Good morning ladies and gentlemen and thank you for standing by. Welcome to Sprott Inc's 2015 Third Quarter 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, November 12, 2015.

On behalf of the speakers that follow, listeners are cautioned that today's presentation in 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 turn the conference over to Mr.

Peter Grosskopf. Please go ahead, Mr. Grosskopf..

Good everyone and thanks for joining us today. On the call with me today is our Chief Financial Officer, Steve Rostowsky. Unfortunately John Wilson the CEO of Sprott Asset Management is traveling and unable to join us today. Our Q3 results were released this morning and are available on our website where you also find the financial statements and MD&A.

I will start on slide 3 with a review of our financial highlights for the quarter. Our AUM of 4.7 billion as at September, down from 7.8 billion at the end of Q2.

As most you know, Q3 was a very tough quarter for the resource markets and this had a negative impact on our results for the period as both our active and passive resource strategies contracted.

We reported a net loss of $0.20 per share for the quarter, the majority of which was attributed to a goodwill write-down related to our acquisition of Global Resource Investments in 2011, which is not surprising given that Global was acquired at [$8.67] per share. Steve will walk you through the details in a few minutes.

Our capital book also experienced losses during the quarter resulting from a large percentage of resource investments in both our seeded funds and our loan book. On the whole, performance of the capital book has bounced back since September 30th and we expect to report better returns in Q4.

Looking now at slide 4, the steep and prolong correction in the natural resource sector has been challenging for our business and has resulted in unsatisfactory financial performance over the past few years.

However we have not stood still during this period and we have used the time to invest in our platform, building new businesses that are well positioned for the future. We are now balanced asset manager with two strong platforms, diversified alternative asset management and our Global Resource franchise.

For this fiscal year, it has been somewhat of a tail of two cities, as I diversified business under John Wilson, has posted stronger than expected growth while the resource business has remained under pressure. During Q3 we completed the rebranding of Sprott Asset Management to reflect its new positioning.

We also conducted a cross-Canada to introduce advisors to the new profile for this business. To support our efforts to reposition and accelerate the growth of this business, we made a key hire during Q3, bringing on Dennis Mitchell as Senior Portfolio Manager.

Dennis is well known to most of you and in the Canadian asset management space and has a strong following amongst retail investors. We have an eminent launch of four new funds for Dennis that we expect to attract significant new assets. The addition of Dennis will complement our enhanced products which are managed by John Wilson.

These products have emerged as our flagship funds and have quickly grown some more than 1.3 billion in AUM by delivering consistent and targeted risk adjusted performance and strong sales. We expect this product line to capitalize on our momentum with the launch of Sprott Enhanced U.S. Equity Class.

We continue to enjoy better than expected success in our alternative income strategy such as the bridging income fund and our private credit fund. These products have experienced strong client demand and are concurrently only constrained due to their growth and manager capacity.

As a result we’re exploring adding new products in this private credit area and evaluating other avenues to meet the investor demand for these strategies. Overall, we’re very pleased with the repositioning of SAM, Sprott Asset Management, and the growth of this business has been better than expected over the past couple of years.

Concurrent with the repositioning of our diversified business, we refocused our resource strategies in order to deliver reduced volatility and more consistent returns, as well as being positioned to capture upside performance during an expected rebound.

We’ve developed and launched new next generation funds such as the Sprott World Gold funds, which have significantly outperformed their benchmarks since inception. We expect these strategies to attract contrarian minded investors looking to position themselves for an eventual recovery in precious metal prices.

And we are working on plans to further restructure our resources businesses to improve alignment, cost efficiency and cross marketing of the strategies. We’ll have more detail on our progress in this area for our year end call. Turning to Slide 6.

Together our exchange with the product account for approximately 40% of our total AUM, and we’re committed to expanding this business. Since our physical trusts were launched in 2010, they’ve been a stable source of revenue and EBITDA for Sprott, despite the weak precious metal markets of recent years.

They’ve also helped us build global awareness for our resource expertise and we expect to capitalize on this brand recognition one sentiment towards precious metals improves. In 2015, we launched our first two ETFs raising approximately 200 million in AUM.

We expect to launch new ETFs early next year, we’re considering opportunities to expand this product line through both resource and non-resource offerings. We’re also continuing to move forward with our exchange offers for Central Gold Trust Silver Bullion Trust.

We hope to complete this transaction by or shortly after year end, and if we’re successful, this would add approximately 800 million to our path this product AUM. I’ll now pass it over to Steve Rostowsky for a review of our financial results.

Steve?.

Thanks Peter. Good morning everyone. I’ll start on Slide 7 with the look at our assets under management and the changes from the beginning to the end of the quarter. Our AUM, as Peter said, was 7.4 billion as of September 30, 2015, down by about 400 million from June this year.

So looking at AUM changes by product type; during the quarter, the market value of our portfolio declined by approximately 300 million and we reported an additional 65 million in net redemption.

On the sales side, while the overall net number was negative, strong sales in some of our mutual funds were offset by redemptions in two of our physical bullion funds and the closure of some underperforming and subscale alternative investment funds.

Investment performance across most of our strategies was negative, particularly our resource focused strategy. Market value declined in our bullion funds were offset by foreign exchange gains as our physical funds are denominated in U.S. dollars.

Moving on to the next Slide which gives you a breakdown of our revenue for the third quarter; management fees were 18.8 million, reflecting a decrease of 1.5 million or 7.4% from the prior period. Average AUM for the year was 7.6 billion, which was down slightly from the same period last year.

Overall, this reflects a decrease in management fees from Sprott Asset Management of 3% with larger declines coming from our revenue focused businesses. Commission revenues were 1.9 million for the quarter ended September 30, 2015, reflecting a decrease of 3.6% in the same period last year.

Continuing muted activity of Sprott Resource Global Investments Limited was partially offset by commissionable transaction activity at Sprott Private Wealth. Interest income, which is driven mainly by the performance of our loan book, was 4 million for the quarter, down about 25% from the third quarter of last year.

The decrease during the quarter was due to lower average loan balances that were about 30 million lower in the current period as compared with the prior year. During the quarter, we recorded 13.3 million in losses from capital invested in proprietary investments and loans compared with a gain of 4.3 million in the third quarter of 2014.

Losses experienced during the quarter were due to a specific loan loss provision as well as market value depreciation in certain seeded fund investments and equity holdings. Other income for the quarter was 11 million reflecting an increase of 6.7 million from the second quarter of last year.

The increases were mainly due to strong foreign exchange gain on translation of U.S. denominated cash receivables and loan balances, the generation of royalty income on energy assets held in our proprietary investments and an arrangement fee earned on a new loan within Sprott Resource Lending Corp. Looking on Slide 10, expenses and earnings.

Expenses for the three months ended September 30, 2015 were 65.2 million, up from 31.5 million during the same period last year. The reason for the large increase was goodwill and other intangible asset resulting from the acquisitions of the Global Companies and Toscana being -- that’s being impaired.

Charges against earnings in the amount of 39.9 million were taken. Excluding these non-cash charges as well as other operating expenses relating to certain energy assets held as part of our proprietary investments which are new this year, expenses increased from 21.5 million to 22.1 million.

Essentially, compensation and benefits decreased primarily variable accruals while selling, general and admin expenses increased.

The principal reason for the increases were higher advertising and promotion costs associated with the rebranding of Sprott Asset Management, higher technology costs and additional fund related operating and start up expenses mainly related to our exchange traded Junior mining fund and the U.S.

listed fund that we acquired with Whitney George joining Sprott earlier this year. On the variable compensation accruals we are actively reviewing our talent management and retention strategies and mainly to adjust our accruals upwards in Q4 but it’s too early to determine the magnitude thereof.

Nonetheless, we expect variable compensation overall to be substantially lower than last year. Adjusted base EBITDA was 1.8 million or $0.01 per share reflecting a decrease of 6.4 million from the [three] months ended September 30, 2014.

The decline was due to a 3.9 million provision against a resource loan during the quarter, lower management fees and lower interest income. This was the first time that we’ve had a full reserve against a loan. We remain comfortable with the valuation of the remainder of our loan book. The next slide shows EBITDA reconciliation in more detail.

And while its largely self explanatory, I would note that the difference between the losses on proprietary investments showing here and in the statement of operation is the 3.9 million loan loss provision that is taken as a charge against EBITDA. We fully expect this to be a one-time non-recurring item.

Looking at our balance sheet strength, provides a snapshot of our current capital position. We continue to enjoy an extremely strong balance sheet. Invested capital stood at 312.7 million reflecting a 30.6 million decrease from December 31, 2014.

The main reasons for the decrease are the losses on proprietary investments and loan and the repayment of the credit line that was outstanding at December 31 last year. Our invested capital is mostly made up of liquid investments or investments where we can achieve liquidity within two years. I will now pass it back to Peter for some closing remarks..

Thanks Steve. So while this has been a tough year for Sprott our results [provide] a underlying potential of what we all believe will be a strong rebound. While resource markets have been tough, we have continued to invest in our business to position the firm for this rebound. We have built a number of new businesses.

We have created multiple internal growth opportunities that we are committed to pursuing. These include the continued growth in our diversified actively managed strategies, the support for existing and new exchange listed product launches, U.S. growth and the potential of expanded U.S.

sales coverage, continued institutional sales efforts, and the expected inception of our lending partnership which we believe will happen later this year or early next. We are fortunate that we have the financial strength that see us through a challenging year like this while still investing for our future in order to execute on our visions.

That concludes our remarks for today’s call. We would now be pleased to answer any questions you may have. And with that, I will turn the call back to the operator..

Thank you. Ladies and gentlemen, we will now conduct the question-and-answer session [Operator Instructions]. Our first question for today comes from the line of Geoff Kwan from RBC Capital Markets..

Hi, there, good morning. Just had a question on the loan issue.

Just wanting I guess better understand what may have been managed or what you other than differently with respect to the loan? And then does this change how you look at doing loans going forward?.

Well, we’ve done 42 loans this has been our only loss. It was not a core strategy loan it was a loan that came to us through the Toscana Energy book. And yes we would do something differently. The Toscana Energy strategies relied on hard asset coverage relating from reserve valuations.

The thing that we would do differently is because this loan in particular was a mez loan. We would not go forward on any energy loan in that decision without hedging our commodity exposure. So that’s something that was historical, that we’ve picked.

We picked up with open eyes over the last couple of years and we believe it’s an isolated incident, totally isolated..

And just the other question, and just more from a broader investment perception side is. With this business, I mean, it seems like you sell are committed to -- I just wanted to get a sense of looking at the Sprott story it’s in some ways is an asset manager and also in some ways a bit of a lender, and I guess a bit of a hybrid company that way.

Just wanted to get your color in terms of that is how you see the vision obviously there’re different components with resource and the non-resource side.

But maybe from a more simplistic view of the Company?.

Just the very first part of your question, were you asking about the resource businesses or….

In light of what happened on the loan side, it’s just thinking about Sprott as arguably in some ways simplistic asset manager and also a lender. Just wanted to see if that’s how you think about the Company from a basic level? Obviously there is both resource and non-resource side.

But just trying to think about it, if maybe not as share point asset manager, let’s call it..

I am going to divide the question if I could into two areas. The first one is on the lending book.

The lending book which we took on as you know about two years ago, from its inception as a closed end fund, it’s been about 100 million to 150 million of exposure on our balance sheet, it’s provided an average return of about 17% this year it will be less than that.

That obviously provided a lot of financial EBITDA towards the shareholders account and towards the building of other businesses. We do fully expect to down shift that book into a lending partnership. It will become a managed strategy and a managed strategy only.

Turning to the second part of your question the commitment that we have to the resource strategies; to put it in the context, on active resource strategies, we have about 1.1 billion of active AUM.

We have about 70 people working on those resource strategies because they’re in different buckets, ranging from private equity, to lending, to actively managed liquids strategies. What’s clear is we can do a better job managing that capital with less people.

What’s also clear is there is incredible rebound potential and that -- the kind of roots of the business that five years ago delivered us 200 million in EBITDA from performance fees and AUM. So we’re absolutely committed to turning it around. And I think that’s a global franchise that has multiples of potential from where it is now.

So, absolutely we’re committed to seeing that vision through..

And last question is, is on that loan book, apologize if I’ve missed this somewhere in the quarterly report.

But do you have a rough breakdown in terms of how you would segment between different sectors whether it’s energy versus precious metals versus more commodity related resources?.

Yes, so we’ll have to give you an pointed detailed disclosure. We’re trying to be as transparent as we can be. In fact you can trace the loans individually to public borrowers that disclose the loans on their financial statements. So the vast majority of the book is in senior mining loans, that’s the core strategy.

And we don’t believe we have the need or risk for any further provisions. In many cases those loans are paying themselves out over the next six months. So, our book does tend to ebb and flow quite actively.

And the two largest positions there are with TMAC mining which is a large gold project in Canada and with Platinum Group Metals which is the large platinum and palladium project in South Africa. So we’re going to point you to the exact disclosure and you can see the percentages there..

So Geoff in those Sprott financials, on Page 45 of the PDF package, detail on resource loans broken down metal and mining, and energy, and then also geographic breakdown of those loans..

Got it, perfect. Thank you. [Technical Difficulty].

Good morning just a few questions.

On the potential change in variable comp, can you elaborate on that, is this a timing issue or is this something that’s going to be implemented and may change in longer term?.

Yes, I think it’s both but where we started historically as you recall always with that sort of 25% of net operating income as you’ve seen in our disclosure over the past few years with all the different businesses and different components, that simple methodology hasn’t really worked, hasn’t really served us well and we were taking a much more bottom up business-by-business type approach.

But obviously in a very difficult year such as we’ve had, we have to look at everybody and all our people and determine exactly who we need to and what we need to pay to retain and motivate people. So while the absolute number [technical difficulty] as a percentage of EBITDA that number might go up somewhat.

But it’s timing in as much as EBITDA grows and we fully expect that will, and Peter said all the reasons that we’ve outlined. The variable comp will not lie the stats that EBITDA was..

Got it, okay.

And then I guess a question is, Steve you mentioned the increase in advertising, technology and fund start up cost, can you perhaps quantify those three and what you consider all three one-time or how should we think about that?.

Yes, so the advertising was about 1.5 million, advertising and promotion in the quarter. There is some run rate to that. It was new as we said because the rebranding started with management. And that is somewhat of an ongoing process, it doesn’t start just with a quarter and then stop.

So as we go forward, we got a support of both the brand and the process. The technology were higher but will have flat lines. So we are not going to continue to see increases in that. And the third piece was the start up costs on the funds, some of them were one-time particularly relating to bringing on the U.S.

focused trust, I mean expenses last but then we obviously have revenue associated with that. So net-net, that was actually positive. The start up of the ETF, I mean again it very much depends on how fast that gets to scale. So we were investing in the start up, the Junior fund is still sub-scale so we continue to sort of subsidize that one..

So if I can just summarize your comments there, it sounds like it will flat line from where it is this quarter but you don’t expect that to ramp up significantly, look out for the next couple of years?.

Correct. I mean I would say our run rate on SG&A somewhere in the sort of 6.6 million range..

Okay.

And then lastly just a numbers question, the 3.9 million loan loss, that’s a pretax number, right?.

It’s a pretax number, correct..

And what would that be post tax?.

Well that would be a fully taxable, it’s not a capital gain. So it’s 26% is our effective tax rate, so..

Okay..

It would be effectively at that rate. I mean in lending we have a lot of losses which we use up.

So we quoted as a tax expense but it actually wouldn’t be a tax recovery the same way as you know a lot of our investment income while we show the taxes from an accounting perspective on cash taxes because we have a lot of losses to use in the lending business..

Okay. Got it. That’s it from me. Thank you very much..

Thank you. And our next question comes from the line of Graham Ryding from TD Securities..

Good morning..

Good morning..

Can I just start with the CGT, SBT acquisition? Can you give me an update maybe on what the percentage of the CGT units that are tendered so far, has it changed at all from your last press release?.

I think it changes all the time depending on how close we are to the expiry date of the offer because units get then they get withdrawn as you go between dates and then they get retendered again. So, I think that the last number on last tender that was accurate it was about 57%..

So you’re pretty close to the threshold.

How much you describe your overall confidence that you’re going to be able to get this over the line?.

Well, we’re still very confident. The large shareholders are all solidly supportive, and as well, there are other mechanics underway which I think would improve our chances. And I am not free to elaborate on those now..

If you don’t get to this threshold I think November 20th you said is the deadline as a result of expecting you’d push this up further if you’re confident that you can ultimately get there?.

We have the way with all to do whatever works for their shareholders. So we’re not particularly stuck to any timing schedule if it takes two weeks, if it takes six months. It’s the end conclusion that we’re after..

And maybe I can just thinking about AUM that you’d be brining, 800 million as of today in U.S. dollars.

And the EBITDA that that would generate, and then considering the cost that you’ve put into this process to-date, how much are you expecting to invest in this transaction and then what’s the time line before you recover that?.

Those estimates are approximations at this stage. But to give you our rough idea, I think the EBITDA does depend on the size of the value of the AUM, which depends on the gold price and in rough numbers it’s something like US$4 million and we don’t have an exactly expense tally for the exercise yet.

But that revenue is very valuable because there is very few costs against it. So it’s a highly valuable contract we’re to gain it for our shareholders, and it would be very accretive if we got, but that 4 million numbers gives you an idea of where it start with on the analysis anyway..

Graham to put a little bit more color, the success or otherwise discussion is quite binary because as Peter said we would bring them in at intra-trust at the same rate as 35 basis points on gold and 45 on silver. But on the expense side under the accounting rules, we capitalize the cost to get those contracts.

If we’re successful it remains capitalized, if we’re not successful we would have to expense dollars and obviously they’ve been pretty substantial going through the process. So, it’s really a binary outcome..

Just going back to the loan book if I could, it sounds like you’ve got some comfort you looked at the rest of the portfolio.

What does that process involve? Is that looking at the average loan to value across all your loans, or are you looking in addition to the actual borrowers on the other side, and there is financial help -- maybe just some color around how you get -- why you’re comfortable in the rest of the book?.

Well, I’ll tell you the process that we follow. We constantly check. Continuously check each loan for the repayment premise. And that constant rechecking is a function of borrower health in every way, so it’s loan to assets, it’s certainty of repayment from either cash flow or other means.

And we don’t waste any time during or taking provisions when we think they’re needed. So this one, this particular experience happens very quickly. The company was in a sale process. We believe we had a clean way through it. And in the end, we didn’t have a clean way through it, so we took the provision right away.

We would do that on any loan and we believe we’re clean everywhere else..

Maybe some color around the mutual fund inflow this quarter. And then there was obviously or perhaps what funds are driving that.

Is it largely the enhanced funds income and then on the outflow side, maybe some color around what that was related to on the alternative…?.

Absolutely Graham, so on the -- you're correct on the inflows, on a net basis and on almost on a growth basis, the enhanced equities class and new enhanced U.S. Equity’s Class those were the bigger inflows. Also pretty good inflows on the diversified bond fund, which Scott Colbourne manages.

On the outflow side Canadian equity continues to be the largest outflow. And then that’s on the mutual fund side. On the alternatives we closed the strategic fixed income funds, that was announced a while back but it finally closed in this quarter, which was about 28 million.

And then we also are in the process of closing our Offshore Funds, they just got too small for to manage much more complex and costly managing the Offshore Funds. So those were closed with a total of about $25 million. So those were the two biggest outflows plus the Physical Trust..

Sorry, the Offshore Fund, is that related to the pre-mandate, the ….

No, no, the Offshore Funds are the legacy funds that Eric used to manage. They follow the Eric case strategy..

Okay. Got it. Thank you..

Thank you. And our next question comes from the line of Scott Chan from Canaccord Genuity..

Hi, good morning guys. Peter just on your last slide in the presentation, can you just elaborate on some of your internal growth opportunities specifically related to the U.S.

growth in sales, coverage comment and also the institutional sales?.

Okay. Well we’ve had the experience of meeting a couple of key candidates to head up U.S. sales for us. And we have also thought that it would be beneficial to have somebody to address our channel partners down there for the exchange listed products because they are held almost exclusively by U.S. clients.

So somebody to help us build those businesses and to focus on more creation opportunities because of course our Physical Trust are very good on providing redemptions for investors that want to get out but we have not had somebody exclusively focused on creation opportunities.

And then that sort of naturally extends itself to see if we can get one of our existing products on to a U.S. shelf and in order to do that you need support. So that’s the U.S. sales opportunity in a nutshell.

And what was your other question Scott?.

Just maybe an update on the institutional sales side, in the past you’ve won a couple mandates there.

But just kind of curious just what you are expecting over the next year or so?.

Yes, so those mandates are chugging along, they don’t provide us with a lot of EBITDA. Those two are in Asia and I do think we have more potential to build business in Asia. I think we’ve just got kind of small total there and it takes time. And when markets are tough, it’s hard to get results. But that doesn’t reduce the potential.

I think there is great potential there. The other institutional side, we haven’t had over the past five years a lot of products that we could pound the table on and we had our lending product which has generated good returns.

But now actually we’ve had a couple in development where we’ve got some really good results versus benchmark and our Gold products in particular are soundly beating their benchmark. So as institutions allocate the Gold we hope to be there. And in order to do that we needed a different institutional staff to support that.

So we are just in the process of interviewing and hiring and making sure that everything is aligned that we can put a real solid effort into selling those funds now..

Okay. And then Peter just lastly just on your balance sheet. I mean obviously resource markets are still volatile right now.

Has there been any change in thought in terms of your kind of split on your capital deployment from over the last few quarters?.

I would say the money that we’ve had in resources has been relatively protected compared to how badly the area has been slammed. I don’t think we have any need to increase that.

In fact I think that we now know what areas that we think can help perform and we will keep those on and we will take a couple of other riskier areas off and you will probably see more of that capital going into diversified strategies as we have diversified in private credit to support, I think that’s a natural conclusion, those are going to keep growing.

So for us it’s a question of not just where we get the best return but where do we get the best sales..

Right.

Did I read something in the MD&A but an alternative product like a market neutral, [that was seed] or was that related to something else?.

I am not sure what you are referring still..

Okay, I was reading through real quickly also back I will give you shed of..

Okay. We will just talk after if it’s fine ….

Okay no problem..

… you can give me a call..

Okay, thanks Steve, thanks guys..

Thank you. And at this time, I will turn the call back to management for closing remarks..

Okay. Well, thank you everybody for your time today and thank you operator. We would be happy to answer any questions offline afterwards. And with that, I will turn the call over to the operator to close the call..

Thank you. Ladies and gentlemen, thank you for your participation in today conference. This does conclude the program. And you may now disconnect. Everyone have a good day..