Ed Coyne: Hello, my name's Ed Coyne, senior management director at Sprott Asset Management. Sprott's a dynamic firm with a pure focus on precious metals and real assets. With over four decades of experience and over 23 billion in assets, we are one of the largest firms in the precious metals real asset universe. Today, I want to talk specifically though about clean energy. More specific, I want to talk about uranium and its potential role in a carbon neutral future. For that, I've asked Tim Rotolo from North Shore Indices to join me for this conversation. Tim, thanks for being part of it.

Tim Rotolo: Thanks, Ed. Good to see you.

Ed Coyne: Well, good to see you. And I think we should dive right into the main crux of this, which is what was the spark or what was the interest level for you in creating an index that was surrounded around uranium?

Tim Rotolo: So when we looked at the marketplace back in 2017 and 2018, there wasn't a natural way for retail investors and really, generalist investors, to play the uranium market. There was one index out there. We didn't think it was a great option. It really owned a lot of non pure play stocks like construction companies and things that wouldn't give investors direct access to the theme. And so we set about creating an index that was really a one stop shop for physical uranium and equities related to uranium mining. And that was the genesis of the North Shore global uranium mining index.

Ed Coyne: And when you created that, what did you see was the initial interest in that? Was there anybody paying attention when it first came out, or what happened?

Tim Rotolo: Yeah, there was a small cohort of retail investors, actually, many of whom were on Twitter, kind of lamenting that there wasn't a better option. And so we looked at a couple of different potential situations, a closed end fund, a pure physical vehicle, and the feedback that we got was that people wanted exposure to both the physical and the mining equities in one vehicle. And so that's kind of how we got to this roughly 80/20 split of the index today, to 80% equities and 20% physical.

Ed Coyne: Well, let's talk about that for a minute because I think the physical market is something that people, like gold or silver, where most people know Sprott, the physical market is where a lot of investors start. So how do I get exposure to this as a commodity? How do I get exposure to this as a real asset? How do I think about that space? Going beyond that, many times investors aren't wanting to make that leap. So it seems like you've sort of solved that solution in creating an all encompassing index that gives you exposure to both. You'd mentioned, I think you said, 20% physical, 80% [inaudible 00:02:47]. What was the reasoning behind that? Did that seem like the right balance for you? What was your thinking there?

Tim Rotolo: So one thing I would say, before Sprott took over uranium Participation Corp, the options were really not great in the physical space. They were corporations that could trade at big discounts and you're really waiting for management to try and unlock that discount or close that discount. Sprott has dramatically improved the ability for investors to access physical uranium now. But it did feel like, from a portfolio construction standpoint, it's a very diverse universe of stocks, many of which are smaller cap, very volatile. And I looked at it, and similar to how I think Sprott thinks about the world, is that you have this spectrum of investment opportunities in most commodities starting with physical being kind of the most low volatility, direct way to play a thesis on rising prices. And then you have generally producers or a more diversified vehicle like an ETF. Hopefully there is one for most of the sectors today. And then you have the individual equities. And again, you have a spectrum, from producers to exploration and kind of the full risk spectrum there.

Tim Rotolo:  And what I wanted to do is create a single investment option that gave people exposure to as much of that spectrum as we could, but then also looking at it and saying, there's going to be times when physical is doing quite well and provides a lower volatility option. So we could actually lower the volatility of the overall portfolio. So kind of using modern portfolio theory to create this more diversified return stream that the physical uranium actually provides a lower volatility option. So when times are good, you're not underperforming physical because you have exposure to these smaller cap exploration stocks and developers, which have a lot of volatility and torque to the upside. But in times of more volatility and downside, the physical actually provides some protection and a ballast, is how I think about it. And so you have this yin and yang and they balance out very nicely over time so you actually get similar upside, but not as much of the downside risk as just owning the equities.

Ed Coyne: Well, it sounds to me like you sort of crack the code on that because at Sprott, with over 23 billion in precious metals, we have also looked at the world that way as far as looking at the physical market first, whether it's our gold trust or our silver trust, and you just mentioned, our uranium trust to the equities. So we've got our active mutual funds in the gold mining space. We've got factor based ETFs. And now with this acquisition, we have the uranium ETF, URNM. And I think that fund, for the typical investor, and there's going to be outliers, the investors that want to buy individual stocks, there's going to be investors that just want to own the physical, I think for the typical investor out there, or what I'd say the more traditional investor out there, having a one stop solution to the uranium space, I think is very dynamic. And we're excited to be part of this and to be able to offer this to our shareholder base.

Ed Coyne: Talk about that from an investment standpoint as an investor is considering uranium as part of their portfolio. This is not a typical allocation that most investors are thinking about on day one. So as they do that, what should they be expecting or what are they signing up for? We've seen some volatility, but we've also seen some tremendous upswings and down swings over the, literally, last year, year and a half. So what should be an appropriate expectation for a client as they start considering uranium as part of their portfolio?

Tim Rotolo: So I think you have to start with your conviction level in the thesis. Why are you involved? Is it the long term clean energy story? Is it the, I would say, kind of more secular supply shortage theory? So today, we have a couple of different theses within the whole uranium sector. You have nuclear energy taking off and becoming a much larger part of the decarbonization efforts. And so I think you need to start there and then you need to decide, the way we've always thought about it is, for us to be right about the macro thesis, physical prices have to go up. And so then the question is, do you want exposure directly just to that physical or do you have kind of a higher risk tolerance and you want to have exposure to the equities?

Tim Rotolo: And then I think it's a question of, where does this fit? Do you have a 10 or 15 or 20% allocation to commodities today? I think uranium is kind of a unique diversifier within the commodity space because it doesn't trade in the same way with the dollar the way gold does or real rates the way gold does. It's not necessarily an industrial commodity the way silver is. And so I think you can look at it as kind of a uniquely opportunistic but now multi-year theme in a portfolio. And I think a lot of it will come down to your risk tolerance around does that mean it should be a 2% position or a 5% position or a 10% position?

Tim Rotolo: And again, I think today, going back a couple of years ago, I would've said this is a much more speculative thesis around there being a supply shortage. That story is here today. And now you have the added benefit of it being a much larger part of the decarbonization effort around nuclear power. So the demand story is here, the supply story is here. I think investors can have more comfort with holding a kind of long term position in uranium and looking at it as a diversifier against equities and even against their traditional commodity allocations.

Ed Coyne: Well, I love to think of it that way. And I think the way you positioned it is exactly the way I would say it as well is a multi-year type of allocation. I think so often people will think about a trade, like a precious metal trade, whether it's the physical side or the equity side, of course in uranium, what we're talking about today is if I get the price right, I'm going to make all my money and not think about it in the terms of what is a multi decade view on this look like? And as you get more and more countries talking about 2035 to 2050 of when will we be carbon neutral, the landscape for nuclear as part of the solution, the base load solution, not the solution, but certainly part of the green energy solution, seems to be here and we seem to think that for decades, it's going to continue to expand and grow.

Tim Rotolo: Yeah. I would agree with that. And I think if we want to think about it, these are still early innings for this multiyear secular story around nuclear power. I think what's been so interesting is how the thesis has evolved and actually just become increasingly stronger. Many things two or three years ago that we never thought was possible, for instance, Diablo Canyon in California, the US government putting 6 billion dollars behind its nuclear power plants, these were things that people literally wrote off as never being possible. I mean, the support from people like Bill Gurley and Josh Wolfe and Marc Andreessen around nuclear power, Elon Musk.

Ed Coyne:  Powerful names.

Tim Rotolo: Yeah. These are incredibly powerful people who have the ability to amplify a message. And for the first time, it feels like nuclear power is being viewed in a very rational light. It's no longer being viewed through kind of the fear mongering that the media had tended to portray it. And so I just think we're at such a different point in the life cycle of this investment opportunity. It's a really exciting time. And again, the fact that it continues to be somewhat uncorrelated to other strategies is just an added benefit.

Ed Coyne: Well, low correlation is key. And I like to say uranium's gone from a trade to an investment. It's now something you can be thinking about as part of your portfolio and being additive over multiple cycles, given that the entire landscape's really expanded here over, really, the last couple years.

Tim Rotolo: Yep. Definitely agree with that.

Ed Coyne: Well, we're excited about the partnership. We're thrilled to have you be part of this conversation. And for those investors out there that want to learn more about Sprott, we encourage you to visit us at Sprott.com, that's S-P-R-O-T-T.com, where you can download a prospectus, fact sheets, white papers, and learn more about how uranium could become part of your portfolio. Once again, my name's Ed Coyne, senior management director of Sprott Asset Management. Thank you.