Sprott starts up new resource fund with Chinese backer

10:23 am by Anwar Ali

Sprott and Zijin have a US$500 million target size for the fund.

Sprott Inc. (TSE:SII) is launching a new offshore fund with China's largest gold miner as its partner, marking its second attempt at establishing a global resource fund with a Chinese firm since a proposal announced in May fell through.

Zijin Mining Group Company will contribute US$100 million to the vehicle, while Sprott will kick in an additional US$10 million as a seed investment towards an eventual US$500 million target size. Sprott said it expects further investments from undisclosed onshore Chinese investors sometime in the fourth quarter.

The two sides have already cleared regulatory hurdles in both Canada and China.

"We are very pleased to launch this new fund which will allow us to open a new market for our investment products," said Sprott chief executive Peter Grosskopf. "We believe the combination of Zijin's technical strengths and Sprott's resource investment expertise will prove to be an attractive option for investors looking to invest in the mining sector with a focus on gold."

Sprott said the fund, to be co-managed by affiliates of Sprott and Zijin, will invest primarily in publically-listed gold equities and debt instruments, as well as other precious metals and copper mining stocks. Americas Now Resources Investment Management will provide technical and marketing services.

The announcement comes after Sprott called off its proposed joint venture with Citicpe HongKong Management Company in July. No explanation was provided, nor were any details of the capital either firm would deploy into the fund.

As of the end of June, Sprott had $7.1 billion assets under management, a 16% drop from the end of June 2012. Sprott's stock, off 30% this year, has suffered along with many of the junior miners in which it has holdings. Shares gained 0.4% on Friday.