Exchange-traded commodities (ETCs) originally issued by Russian mining giant Norilsk Nickel could relist on the London Stock Exchange as early as next year after a swift rebrand and moves to “de-Russianise” the platform with a change of operator and metal broker.
In fact, within three months of Russia invading Ukraine, Norilsk’s asset management arm, Global Palladium Fund (GPF), agreed to undergo a novation with the products’ distributor, NTree International, a process where it passes over control and authority as well as the assets and liabilities of the 10-strong ETC platform to the other third party.
It is worth remembering neither firm is the owner of the ETCs given they are considered a Section 110 special purpose vehicle (SPV) under the Irish Taxes Consolidation Act 1997. Instead, NTree International has been made the “arranger” of the platform, enabling it to design, distribute and charge for products.
Tim Harvey, founder and CEO of NTree International, told ETF Stream: “The necessary pivot was achieved very quickly as investors throughout Europe have not accepted Russia exposure in their portfolios, so this was a move to ‘de-Russianise’ the platform completely.
“All of our service providers were not happy with the perceived Russia exposure, so this was a case of moving control from GPF itself to NTree International, which is a UK company, making it acceptable to our partners. We had to go back to the beginning, rewrite the prospectuses which involved a lot of capex.”
Harvey added that under a new brand, Elementum Metals, the ETCs and the assets housed within them have “no Russia exposure” and although their value chain contains some of the counterparties implemented by GPF, these companies are not Russian.
For instance, the physical metal backing the strategies is still held in the same warehouses in Rotterdam, while the blockchain-based custody chain used by the ETCs will remain the same after the service provider “went through a similar process of change of ownership earlier this year”, Harvey noted.
Also, while Norilsk previously provided the underlying physical metals for the strategies, the ETCs can now take any good delivery metals available in Rotterdam including Canadian cobalt and Peruvian copper.
Harvey said these steps were taken “because otherwise, the platform was going to shut down due to perceived Russian control”.
Despite the changes, the ETCs are yet to relist on the Deutsche Boerse or London Stock Exchange, however, Elementum copper and nickel strategies have already been brought back online on the Borsa Italiana.
Harvey said he expects to relist in Germany and the UK by the end of this year and early next year, respectively.
Other key strategic shifts also took place as recently as this month. On 5 December, Apex Fund Services announced it would resign as administrator and corporate service provider on the ETC range from March 2023, after more than two years of partnering on the products.
Just four days later, NTree International announced it would perform a mandatory redemption on the first four GPF ETCs brought to market – covering gold, silver, platinum and palladium – as part of a strategic shift to focus on base metals.
“In the physical market for base metals, we do not have much competition, so this will be our focus,” Harvey continued. “We have copper and nickel ETCs, the only physical base metal products in the world, and the electric vehicle basket, which is the only product including physical cobalt and we intend to add lithium to the basket next year as well.
“We are looking at potentially launching a physical aluminium ETC and an energy transition basket, which we are still designing, to make sure it has enough different performance characteristics to complement rather than compete with the EV basket.”