In a market dominated by passive investment strategies, Sprott Asset Management has launched an exchange-traded fund (ETF) strategy that offers investors active management in the gold and silver mining sector. The Sprott Active Gold & Silver Miners ETF (ticker: GBUG) represents a targeted approach to precious metals exposure, designed to capitalize on sector-specific expertise and market inefficiencies. GBUG’s objective is to seek long-term capital appreciation.
GBUG arrives at a moment when gold prices have surged, yet mining equities have lagged, presenting what Sprott identifies as a potential catch-up opportunity. Designed to help investors navigate economic uncertainty and inflation concerns, the fund combines the liquidity of an ETF with the potential for outperformance through active management.
In an interview with The Wealth Advisor’s Scott Martin, Steve Schoffstall, Director of ETF Product Management at Sprott, discussed how GBUG aims to provide capital appreciation through selective investment in mining companies, leveraging the firm’s century of combined experience and deep industry relationships.
Active Management in a Traditionally Passive Space
While most precious metals ETF strategies follow passive indexing techniques, GBUG takes an active approach to portfolio construction that allows for selective investment in mining companies with compelling potential, Schoffstall explains. Unlike passive index-tracking alternatives, GBUG’s portfolio is constructed through rigorous company selection that seeks to deliver outperformance.
The ETF’s management team applies a comprehensive selection methodology that extends beyond typical financial metrics, he adds. They evaluate management quality, analyze capital requirements, and employ a proprietary model that assesses how factors including pricing, costs, taxation, and debt obligations impact company valuations.
Sprott’s approach combines quantitative analysis with qualitative assessment, creating a framework for identifying miners with value potential. The active management model enables the fund to try to avoid laggards while focusing on companies positioned for outperformance, a critical differentiator in a sector characterized by significant performance dispersion, Schoffstall believes.
Boots-on-the-Ground Expertise
What truly sets GBUG apart from other precious metals investment options is the depth of specialized knowledge informing the portfolio decisions. The management team includes an economic geologist and professionals with extensive industry experience who bring decades of relevant background to their investment decisions.
According to Schoffstall, their due diligence process involves conducting more than 200 management team meetings annually and performing up to 30 site visits per year to mining operations across diverse geographies from North America to such remote locations as Papua New Guinea.
Schoffstall highlights the team’s geological proficiency as setting GBUG apart from funds relying solely on financial analysis when evaluating mining operations. “It’s really beneficial to have that expertise,” he says. “[Collectively, the team at] Sprott, in general, has 40 years or more in the precious metals and mining sector. Over that time, we’ve been able to develop very deep relationships.”
This emphasis on direct engagement with mining operations and management teams reflects Sprott’s commitment to thorough due diligence. While many investment firms may rely primarily on desk research and published data, Sprott maintains what Schoffstall describes as an “older school approach,” prioritizing in-person assessments and relationship development.
The value of such connections cannot be overstated in an industry where management quality can significantly impact outcomes. These long-standing industry relationships give Sprott distinctive perspectives on company leadership and operational effectiveness. “Those relationships that we’ve developed really give our management team insight into things like management structure and how well a company is being run,” Schoffstall notes.
For advisors and their clients, the GBUG strategy provides access to robust mining sector analysis that would otherwise be difficult to replicate in individual portfolios. Sprott’s specialized knowledge applied to portfolio construction is a potential differentiator in a sector where operational execution could impact investment returns.
Portfolio Construction and Investment Focus
In building this mining equity strategy, Sprott combines the transparency,1 liquidity,2 and potential tax efficiency of an ETF with the expertise of active management. GBUG adopts a focused yet flexible approach that allows investors to gain exposure to the sector’s potential while leveraging a professional security selection approach.
The strategy centers on gold and silver mining companies, primarily targeting those involved in mining, development, and deposit exploration. Beyond these principal industry operations, GBUG also considers streaming and royalty companies for inclusion.
While maintaining focus on gold and silver, the fund preserves optionality to include a minor allocation to other precious metals, Schoffstall explains. Limited exposure to platinum and palladium producers provides supplementary diversification within the precious metals space while retaining the core focus on gold and silver miners, with gold producers serving as the primary portfolio component.
A GBUG portfolio typically allocates between 80% and 95% to gold and silver equities, with the remaining portion directed toward other precious metals opportunities. These allocation decisions reflect both current market opportunities and strategic considerations about the relative potential of different segments within the precious metals space.
Unlike physical bullion investments that aim primarily for capital preservation, GBUG targets capital appreciation. Its emphasis on mining equities rather than physical metal exposure provides embedded leverage to precious metals prices, seeking to amplify returns when the underlying commodities perform well.
The Case for Gold Mining Equities
A compelling case for GBUG lies in the current market dynamics affecting gold prices and mining company valuations. Despite strong performance in physical gold, particularly owing to central bank buying, mining equities have underperformed relative to bullion.
Schoffstall points to a valuation disconnect between miners’ improving earnings fundamentals and their share prices. Mining companies have posted strong earnings growth that stock prices have not yet fully reflected. “We think the market is a little bit behind as it relates to the gold miners relative to the bullion, which has done really well as of late,” he says. “And we think there’s the opportunity to catch up from the equity side.”
This divergence creates a potential opportunity for investors. Mining stocks historically provide leverage to metal prices but have not yet fully reflected the strength seen in gold markets. The situation is particularly notable given the compelling valuations of gold mining companies compared to broader equity markets.
Gold mining companies currently offer better value metrics than S&P 500 stocks, carrying less debt, operating with higher profit margins, and providing positive dividend yields compared to the broader market, Schoffstall adds.
The historical performance of gold equities further strengthens the investment case. Over the past two decades, gold has outperformed both the S&P 500 and fixed income investments on an annualized basis, with even more relative outperformance compared to the U.S. dollar.
The combination of attractive valuations, strong fundamentals, and historical performance trends suggests mining equities may be well positioned to deliver returns as the precious metals bull market continues to develop.
Supply-Demand Dynamics Supporting Precious Metals
The fundamental outlook for precious metals appears supportive, with supply constraints meeting rising demand. Gold has seen unprecedented central bank buying, with central bank purchases exceeding 1,000 tons annually for three consecutive years—a substantial increase from previous levels of about 650–670 ounces recorded in 2018.
Silver demand shows equally promising trends, particularly from industrial applications. “The industrial uses are now in silver, making up a larger percentage of overall silver demand. It’s somewhere around 55% of total demand,” explains Schoffstall.
On the supply side, challenges in production suggest potential upward pressure on prices. “We’ve started to see more investment and record investment going into exploration for more gold deposits. We’re seeing declining order grades,” Schoffstall observes, adding that “we think we’re going to need higher prices moving forward to give more incentive to keep that exploration moving along.”
An additional factor potentially supporting future performance is the relative under-participation of U.S. investors in the gold market rally. “When we look at gold investments in the United States, it has lagged other parts of the world over the last several years,” Schoffstall notes, suggesting untapped demand that could drive further price appreciation.
These production challenges, increasing industrial and central bank demand, and potential new investor interest create a favorable backdrop for the precious metals sector that GBUG targets.
Strategic Positioning in Portfolios
Investment professionals evaluating GBUG for client portfolios can consider several implementation approaches. The fund can function as either a stand-alone allocation or a complement to passive strategies.
“We’re proponents of having a dedicated physical allocation within portfolios. An active strategy like GBUG could come alongside that type of allocation and provide that enhanced return potential,” Schoffstall explains, or advisors might “have passive at their core and decide to add active on top of that.”
The significant performance dispersion among mining companies — with Schoffstall noting an average gap of “about 170%” between top and bottom performers over the past five years—underscores the potential value of active selection. Even comparing the top 50% of performers against the bottom half reveals “a dispersion of about 100%.”
As economic uncertainty, inflation concerns, and geopolitical tensions continue to drive interest in precious metals, GBUG offers advisors a vehicle that combines specialized expertise with the familiar ETF structure. The fund’s positioning as the only* active ETF focused on providing exposure to gold and silver miners, backed by Sprott’s decades of sector experience, provides a distinctive option for advisors seeking both diversification and growth potential in the precious metals space.
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1 Transparency is the extent to which investors have ready access to required financial information about a company, such as price levels, market depth, and audited financial reports.
2 Liquidity refers to the ease with which an asset or security can be converted into ready cash without affecting its market price.
*Based on Morningstar’s universe of Precious Metals Sector Equity ETFs as of 2/28/2025.
The S&P 500 Index is a market-capitalization-weighted index of 500 leading publicly traded companies in the U.S. It is commonly used as a benchmark to measure the overall performance of the U.S. stock market. One cannot invest directly in an index.
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Additional Resources
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Important Disclosures
An investor should consider the investment objectives, risks, charges and expenses carefully before investing. To obtain a Sprott Active Gold & Silver Miners ETF Statutory Prospectus, which contains this and other information, visit https://sprottetfs.com/gbug/prospectus, contact your financial professional or call 1.888.622.1813. Read the Prospectus carefully before investing.
The Sprott Active Gold & Silver Miners ETF is new and has limited operating history. Investors in the Fund should be willing to accept a high degree of volatility in the price of the Fund’s shares and the possibility of significant losses. The Fund will be concentrated in the gold, silver and precious metals mining and related industries. As a result, the Fund will be sensitive to changes in, and its performance will depend to a greater extent on, the overall condition of the gold, silver and precious metals industry, highly dependent on the price of gold and silver bullion. The gold, silver and precious metals industry can be significantly affected by competitive pressures, central bank operations, events relating to international political developments, the success of exploration projects, commodity prices, adverse environmental developments and tax and government regulations. An investment in the Fund involves a substantial degree of risk. The Fund is not suitable for all investors. The Fund is considered non-diversified and can invest a greater portion of assets in securities of individual issuers than a diversified fund. As a result, changes in the market value of a single investment could cause greater fluctuations in share price than would occur in a diversified fund.
The Fund adviser’s judgments about the growth, value, or potential appreciation of an investment may prove to be incorrect or fail to have the intended results, which could adversely impact the Fund’s performance relative to its benchmark.
Shares are not individually redeemable. Investors buy and sell shares of the Sprott Active Gold & Silver Miners ETF on a secondary market. Only market makers or “authorized participants” may trade directly with the Fund, typically in blocks of 10,000 shares.
Funds that emphasize investments in small/mid-cap companies will generally experience greater price volatility. Diversification does not eliminate the risk of investment losses. ETFs are considered to have continuous liquidity because they allow an individual to trade throughout the day. A higher portfolio turnover rate may indicate higher transaction costs and may result in higher taxes when Fund shares are held in a taxable account. These costs, which are not reflected in annual Fund operating expenses, affect the Fund’s performance.
Fund distributions are generally taxable as ordinary income, qualified dividend income, or capital gains (or a combination). Distributions on investments made through tax-deferred arrangements may be taxed later upon withdrawal of assets from those accounts.
This commentary should not be construed as tax advice, and as with any investment, you should consult your own tax professional about the tax consequences of an investment in shares.
Sector weightings are determined using the Bloomberg Industry Classification Standard (“BICS”).
Sprott Asset Management USA, Inc. is the Investment Adviser to the Sprott Active Gold & Silver Miners & Physical Silver ETF. ALPS Distributors, Inc. is the Distributor for the Sprott ETFs and is a registered broker-dealer and FINRA Member. ALPS Distributors, Inc. is not affiliated with Sprott Asset Management USA, Inc.
®Registered trademark of Sprott Inc. 2025.
