The production of electric vehicles (EVs) is near the forefront of the energy transition, and automaker Tesla is well aware of this. The electric automaker’s CEO and founder Elon Musk recently made a plea to mine more nickel as demand for EVs rise.
Nickel is a key component when developing batteries for EVs. One of the countries that will play a vital role in its extraction from the earth will be Indonesia, and Tesla is eyeing the country for mining opportunities.
A Yahoo! Finance article did note that “a Reuters report signaled that Tesla might be readying to open a factory in Indonesia, in return for nickel mining rights. In case you are wondering, Indonesia is the world’s biggest nickel producer, while the southeast Asian country also has a ban on exporting raw nickel.”
With this growth opportunity in nickel mining, investors will want to look at the Sprott Nickel Miners ETF (NIKL). Vale Indonesia is one of its key holdings, which offers global diversification as opposed to selecting single stocks.
With this ETF, investors get exposure to nickel mining in other parts of the world. As of March 21, the fund has holdings mainly in Australia (about 50%), but also Canada and the aforementioned Indonesia.
A Unique Option For Nickel Exposure
NIKL 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. Per its fund description, NIKL seeks to provide investment results that track the total return performance of the Nasdaq Sprott Nickel Miners™ Index (NSNIKL™).
The index, in particular, is designed to track the performance of a selection of global securities in the nickel industry, including nickel producers, developers, and explorers. The fund comes with a 0.75% expense ratio and focuses most of its holdings (as of March 21) on small-cap equities, offering investors growth exposure as the demand for nickel gains momentum during the energy transition phase.
Key characteristics per NIKL’s product website:
- Pure-play nickel ETF: The only U.S.-listed ETF focused on nickel mining companies that are providing a critical mineral necessary for the clean energy transition.
- Essential to electric vehicles: Nickel is a vital component in the rechargeable batteries used for hybrid and EVs and clean energy storage.
- Growing demand: With the recent discovery that adding more nickel to EV batteries increases their drivable range, demand for this critical mineral for use in EVs and battery storage may increase nearly 20 times by 2040, relative to 2020.
- Well-positioned companies: Companies that are upstream in the supply chain may be well positioned to benefit from the increased investment in nickel necessary for the clean energy transition.
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