchases to hedge its shorts on the metal.

Cobalt

Cobalt futures are around $52,000 per tonne. This is way below the 82,000 its peak in April as one again – recession fears slow demand. Cobalt is a key metal in electric vehicles and has been benefitting by the growth in this vertical and adjacent industries like rechargeable batteries and energy storage.

Lithium Carbonate

Lithium Carbonate prices rose to a high of 510,500 yuan per tonne in September, rising over 80% year-to-date as demand pressures (i.e., electric vehicle manufacturing) affect a relatively low supplies.

The released press release states:

“The Trust’s investment objectives are to provide a secure, convenient, and exchange-traded investment alternative for investors interested in holding Battery Metals without the inconvenience that is typical of a direct investment in Battery Metals. The Trust does not anticipate making regular cash distributions to holders of the Units.”

RBC Capital Markets and Canaccord Genuity Corp. are acting as joint lead bookrunners for the Offering and Cantor Fitzgerald Canada Corporation is acting as a joint bookrunner for the Offering.

Uranium Omens

An important thing to note about the creation of the ETF is Sprott’s buying power and influence. Sprott launched the Sprott Physical Uranium Trust in 2021, which purchases uranium and provides storage as a long-term investment. Since its inception, the fund has purchased about 59 million pounds of uranium, representing about 55% of global uranium produced in 2021.

The price of uranium has spiked over the last 2 years, peaking at $65, and is currently at $49.

We will monitor this space and anticipate that Sprott’s purchasing activity should buoy the price fortunes of nickel, cobalt and lithium carbonate.

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The opinions provided in this article are those of the author and do not constitute investment advice. Readers should assume that the author and/or employees of Capital 10X hold positions in the company or companies mentioned in the article. For more information, please see our Content Disclaimer.

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