Molybdenum may not sound as sexy as silver, but one Canadian firm is hoping to cash in on the growing demand for this and other unusual metals with its latest fund —an offshore version of its current long/short exotic metals hedge fund.
Sextant Capital Management is set to rollout The Sextant Canadian Energy and Exotic Metals Hedge Offshore Fund on July 1 with approximately $30 million in commitments.
According to Dino Ekonomidis, vice-president of corporate development, "The onshore product is basically a PIPEs fund with exotic metals with a hedging strategy against the underlying commodities."
He said that there is growing demand for unusual metals and minerals that are used in various sectors such as the booming petroleum industry, and there are very few funds, such as Sextant, that focus on this sector.
"Molybdenum oxide is used in to de-sulfur heavy oil, so there is a large demand for this product and it looks like in the next few years there will be a deficit in the supply and demand curve," he said. In addition to the fund's focus on metals such as gold, silver, molybdenum, zinc and titanium, the new fund will also invest in energy stocks.
"The offshore fund will use [the onshore strategy], plus it will be an energy fund as well, based on Canadian oil sands."
According to The Canadian Association of Petroleum Producers, there are 175 million barrels of recoverable oil reserves in Canada's oil sands, which are the second largest reserves in the world after Saudi Arabia. However, the sands consist of thick, heavy crude that is mixed with sand, water and clay, requiring significant effort to extract and upgrade into marketable products.
Ekonomidis explained that the new fund will also involve reorganizing the allocations of the Rogers International Commodity Index to what the managers believe is more indicative of growth going forward.
The fund will be open to U.S. and other foreign investors, and Ekonomidis is seeing a lot of interest from investors in Dubai and Zurich.