Demand for critical minerals will set the stage for certain regions around the globe that are abundant in supply, such as Latin America. This creates a growth opportunity worth considering in exchange traded funds (ETFs) like the Sprott Energy Transition Materials ETF (SETM).
The shift to cleaner alternative energy sources is propelling this demand as more countries look to reduce their carbon emissions. The result is more clean technology that will require the use of critical minerals for manufacturing purposes.
“The transition to clean energy will spark decades of demand for the metals needed to multiply solar and wind parks, power lines and electric cars,” the Economist noted. “Latin America holds more than a fifth of the global reserves for five critical metals.”
“It already dominates the mining of copper, pervasive across green technologies, and holds nearly 60% of the world’s known resources of lithium, used in all main e-vehicle battery types,” the Economist added. “It is also rich in silver, tin and nickel.”
Get Global Exposure to Critical Minerals
One of the countries in Latin America looking to expand its critical minerals operations is Chile, particularly when it comes to lithium. The mineral is crucial in helping to create batteries used in electric vehicles (EVs).
“Investors gained some clarity last week when the Chilean government released a 33-page document that expands upon its initial pledges with specific timelines and targets,” a Foreign Policy article said. “Chile is currently the world’s second-largest producer of lithium, a critical mineral that is used in electric car batteries and key to the global green energy transition.”
With exposure to Latin American countries like Chile, SETM presents investors with an opportunity to capture this global growth. It focuses on companies positioned upstream in the supply chain that stand 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.
With an expense ratio of 0.65%, the fund allocates its assets over 100 holdings (as of August 11). In addition to Chile, country exposure includes Canada, the United States, Australia, and other nations, adding to the global diversification of the fund.
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