Sprott says new copper fund is too small to pose a market risk

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Sprott Inc. says its new fund to buy and hold physical copper will be too small to have an impact on global availability of the industrial metal, despite past controversy over attempts to launch similar products about a decade ago.

Hussein Allidina, head of commodities of TD Asset Management, joins BNN Bloomberg to share his outlook on the oil market.

The Sprott Physical Copper Trust, which began trading on the Toronto Stock Exchange in June, holds more than 10,000 metric tons of copper in warehouses mostly in Asia, according to the Canadian investment firm. It now aims to raise another US$500 million, which at current prices would buy about 50,000 tons of copper.

According to Sprott Asset Management Chief Executive Officer John Ciampaglia, the company’s new fund is too small to make a meaningful dent in a copper market where about 22 million tons is mined annually. While Sprott’s stockpile is indeed small relative to global supply, it’s already equivalent to more than all the copper available in warehouses linked to the copper futures contract listed in New York, as well as about 5% of the stocks linked to the contract listed in London. If the fund grows to the point where it attracts around $2 billion in assets, it would need about 200,000 tons of copper, which would be roughly equal to the amount currently available in London and New York warehouses.

 

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