Norilsk Nickel becomes first miner to launch metals ETPs

One of the mining industry’s most serious polluters is moving into asset management, launching a range of exchange traded products that will track the price of gold, silver, platinum and palladium.

The move by Norilsk Nickel marks the first time that a mining company has launched tracker products, thrusting the world’s biggest producer of palladium and nickel into the cut-throat price war raging among asset managers including BlackRock, State Street, Invesco and UBS.

Norilsk, one of the world’s worst sulphur dioxide emitters, has tried to improve its environmental image in recent years. But the company received a public tongue-lashing last year from Russia’s president Vladimir Putin following an enormous fuel spill that turned two rivers in Siberia crimson — an environmental disaster that cost Norilsk a record $2.1bn fine.

The new Norilsk precious metals trackers, which start trading on Deutsche Börse on Monday, are debt securities backed by physical metal, a structure known as an exchange traded commodity.

The ETCs will be run by the Global Palladium Fund, which was established by Norilsk in 2016 to advance the development of metals in technologies used by the aerospace, electronics, and automotive industries. 

“These physically backed ETCs will provide investors with the opportunity to invest in precious metals that are going to be crucial in the transition to a net-zero carbon economy,” said Alexander Stoyanov, GPF chief executive.

Silver is used in multiple industries, including electronics and solar energy. Platinum and palladium are used in catalytic converters that reduce damaging pollution from vehicle exhaust fumes.

Fees for the trackers have been priced aggressively, with annual total expense ratios ranging between 14.5 basis points and 20bp — among the lowest charges for precious metals ETCs in Europe. The four products will also be listed on the London Stock Exchange. More Norilsk metal price tracker launches are also being planned.

Metals ETCs could provide a new source of financing for Norilsk.

“Some market participants will view this initiative as Norilsk securing some convenient financing for some of its own metal inventories,” said John Meyer, an analyst at SP Angel, a London-based corporate finance broker. 

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The launch follows a marked increase in investor appetite, which helped to drive the price of gold and palladium to all-time highs last year.

Investors allocated $52.6bn in new cash to precious metals exchange traded products in 2020, more than double the net inflows of $21.8bn registered in the previous year, according to ETFGI, a London-based consultancy.

Anton Berlin, vice-president, sales and distribution at Norilsk Nickel, said: “We expect significant growth in investor demand for precious metals over the next decade as economies focus on meeting the challenge of global climate change.”

He said environmental, social and governance standards would also be included in the ETCs.

“Metals will be sourced on a ‘best efforts’ basis from producers and suppliers that support the UN Sustainable Development Goals and other global responsible mining initiatives,” said Mr Berlin.

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