Nornickel’s GPF launches low-cost physical metal ETCs

Jan 18th, 2021 | By | Category: Commodities

Nornickel, the world’s largest producer of palladium and refined nickel and a major producer of platinum and copper, has entered the exchange-traded products market with the issuance of a series of ETCs on Xetra.

Nornickel’s GPF launches low-cost physical metal ETCs

Alexander Stoyanov, Chief Executive Officer of GPF.

The Russian mining giant has launched the ETCs via its Global Palladium Fund (GPF) and an Ireland-registered vehicle called Ridgex, partnering with London-based NTree International to direct marketing and distribution efforts.

GPF will contribute the metals that physically underpin the ETCs.

The debut listings include the GPF Physical Gold ETC (0IIA GY), the GPF Physical Silver ETC (0IIB GY), the GPF Physical Platinum ETC (0IIC GY), and the GPF Physical Palladium ETC (0IID GY).

All four ETCs are scheduled to list on the London Stock Exchange in the next few days.

Two further products – GPF Physical Copper ETC and GPF Physical Nickel ETC – are expected to arrive later in the first quarter of this year.

The ETCs come with the lowest charges in the European marketplace. The gold product has a total expense ratio (TER) of just 14.5 basis points, half a basis point cheaper than the next-cheapest gold ETC (a title held jointly by products from Amundi, iShares, and Invesco), while the silver, platinum, and palladium products each have TERs of 20 bps.

The products are thought to be the first ETCs to use distributed ledger technology to record physical bar information, a process that is designed to offer an extra layer of security and proof of ownership to the issuer. The use of this blockchain-based technology is in addition to conventional record-keeping processes used by the custodian.

The precious and platinum-group metals that underlie the ETCs are held in secure vaults in London and Zurich. The metal behind the pending copper and nickel ETCs will be stored in LME-authorised warehouses in Rotterdam.

In terms of environmental, social and governance (ESG) considerations, the ETCs have been endowed with a robust sourcing process. Only metal sourced from producers and suppliers signed up to the UN’s Sustainable Development Goals and other global initiatives in sustainable development and responsible mining will be eligible for inclusion.

This is in contrast to Nornickel which has a somewhat patchy record on environmental matters. Indeed, the company, which is led by Vladimir Potanin, a billionaire oligarch understood to be close to Vladimir Putin, is routinely excluded from many ESG-focused funds.

Commenting on the launch, Alexander Stoyanov, Chief Executive Officer of GPF, said: “GPF is pleased to bring these physically backed metal ETCs to market, giving investors the opportunity to invest in metals that are going to be crucial in the transition to a net-zero carbon economy.”

Anton Berlin, Vice President, Sales and Distribution of Nornickel, added: “We expect significant growth in investor demand for access to metals over the next decade as economies undertake the energy transition and focus on meeting the challenge of global climate change. As a mining company, providing access to metals to a broader range of market participants helps improve market liquidity and price discovery.”

Timothy Harvey, Chief Executive Officer and Founder of NTree, commented: “The new ETCs give exposure to the spot price of precious metals with some of the lowest charges in Europe. We are excited to have helped design and manage such an innovative investor proposition and to continue working with GPF on the promotion of their ETC programme. We see growing investor appetite for commodities that will be driven by the cyclical recovery out of the pandemic and, perhaps more importantly, by the push towards a net-zero carbon economy.”

The products come to market with around $30 million in assets.

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