Capital Investment Necessary to Avoid Critical Minerals Shortage

While the demand for critical minerals is expected to rise in the next decade, it will need additional tailwinds in the form of capital investments, according to a Reuters article.

The global transition to alternative energy sources is the primary catalyst for this rise in demand for critical minerals. Electric vehicles (EVs), for example, require the use of lithium to manufacture EV batteries, and as such, lithium mining and manufacturing will be a necessity as the transition to net-zero is underway.

However, a common economic problem in any industry is wondering whether demand will outstrip supply. That same premise holds when it comes to critical minerals.

“Rapid demand growth as a result of the energy transition could lead to a shortage of several metals in the next decade unless investment is increased, a global group of energy producers, consumers and financial institutions said,” the Reuters article noted. “Large supply gaps for lithium, nickel, graphite, cobalt, neodymium and copper could lead to higher prices and delay the goal of reaching net-zero emissions by 2050, the Energy Transitions Commission (ETC) said in a report.”

The ETC report also made light of the capital-intensive requirements necessary for the energy transition. Investment in the aforementioned metals averaged $45 billion the past 20 years versus $70 billion needed each year until 2030 in order to expand supply — a sizeable $25 billion gap.

Investment in Mining

The need for capital investments in mining is one of the areas that can help increase supply in order to meet demand. Given this, opportunities in mining for critical minerals exist in exchange traded funds (ETFs).

For nickel, ETF investors can opt for the Sprott Nickel Miners ETF (NIKL). The fund offers a unique option to investors, given that it’s the only ETF to provide focused exposure to the nickel miners that supply a critical mineral for the batteries which store clean energy and support the electric vehicle revolution.

NIKL seeks to provide investment results that track the total return performance of the Nasdaq Sprott Nickel Miners™ Index (NSNIKL™). The index, in particular, aims to track the performance of a selection of global securities in the nickel industry, including nickel producers, developers, and explorers.

As mentioned, lithium is also necessary for mining, which paves the way for opportunities in the Sprott Lithium Miners ETF (LITP). LITP seeks to provide investment results corresponding to the total return performance of the Nasdaq Sprott Lithium Miners Index. The index endeavors to track the performance of a selection of global securities in the lithium industry, including producers, developers, and explorers.

For more news, information, and analysis, visit the Gold/Silver/Critical Materials Channel.