Sprott’s Steve Schoffstall introduces SLVR, the only† ETF to provide exposure to both pure-play†† silver miners and physical silver. As one of the world’s oldest currencies and a critical material essential to energy, technology, the automotive industry and healthcare, silver and its miners may offer long-term investment opportunity.
†Based on Morningstar’s universe of Precious Metals Sector Equity ETFs as of 1/14/2025.
††The term “pure-play” relates directly to the exposure that the Fund has to the total universe of investable, publicly listed securities in the investment strategy.
For the latest standardized performance, please visit the individual website pages: SLVR. Past performance is no guarantee of future results.
Michelle Yu: Hi, everyone. I'm Michelle Yu. It's a special day in our New York studios. That's because our partners at Sprott Asset Management are here to talk about the recent launch of their new silver exchange-traded fund (ETF). It happens to be the only U.S.-listed ETF offering pure-play exposure to both silver miners and physical silver.
For more, let's welcome Steve Schoffstall, Director of ETF Product Management at Sprott Asset Management. Before I get to Steve, I just want to point out that silver is a unique commodity because it's both a precious and industrial metal. So, I will start by asking Steve what investors should know about its qualities as a precious metal. Steve, it's great to see you.
Steve Schoffstall: It's great to be here. Thanks. It's a great lead-in. Silver is traditionally known as a precious metal. The industrial side has started to take hold over the last decade or so.
But when you look at its monetary and precious metals uses, you see that both silver and gold shine in periods of high inflation, political uncertainty, and decreasing interest rates—those types of environments that we've been starting to see here for the last 12 months or so, and many think will continue going forward.
The interesting thing about silver is that it does act a little bit differently than gold. It tends to give a little bit more torque in the return. If you were to go back over the last five bull cycles as they relate to precious metals, back to the 1970s, you would see that, on average, silver returns about two times that of gold. In this most recent rally, we found ourselves in, it was a little bit less, about 1.4 times.
Another widely followed metric is the gold-to-silver ratio, simply how many ounces of silver to buy an ounce of gold. Traditionally, over the last 35 years, that runs at about 70. We currently are now closer to 90. That leads us to believe that there's the opportunity for silver to catch up to the performance that we've seen with gold in recent years and that’s an exciting time for the fund that we've launched.
Michelle Yu: One thing I want us all to keep in mind as we watch is that the energy transition and rise of artificial intelligence are driving industrial demand for silver. What impact does this have on silver?
Steve Schoffstall: The demand for silver for industrial uses now is about 55% of the overall usage and demand of silver. It comes down to electricity and more energy needed to power. If you look at developing countries, such technological advancements like AI, where silver is also used in the computer chips that are powering the data centers. If you look at China, India, and other countries like that, they're increasing their standards of living, and this is requiring a lot more electricity.
At the same time, we are transitioning to cleaner forms of energy, which requires this large infrastructure build-out. Silver is used very heavily in solar panels. Over the last several years since 2015, solar panels have seen about a 28% increase annualized, which is very significant growth. In 2015, about 6% of silver was used for solar panels. Now we're at about 16%, and the forecast is for much more solar going forward.
Michelle Yu: Has the silver supply been able to keep up with the growing demand?
Steve Schoffstall: It's a little bit different than with other commodities. The short answer is no. If you look at supply going back to 2015, we can see that the growth rate is pretty stagnant. It decreased by about 3% over that time. The main reason for that is, if you look at how silver is mined, it's usually a byproduct metal.
About 72% of silver is mined as a result of mining something else, like zinc, copper, or lead. It makes it much more difficult for mines to expand capacity because that's not their primary economic growth driver. For those reasons, it has been difficult to expand the supply of silver.
Once we start to look at the growth in solar panels and the increased demand there, we also see that inventories have been drawn down for the last several years. If we look at the silver market as a whole, each of the last six years has been in a deficit. So, from the miners' perspective, there's some work to get more supply rather than meet the demand.
Michelle Yu: As mentioned earlier, Sprott recently launched a new silver miners' ETF. What can you tell us about that, Steve?
Steve Schoffstall: We are excited about the Sprott Silver Miners & Physical Silver ETF, ticker SLVR. It's the first and only silver miners ETF out there with a dedicated physical allocation to the portfolio and a pure-play focus on the miners. So, the screen looks and allocates about 18% or so of the portfolio to physical silver. Then, for the equity component, which makes up the other 82% of the portfolio, it allocates primarily to pure-play equities.
We define pure play as companies with at least 50% of their revenue or assets tied to mining silver, so they are predominantly silver companies. Now, to add a little bit of liquidity to the portfolio, we have a small portion—no more than 15% of the portfolio with a 25% revenue test. That's just to increase the investability of the universe because it is difficult to find dedicated silver companies that have sufficient size to support a product.
Michelle Yu: Why does a pure-play strategy matter so much in silver mining?
Steve Schoffstall: It's particularly important in silver miners. When we go back to the byproduct story where we have a 72% being mined as a byproduct, most of the silver companies are mining other metals. If you look at the 10 largest silver miners, none of them are primary silver miners. They have other drivers of their business, and lead and zinc combined make up about 31% of their activity.
This means that when you look at other existing silver mining ETF strategies, they tend to be much more diversified. They invest in companies that don't necessarily have a lot of exposure to silver. In some cases, what we will see is that their criteria for inclusion in the index is that to be considered a silver miner, you just have to have an economic impact based on silver.
You could be looking at companies that have small, single-digit percentages of their revenue actually coming from mining silver. If you look at SLVR and its strategy and how that compares to other strategies, you'll see that the SLVR strategy has about 70% allocation to silver. That's more than twice, in some cases, what we are seeing with other strategies.
Also, it has a very low overlap with other existing ETF strategies on the market, so you're getting a differentiated product. On the other hand, when you look at companies with less than 25% of their revenue tied to silver, some of the other strategies have about half their portfolio invested in those companies. Those won't meet the screen for SLVR.
Michelle Yu: Given that, why do you think investors would consider adding exposure to their portfolios?
Steve Schoffstall: It boils down to the two uses we talked about: first, from the monetary and precious metals side of the equation. It is a great diversifier, so it does add that potential risk reduction within a portfolio. If you look at the correlation relative to the S&P 500, it is less than 0.5. It has a negative correlation with the U.S. dollar for bonds. It is sub 0.4 for a correlation.
Then, when you look on the industrial side, because it is a pure-play product and we have that 50% screen on the revenue, what we see is equities that do have a 50% screen. They are all in; the cost of mining is somewhere around $17.18 an ounce of mined silver, with prices currently around $32.36 an ounce, which could be quite profitable. As prices continue to move higher, if that's the case, they're in a position to potentially have, you know, much stronger balance sheets and higher revenue pushing prices higher.
Michelle Yu: Steve, thank you so much. We're going to leave it at that. Thank you for stopping by and educating us. That will do it for us here at Asset TV as well. Thank you so much for watching. We hope to see you next time. Take care.
Investment Risks and Important Disclosure
Relative to other sectors, precious metals and natural resources investments have higher headline risk and are more sensitive to changes in economic data, political or regulatory events, and underlying commodity price fluctuations. Risks related to extraction, storage, and liquidity should also be considered.
Gold and precious metals are referred to with terms of art like store of value, safe haven and safe asset. These terms should not be construed to guarantee any form of investment safety. While “safe” assets like gold, Treasuries, money market funds, and cash generally do not carry a high risk of loss relative to other asset classes, any asset may lose value, which may involve the complete loss of invested principal.
Past performance is no guarantee of future results. You cannot invest directly in an index. Investments, commentary, and opinions are unique and may not be reflective of any other Sprott entity or affiliate. Forward-looking language should not be construed as predictive. While third-party sources are believed to be reliable, Sprott makes no guarantee as to their accuracy or timeliness. This information does not constitute an offer or solicitation and may not be relied upon or considered to be the rendering of tax, legal, accounting, or professional advice.
You are now leaving Sprott.com and entering a linked website. Sprott has partnered with ALPS in offering Sprott ETFs. For fact sheets, marketing materials, prospectuses, performance, expense information and other details about the ETFs, you will be directed to the ALPS/Sprott website at SprottETFs.com.
Continue to Sprott Exchange Traded FundsYou are now leaving Sprott.com and entering a linked website. Sprott Asset Management is a sub-advisor for several mutual funds on behalf of Ninepoint Partners. For details on these funds, you will be directed to the Ninepoint Partners website at ninepoint.com.
Continue to Ninepoint Partners