Sprott Asset Management has launched an ETF capturing mining companies exposed to energy transition metals with white-label issuer HANetf.
The Sprott Energy Transition Materials UCITS ETF (SETM) is listed on the London Stock Exchange with a total expense ratio (TER) of 0.75%. It will list on the Deutsche Boerse and Borsa Italiana at a later date.
SETM tracks the Nasdaq Sprott Energy Transition Materials ex Uranium index which offers exposure to 77 companies involved in mining, refining, smelting and recycling copper, lithium, nickel, cobalt, graphite, manganese, rare earths and silver.
The ETF’s arrival in Europe follows the launch of a sister product in North America in February, however, the UCITS equivalent removes any exposure to uranium mining companies.
Stocks must have a market cap of over $100m, a three-month daily average trading volume of $500,000 and at least 50% revenue exposure to a transition metal business to be eligible for inclusion.
Constituent weights are calculated by multiplying market cap by theme intensity score, with no individual allocation exceeding 4.75% and no material making up more than 25% of the overall basket.
SETM’s index applies an ESG screen whereby companies in violation of United Nations Global Compact principles, those with a Sustainalytics controversy rating of five or with involvement in controversial weapons, oil and gas, thermal coal or pesticides are excluded.
Speaking to ETF Stream, John Ciampaglia, CEO of Sprott Asset Management, said: “We partnered with Nasdaq on the index, with Sprott developing the universe and screening companies for pure-play exposure to the target theme.
“Major mining companies such as BHP, Rio Tinto and Glencore are not included because they have too much of their businesses in non-energy transition materials.”
Ciampaglia said his firm decided to focus on mining equities as it is “hard to replicate” underlying commodities such as lithium and nickel in physical form while futures markets mean investors have to consider the effects of backwardation and contango.
He added: “As the prices of these commodities rise, the upstream part of the sector is going to be the big beneficiary, with brownfield operations coming back online and potential for new greenfield development as prices increase.
“With commodity prices so low, there was no capital going into the sector – there have been supply constraints as underinvestment made mining uneconomical but this will change as the energy transition continues to gain momentum.”
SETM marks Sprott’s second ETF with HANetf after the pair launched the Sprott Uranium Miners UCITS ETF (URNM) last April.