ETFs with exposure to Australia’s lithium industry will provide investors with growth opportunities for the long-term horizon. One fund worth a look is the Sprott Lithium Miners ETF (LITP).
Australia presents a compelling investment option given its abundance in the supply of the metal. Global research firm McKinsey noted that the country is currently the largest producer of spodumene, which is the base material necessary to produce lithium hydroxide and lithium carbonate. Additionally, Australia has the second largest such ore reserves in the world.
The problem with Australia is not supply, but the capability to refine the aforementioned spodumene into such hydroxide. That is a process necessary to create lithium-based batteries for the EV market.
However, with advancements from technology and key partnerships with other nations amid a global transition to alternative energy, Australia could meet the growing demand for EVs in the next decade. This is a win-win for the country’s economic growth as well as the investors who capitalize early on this potential.
“The opportunity for Australia is twofold: rising lithium demand and the country’s capacity to produce lithium hydroxide,” McKinsey added. “The lithium hydroxide market may generate up to $10 billion per year in additional revenue for market participants by 2030—with the potential to create jobs, diversify Australia’s raw-materials industry, and support Australia’s push toward green energy.”
Focused Lithium Exposure and More
Given the potential for exponential growth in the industry for Australia, LITP presents a compelling option to capture this investment potential with opportunities in mining. The fund’s portfolio includes over 40% exposure to Australian equities that focus on the metal’s mining.
LITP seeks to provide investment results corresponding to the total return performance of the Nasdaq Sprott Lithium Miners Index. That index is designed to track the performance of a selection of global securities in the industry, which includes producers, developers, and explorers.
As of November 30, the fund features 48 holdings, offering investors broad exposure to the industry’s ancillary services. Top holdings, which comprise over 30% of the fund’s assets, include Sociedad Quimica y Minera de Chile SA, Pilbara Minerals, and Albemarle Corp. Aside from Australia, the allocation spreads to the United States, Canada, Chile, Brazil, and other countries for added global diversification. IGO Ltd is currently the top holding in the Australian lithium mining market.
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