Europe Looks to Africa to Shore Up Critical Minerals Supply

With the demand for critical minerals set to rise in the coming years, the European Union (EU) is looking to shore up its supply with the help of Africa — in particular, the Democratic Republic of Congo.

Per a report from Reuters, the EU is having talks with not only Congo, but other African nations in a move to reach its net-zero goals. Critical minerals, such as lithium, are essential in creating rechargeable batteries for electric vehicles (EVs) to reduce carbon emissions.

“The European Union is in negotiations with Democratic Republic of Congo, a leading source of battery minerals, and aims for talks with other African countries to shore up its supplies of critical raw materials, an EU official said on Wednesday (May 31),” Reuters confirmed.

“As part of efforts to reduce dependency on China, which dominates supplies of minerals needed for a transition to a lower carbon economy, the EU’s Critical Raw Materials Act, which has yet to enter force, established targets to develop alternative sources,” the article added further.

This is part of a recurring trend of developed nations looking to emerging economies for their critical minerals resources. Given that nations are aligning with one another to meet ongoing critical minerals demand, it presents a growth opportunity for investors via funds like the Sprott Energy Transition Materials ETF (SETM).

Investing in Critical Minerals Growth

While investors have the option to invest in a variety of critical minerals, SETM presents a more broad-based option to capture the growth. It focuses on companies positioned upstream in the supply chain and standing to benefit from the increased investment in the critical minerals required for the clean energy transition.

Per its fund description, SETM seeks to provide results that correspond to the total return performance of the Nasdaq Sprott Energy Transition Materials Index. The index tracks the performance of a selection of global securities in the energy transition materials industry.

The fund offers a pure-play fund to capitalize on the transition to clean energy use, setting up the increased demand for critical minerals. Mining will also be necessary for other minerals such as uranium, copper, nickel, silver, manganese, cobalt, graphite, and other rare earth elements. As such, this gives SETM further diversification of its holdings.

“Companies that are upstream in the supply chain may be well-positioned to benefit from the increased investment in the critical minerals necessary for the clean energy transition,” Sprott noted on the fund’s product website.

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