Good morning ladies and gentlemen and thank you for standing by. Welcome to the Sprott Inc.'s First Quarter 2015 Results Conference Call. At this time all participants are in a listen-only mode. Following the presentation we will conduct a question-and-answer session. Instructions will be provided at that time for you to queue up for questions.

[Operator Instructions]. As a reminder, this conference is being recorded today, May 13, 2015. On behalf of the speakers to follow, listeners are cautioned that today's presentation and the responses to questions may contain forward-looking statements within the meaning of the Safe Harbor Provision of the Canadian Provincial Securities Law.

Forward-looking statements involve risks and uncertainties and undue reliance should not be placed on such statements. Certain material factors or assumptions are implied in making forward-looking statements, and actual results may differ materially from those expressed or implied in such statements.

For additional information about factors that may cause actual results to differ materially from expectations and about material factors or assumptions applied in making forward-looking statements, please consult the MD&A for this quarter and Sprott's other filings with the Canadian Securities Regulators.

I will now like to turn the conference over to Mr. Peter Grosskopf, Chief Executive Officer for Sprott Inc. Please go ahead, Mr. Grosskopf..

Thank you, operator and good morning everyone. Thanks for joining us today. On the call with me today are Steve Rostowsky, our Chief Financial Officer; and John Wilson, the CEO of Sprott Asset Management. Our Q1 results were released this morning and are available on our website where you can also find the financial statements and MD&A.

It seems as though we just reported, it being a short period between reports and some of you may have noticed some minor differences in our statements, but I can assure you that for us at Sprott its very much business as usual and we are simply executing on our plan. I’ll start with slide three and review our financial highlights for the quarter.

Our assets under management at the end of the quarter were $7.8 billion, up approximately $800 million from the end of last year. This increase was attributed to the combination of good investment performance, new product acquisitions and some favorable FX results.

We have generated positive net sales year-to-date and Steve and John will give you further breakdowns in their words. Our capital book continues to performance well generating a 13% annualized return on the quarter and our invested capital now stands at more than $325 million.

Turning to the next page, the quarter for us and I think by far the most importantly featured strong performance from the majority of our funds. During Q1 we completed the transfer of previously announced specialty funds that were managed by Whitney George, which added more than $300 million to our total assets under management.

We also launched our second ETF, the Sprott Junior Gold Miners ETF. We have approximately $200 million U.S. in ETF AUM and we expect to launch additional new products before the end of the year. I might mention that the growth rates in our ETF products have exceeded our expectations.

We’ve continued to enhance our investment capabilities by bringing on experienced PMs in core areas. In Canada we recently added Mark Wisniewski, an experienced fixed income specialist and with him acquired a credit fund he currently manages from his previous employer. In the U.S.

we hired Trey Reik, a well-known portfolio manager and thought leader in the precious metals space. He along with Whitney George will broaden our U.S. presence and provide us with another avenue through which to market our products to institutional investors.

These hires point to our ability to attract like-minded, highly experienced manager talent by providing them with a platform for growth. While we have made no large payments to buy their businesses, we have gained new clients adding more than $350 million in AUM with new partners who have a passion and experience necessary to lead areas for our firm.

With that I’ll turn the call over to John Wilson, who will provide an update on our progress at Sprott Asset Management. .

All right thank you Peter. Well, at Sprott Asset Management we continue to make solid progress expanding the breadth and scale of our asset management platform, as Peter mentioned adding both new products and experienced talent.

Our focus and our opportunity is to continue to differentiate ourselves in the market place by offering investors solutions, investment solutions that they can’t get elsewhere.

Increasingly you will see us out in the market place investing in our brand and educating advisors of the wide [Technical Difficulty], of differentiated solutions that we offer them and the value that that offers to their clients. We have been very pleased with our fund performance during the first quarter.

Most of our strategies have delivered – the vast majority have delivered positive returns this quarter and we’ve had several that are leading their categories, including both their small cap and energy funds run by our metal and as well the Canadian equity fund, which we put under new management at the end of last year under Jon Weisblatt and James Bowen.

They are off to a very strong start to this year. We are committed to developing scale in core categories and as Peter mentioned, we recently strengthened our fixed income capabilities with the addition of Mark Wisniewski.

Mark runs a credit strategy that we feel is an excellent complement to our existing products and we expect his unique approach will appeal to both advisors and high network investors. In the core equity category the enhanced products that I manage continue to build scale and we are now around $1 billion in assets at the end of the first quarter.

Additionally, we have made changes to the way we look at resource investing, we’ve added more resources, more process, more due diligence, and we believe that our process oriented approach will lead to a better long term risk adjusted returns in what can be a very volatile asset class.

Finally in terms of product development, we have a whole slate of new differentiated products that are in the pipeline and we expect that you will continue to see more of those launches we moved though the year.

Moving to the next slide, as most of you are aware, during the quarter we announced our intention to make exchange offers for all the outstanding units of the Central GoldTrust and Silver Bullion Trust.

If successful this transaction will significantly increase the asset base of the Sprott Physical Trust and lower our fixed cost per unit in those vehicles. We are currently quite restricted by what we can say about this offer, but we expect to file a circular next week. We’ll be able to speak more freely once that’s done.

What that, I’ll pass it over to Steve Rostowsky to review this quarter’s financial results..

Thanks John. Good morning, everyone. I'll start on slide seven with a look at our assets under management. As Peter mentioned, our assets under management was $7.8 billion as of March 31 this year, up from $7 billion at the end of last year.

The majority of the increase was due to positive investment performance, which added more than $460 million to our total AUM, as well as $300 million gain from the acquisition of the two funds managed by Whitney George. I’ll go into more detail on the next slide. So turning now to AUM by product type, net sales were positive $12 million.

Positive contributions were laid by our two exchange traded funds, by the Enhanced Equity Fund, the Real Assets Fund and the Sprott Bridging Income Fund, as well as the flow through 2015 LP.

Net redemptions were lead by two our Physical Trusts, our two income long and short funds and some of our mutual funds, including Canadian Equity and Small Cap equity fund despite the excellent investment performance that both of those funds experienced in the quarter as John mentioned earlier.

Market value changes totaled $462 million, led by our Bullion Funds, with much of that performance being due to currency gains rather than increases in the USD prices of the underlying metals.

Virtually all of our mutual funds had positive investment returns for the quarter, led again as John mentioned by the Enhanced Equity Fund and the Canadian Equity Fund in dollar terms. As of March 31, 2015 our AUM of our managed companies was $775 million, slightly higher than the $770 million as of December 31, 2014.

Of note there was some reduction in the AUM of Sprott Resource Corp., offset by a currency pickup in the Korean Won of the Korean Fund that we manage. Our fixed term LPs grew by an aggregate of $9 million in the quarter and as previously discussed, we acquired two funds with AUM of $360 million Canadian from Royce.

Moving on to slide nine, which gives you a breakdown of our revenue for the first quarter; management fees were $18.6 million reflecting a decrease of $800,000 from the prior period. Average AUM for the year was $7.6 billion, essentially flat from the same period last year.

Management fees from our SAM managed funds were up slightly, but were offset by lower managed fees from our managed companies and from our fixed term limited partnerships. Commission revenue was $2.1 million for the quarter, reflecting a slight increase from the same period last year.

This increase was due to private placement activity at SPW that was largely offset by a decline in private placement activity at Sprott Global Resource Ltd in a very tough market for resource equity financing.

Interest income was $6.8 million for the quarter, up from $5.4 million in the first quarter of 2014, due largely to higher average loan balances this year. During the quarter we recorded $2.9 million in losses from capital invested in priority investments compared with a gain of $4.4 million in the first quarter last year.

Other income for the quarter was $8.6 million, reflecting an increase of $7 million from the prior period. The increase was largely due to increased foreign exchange gains on U.S. dollar denominated cash deposits receivables and loans. Looking now at slide 10, summary financial information.

We just discussed revenue for the quarter, so moving to expenses. Expenses for the three months ended March 31, 2015 were $24.5 million, up from $21.2 million in the same period last year.

Compensation overall was little changed, discretionary bonus accruals were higher on higher EBITDA, while stock based compensation was lower, primarily due to lower amortization of stock awards from prior years and a reversal of the amount of expected earn out shares to be issued relating to Toscana.

Sub advisor fess were higher given additional sub-advised product offers and G&A was higher on higher professional fees, increased marketing costs and higher technology subscriptions, partially offset by lower funds startup costs and fund subsidies.

We also incurred $1.5 million in direct costs relating to certain energy assets, included in propriety investments. $700,000 of that is depletion allowance, which is added back in our EBITDA reconciliation.

There is a partial revenue offset in other income, plus we will receive a return of capital from that investment, so our overall return on the investment is positive. We did not have those investments in Q1 last year.

Adjusted base EBITDA for the first quarter of 2015 was $13.8 million, reflecting an increase of 51.8% from the three months ended March 31, 2014. Net income was $6.9 million or $0.03 per share compared to $10.2 million or $0.04 a share in the first quarter last year. The next slide shows the EBITDA reconciliation in more detail.

Think this slide is self explanatory, but we feel it’s useful to show the components of the adjustments included in the adjusted EBITDA metric and the only new item is the $700,000 that I just referred to. Slide 12, provides a snapshot of our current capital position.

We continue to enjoy an extremely strong balance sheet with $326 million in invested capital. Our invested capital is currently fairly equally divided into three main areas, cash, other short term investments and loans and other investments primary seed capital in managed product.

The capital book is mostly made up of liquid investments or investments where we can achieve liquidity within two years. I’ll now pass it back to Peter for some closing comments. .

Thanks Steve. Just to clarify one point that Steve made and it also is reflected on our balance sheet in seeded investments and that is, we had made an $8 million commitment to a drilling fund that is managed by our experienced team at Sprott Toscana.

Now for those of you that follow the energy sector closely, first of all we have a great team in Calgary and they had largely been stepping aside from the market over the last two or three years.

During 2014 the opportunity started to get a bit more interesting towards the end of the year and one of the key opportunities there in Calgary which our team is capable of managing are joint drilling commitments with experienced operators and it’s a huge opportunity in Calgary right now.

So we started to seed an investment there late last year and we would hope to be able to ideally transfer it to the commitment and assets to a fund and generate a new product in that area. So turning to the last page before opening it up for questions, I’ll review our key priorities for 2015.

We are going to continue to expand our smart passives business through both new ETF launches, as well as by pursuing the GTU exchange offer. We will continue to grow our alternative investment platform through both organic growth and by attracting proven talent and giving them a platform to grow their business.

We are working to develop scale in key categories such as fixed income, private credit and real assets. We have a platform that’s capable of supporting a much larger asset base than current AUM and in order to maximize their capacity, we need to return to attracting large scale accounts and in that light we have best in class resource strategies.

We are currently incubating a new Gold Equity Strategy that we are naming the Sprott World Gold Fund.

We expect to be marketing this product to institutional investors over the next few months and I would note that on both the Gold Equity Strategies through Trey Reik’s contributions and with respect to our lending platform, we’ve taken on some great new relationships over the past quarter and although these have not shown up in our AUM to-date, they will hopeful so, will do so in some cases in subsequent quarters.

And then lastly, our balance sheet is a key competitive advantage amongst independence and will continue to prudently mange our capital book, while also considering domestic and international acquisition opportunities. That concludes our remarks for today’s call. We’d be now pleased to answer any questions you might have.

And with that, I’ll turn the call back to you operator..

[Operator Instructions] I would now like to introduce our first questioner Gary Ho from Desjardins Capital. Please proceed. .

Good morning. On the Central GoldTrust and the Silver Bullion Trust potential acquisition, MD&A was mentioned as still in early stages. So just wondering how you envisioned this to play out maybe over the next few quarters. And second, how should we think about the financial impact for Sprott Inc.

if this deal is successful?.

This is John Wilson and as I mentioned, we expect to proceed with the offer, but we have to file the offering memorandum, offering circular, sorry, and so we are really limited in terms of what kind of conversation we can have around the offer until that’s out. So you’re just going to have to bear with us.

Once the offer is out, then we can get into more detail, but at this time I am just going to leave it at that..

Okay, and then maybe a broader question. So just curious to know may be Peter or John, just your thoughts on M&A over the next 12 to 24 months maybe is to focus more in Canada or U.S., more in the retail side.

Any color you can provide, that would be great?.

So Peter and I and the rest of the team talk about M&A frequently in terms of what opportunities are out there. I don’t think any of us feel like we have to pursue M&A to achieve our objectives and we have a fairly aggressive view of where we can be three years out and we think we can do that organically.

But it’s an opportunity that would present itself that accelerated that path and increased the probability, then we would absolutely, we feel like we have the ability to not only achieve that kind of deal, but we have the ability internally to execute on the integration.

But right now in terms of our business plan and our strategy, it’s not really focused on M&A at all..

I mean the asset management markets have had a great recovery in the last four or five years. Most managers, especially on the public side are trading at fairly decent valuations.

It’s hard for us to get the kind of returns from M&A that we get out of our own growth plan and as a counter balancing thought, there are a lot of managers in the kind of $500 million to $3 billion range that are finding it difficult to grow, so we do see a lot of opportunities..

Okay, great. And then lastly, just a numbers question. How much of your AUM maybe U.S.

dollar denominated and if you can isolate the FX impact on the $462 million market movement in the AUM this quarter?.

So the biggest amount of our AUM that is U.S. dollar denominated are our Physical Bullion funds, which account for about $3 billion of our AUM, maybe $3.5 billion when you consider the Domestic Bullion funds. So a good chunk of that $462 million is FX. Hard to get an exact number, but probably half of it is FX related..

Okay, perfect. That’s it for me. Thank you..

Our next question comes from the line of Paul Holden from CIBC. Please proceed with your question..

Hi, thank you. Good morning. You’ve seen some pretty good momentum in your mutual fund business in the past quarters, but seem to slow down in terms of net sales in Q1.

So wondering if there is anything in particular you can attribute that to, whether it’s on the gross sales line or some gross redemptions picking up somewhere or any particular products where just momentum slowed a bit..

No, I don’t think – we don’t look at the business as, every quarter it has to be sort of a linear trajectory. There’s ebbs and flows in the business.

We had a lot of new product launching and we put a lot of focus in our sales channel on getting those products traction, which took some focus away from other products that had pretty good sales momentum.

We’re willing to make that trade off because we feel it’s better for the long term to have multiple sources of growth and we’ve had great success doing that.

We mentioned the bridging income fund is off to a terrific start and so we’re on – we’re actually ahead of plan for this year, even coming through the first quarter at the rate we did and this year for us was about building the bridge to meaningfully growing our business over the next three years.

So we’re ahead of that plan and nothing in the first quarter really surprised us, in fact we’re pretty pleased with them that way..

I would note as well that Steve highlighted there were a couple of non-mutual funds, redemptions that occurred during the quarter due to year end effect and the mutual funds sales did chew through those. So it looks like a muted quarter for sales, but actual mutual fund sales have been going fairly well. .

Okay. And then when I think about your strategy in terms of building the alternative investment platform, one of the challenges I see there is the high water mark on your existing mandate. So wondering how you think about that as the best path going forward to create some new funds where you don’t have that legacy issue..

Well, this is John Wilson. So we have three or four funds at this point accruing our performance fees against high watermarks. Certainly some of the legacy resource products are a long way from high watermarks, but the flip side of that is their AUM has become a very small portion of our fund line up now anyway.

So three quarters of our fund lineup is non-resource related products. Most of those are at or close to high watermarks. So it is part of our DNA to launch products that are differentiated and have performance fees associated with them. You will definitely see more of those products as we move through the year.

But we’re actually pretty okay with where we are in terms of high watermarks right now. .

Okay. And then you just talked about building out the institutional business outside of Canada with more of a resource to look for it and trying to find investors that are willing to invest counter cyclical. So wonder if there’s any update on conversations there.

What kind of indications of interest you’re getting?.

Well, it’s slow. It’s tough to attract institutional investors when you have the kind of three year look back numbers that we all struggle within the resource business, but it is happening and we’ve added some good names to our roster. Adding Trey is really going to materially move the dialer.

Trey brought with him some existing relationships that are committed to the sector and on the lending side we’ve got some very good syndicate partners that we hope to be able to turn into fund partners in the near future. Our lending business is growing fairly rapidly right now.

We’ve got great opportunities across all of our resource funds and in that sector when you’ve got a great idea and you’ve got a great team, eventually you’re going to attract the capital and right now we’ve got loads of opportunity. So I hope that we can really start to turn the jets on, but it’s been a slow process..

And a couple of accounting type questions. The first one on the discretionary cash bonus. You attribute part of the increase to transition expenses.

Is that effectively another way of saying additional expenses associated with portfolio management hires?.

No, transition expenses are really related to departures..

Okay. So those would be more one time in nature..

Absolutely..

Got it. And then just curious on the Sprott Korea, started paying a trailer fee on that mandate. So I’m just trying to wrap my head around the trailer fee there..

It’s really a referral fee. It goes on the same line as trailer. We were introduced to the Sprott Korea opportunity by a third party and we pay a referral fee. It’s like a trailer, but it’s really a referral..

I understand, understand, thank you. That’s all the questions I had..

And our next question comes from the line of Marko Kais from TD Securities. Please proceed with your question..

Good morning.

My first question is I was just wondering, how much will Mark Wisniewski bring on AUM and what kind of considerations would you pay for that?.

Sorry, could you repeat the question?.

I was like, how much will Mark bring in AUM and what kind of consideration would you pay for that?.

Yes, the starting number is around $20 million, $25 million and the consideration will really just start off expenses of bringing the fund over, so not a material consideration..

Okay, that’s helpful, thank you. And I was wondering, could you comment on the performance of the Gold Miners ETF provides a [Indiscernible] competitor.

Like are you guys seeing any evidence of these factor based trailer paying off at this point?.

Yes, so we have a factor model as most of you are aware that’s based on – we think are the key drivers of our performance in that asset class for those types of equities. That has a very strong long term out performance. We are still early days.

I think we’re eight months into it, so there have been periods when we’ve been under, longer periods when we’re over and we’re in a period when it’s slightly under. There’s some big swing factors.

Barrick is abig market wait in the index and has had some out performance, so that has helped the index fleeted vehicle relevant to ours, but we’ve had great success with the product, because people understand over the long term our factor pulse is going to weight out. It at least hasn’t and we expect it will in the future..

Okay. And my last question is just around the Canadian Equity Fund. We see the materials exposure ticking down quite notable over the last few months. Is this more of a structural asset location change or it’s just going to present market opportunities..

Well, actually the biggest reason that the materials rate had dropped is the outperformance of the other part of the fund. We’ve had a terrific start to the year. The mandate is Canadian Equity Fund. Its history and its legacy was as a stock picking fund.

We think Jon and James are excellent portfolio managers and stock pickers and they’ve made some terrific – had some terrific wins already in the non-material sector, which is material increase the waiting in that portion of the fund. So the materials wait can go up and down, that’s their call.

It has come down, but it’s mostly because of how well the other stuff is done..

Okay, thank you..

And our next question comes from the line of Scott Chan, Canaccord. Please proceed with your question..

Hi, good morning guys. Peter, just on the U.S. side, can you just – with trades hiring and Whitney George’s fund, can you just give us a sense of the vision that you see on the U.S. side and is it going to be complementary to Reik rules group down there or is it going to be more independent on that fund..

Well, it’s certainly going to be – I mean, it’s going to be both of those things. It’s going to be complementary because the two of them, both sit on our precious metals team, but Trey’s product style, which is institutional quality management. He’s handled segregated accounts and he’s handled more hedge fund style accounts, is not what Reik does.

Reik has 10 year committed partnerships, earlier stage companies, so the two funds do not compete with each other. They are addressing different markets and different strategies, but they are complementary..

Okay. You guys have built a pretty good ETF platform with the two new recent funds and you talk about new offerings. Would the new offerings still be in the resource or would you look at other types of ETF offerings outside of resource. .

Well, we’d look at everything. I mean the numbers on the ETF or the passives business. I mean when you look at us, we’re really in two great areas; alternatives and passives, those are the two areas globally that are growing. The growth of passives is nothing short of spectacular in our industry. We’re going to have to look at everything in due course.

But if you take a look at our global brands, we’re one of the top brands in resource fund management globally and we have lots of runway in terms of introducing resource products, lots of runway. So you might see five resource ETFs, you might see 10. There are a lot of good ideas and we have a lot of inherent investment management expertise.

So we have a lot of people that follow our company..

Okay.

And Steve, just on the financials; I know still going through it, the adjusted basic data you guys report, that includes the other income and the FX gain?.

That’s correct. It excludes the gains and losses on property investments and pretty much everything else is in other than the normal stuff that’s excluded from EBITDA..

Right. Okay, and just on the G&A line, last quarter was a lot higher because it performs fees and some advisory expenses and it came down latched in and locked this quarter. Just trying to get kind of a run rate for the balance of the year on that line, excluding obviously the Q4 number..

I’d say the number is probably about $6 million a quarter, but again it depends exactly which numbers you put in and closer to the extent that some advisory costs go up, there’s a revenue offset, a direct revenue offset against that.

So for example, as John mentioned our bridging income funds being one of our top sellers that as a sub-advice fund and as the AUM goes up we get more fees, but there is also more sub-advisory costs..

Okay, thanks guys..

This concludes today’s question-and-answer session. I’d like to turn the call back over to the speakers for any closing remarks..