New copper fund revives controversial product

Stack of cathode copper plates. Stock image.

Sprott Inc. has launched a $100 million fund that will buy and hold physical copper, marking a comeback for a class of investment product that has in the past been highly controversial among investors and regulators.

The new Sprott Physical Copper Trust started trading on the Toronto Stock Exchange on Thursday. Sprott, which already has successful funds backed by physical gold, silver, platinum, palladium and uranium, said in a prospectus that it would be “the world’s first physical copper fund.”

Funds that allow investors to buy and hold physical copper have stirred controversy in the past. In 2012, US manufacturers petitioned the Securities and Exchange Commission and ultimately went to court to try to block the launch of similar copper-backed funds proposed by BlackRock Inc. and JPMorgan Chase & Co., arguing the investment vehicles would leave less metal available, creating shortages and boosting prices. Both firms ultimately scrapped their plans.

Sprott’s physical uranium trust, similarly, was blocked from listing in the US in 2022 after a failure to meet listing standards.

Much as in the early 2010s, the copper market has drawn a stampede of investors in recent months thanks to its critical role in a range of cleaner technologies like electric vehicles, wind turbines and solar panels. Prices surged to a record high of $11,104.50 a ton last month, but have since retreated.

The Sprott copper fund will use the funds raised to buy copper directly from mining companies and trading houses, which will then be stored in warehouses across Europe, North America and Asia, according to company filings. It plans to invest approximately 90% of the funds raised to buy copper “as soon as practicable,” which, after underwriters’ fees, would translate to purchases of about 8,000 to 10,000 tons.

That’s a relatively small amount for the global copper market, where about 22 million tons is mined every year. Still, it compares to inventories on the London Metal Exchange of 122,200 tons and on Comex of less than 15,000 short tons.

“The trust will address a need in the market by providing investors with an alternative to holding copper futures,” Sprott Asset Management CEO said John Ciampaglia said in a statement Thursday.

Sprott’s physical uranium trust, launched in 2021, has bought more than $2.2 billion of the metal since it began, and now has net assets of nearly $6 billion.

The sale of Sprott Physical Copper Trust was led by Canaccord Genuity Corp, Bank of Montreal and Cantor Fitzgerald LP, with Royal Bank of Canada and Toronto-Dominion Bank also involved in the deal. The banks have an option to sell an additional 15% of the offering after the close, which could raise proceeds to $115 million.

(By Jacob Lorinc and Jack Farchy)


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