In a move to offer investors access to spot uranium prices, Sprott Asset Management has taken over Uranium Participation Corporation (UPC), a physical uranium fund that trades in Toronto, relaunching it as the Sprott Physical Uranium Trust. The new trust will launch in late Q2 or Q3 of 2021.
Sprott also hopes to dual list the fund in the U.S., said Sprott CEO John Ciampaglia in a new interview with BNN Bloomberg.
“Uranium was in a long bear market, said Ciampaglia. “We believe that this bear market is over and that a new bull market is now underway.”
UPC was the first investment vehicle worldwide to offer exposure to the spot uranium price, said Ciampaglia, adding that, “we think it’s a natural fit and extension for Sprott to take over the management.”
Currently, Sprott holds over $13 billion in physically backed precious metal funds. Ciampaglia notes that there is also a great deal of overlap in interest for shareholders of precious metals, like gold bullion, and those of uranium.
UPC to Continue to Hold Physical Uranium
Currently, UPC holds physical uranium, as compared to a portfolio of futures contracts; there are no plans to modify fund’s the investment objectives.
Specifically, UPC holds uranium oxide in concentrates (“U3O8“) and uranium hexafluoride (“UF6“). At the end of March 2021, UPC reported holding 16,269,658 pounds U3O8 and 300,000 KgU as UF6, with a then market value of approximately C$665 million, according to a press release announcing the purchase.
Sprott hopes to modernize the structure into a more traditional investment fund trust. The company is also applying for a dual listing on the NYSE.
“We think it’s important to have the new trust listed on the New York Stock Exchange because of the huge number of investors and the depth of the capital pool in the United States,” said Ciampaglia, adding that UPC’s current structure as a corporation doesn’t allow for this arrangement.
Access to the U.S. market is key, Sprott has found, as it has raised over $4 billion over the past six months for its precious metal trusts.
“In our experience, greater liquidity and scale begets greater liquidity and attracts a lot more institutional investors over time. It’s important to scale these funds to improve their liquidity, lower their overall costs and attract larger investors,” added Ciampaglia.
Premiums and Discounts
UPC has seen significant swings in premiums and discounts, however. Between 2018 and 2020, UPC frequently traded at a big discount to NAV; but recently, it has developed a trading premium as high as 10%.
Ciampaglia sees the trading premiums and discounts settling as wider interest and access to the fund develops.
” We would hope that over time that the dispersion of discounts and premiums will compress. There are a number of ways to manage that,” he said, adding that “we’ve had a positive experience with our physical metal funds trying to manage that so that there aren’t huge deviations.”
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