Where to invest in the metals that will engineer the energy transition

A professional investor tells us where he’d put his money. This week: John Ciampaglia, manager of the Sprott Energy Transition Materials UCITS ETF.

Woman waiting for her car to charge
(Image credit: Getty Images)

Sprott has specialised in the metals and mining sector for decades. The Sprott Energy Transition Materials UCITS ETF focuses on eight critical minerals that are essential to the generation, transmission, and storage of clean energy. We apply a rigorous investment-screening process to select the pure-plays well positioned to benefit from the increased investment in the critical minerals necessary for the clean-energy transition. These three companies are at the epicentre of the clean-energy movement.

Driving the EV revolution

Lithium is synonymous with electric-vehicle (EV) batteries, and Sociedad Quimica y Minera de Chile SA (NYSE: SQM) is the second-largest producer of this critical mineral. Being based in Chile, SQM has exclusive access to the world’s largest and highest-known concentration of lithium-rich brines. The group expects to produce about 180,000 metric tons of lithium carbonate in 2023, with plans to increase refining capacity of lithium carbonate and lithium hydroxide in the coming years.

With a market capitalisation of more than $19bn, SQM has considerable resources and expects to expand its refining capacity. Record-high lithium prices in the autumn of 2022 caused users to draw down existing supplies of lithium rather than purchase additional material at inflated prices, lowering sales in the short term. Demand for restocking and rising prices in the early part of 2023 is expected to contribute to a strong second half of the year.

Subscribe to MoneyWeek

Subscribe to MoneyWeek today and get your first six magazine issues absolutely FREE

Get 6 issues free

Sign up to Money Morning

Don't miss the latest investment and personal finances news, market analysis, plus money-saving tips with our free twice-daily newsletter

Don't miss the latest investment and personal finances news, market analysis, plus money-saving tips with our free twice-daily newsletter

Sign up

Copper leads the charge

Given its ability to conduct electricity efficiently, copper plays a central role in energy transmission and EVs. Producing more than 4.2 billion pounds of copper in 2022, Freeport-McMoRan (NYSE: FCX) is the largest publicly traded miner of this critical mineral in the world, boasting copper reserves in Indonesia and North and South America. Thanks largely to the energy transition, demand for copper may double between 2022 and 2035. FCX is already well positioned to meet the world’s growing need for copper, having copper reserves of 111 billion pounds, but it also intends to increase production.

Freeport’s copper resources – which include reserves, discovered deposits and undiscovered deposits based on geological surveys – amount to an estimated 235 billion pounds. Accessing these vast reserves in a sustainable way is a priority for Freeport. It implements the sustainable development framework created by the International Council on Mining and Metals (of which FCX is a founding member). 

The boom in battery technology

EV makers are continually searching for new battery technologies that can lower costs and increase cars’ range. Increasing the proportion of nickel in lithium-ion batteries to as much as 80% has helped meet both goals. The A$11bn (£6bn) Australia-based explorer and miner IGO Limited (Sydney: IGO) is a leading supplier of nickel. 

In addition to its three nickel-copper-cobalt operations in Western Australia, IGO has nearly a dozen more exploration projects and two lithium-producing assets in the battery metals-rich country. Over the last several years, IGO has invested heavily to ensure the company’s future growth and enable it to capitalise on the growing demand for critical battery minerals.

Nicole García Mérida

Nic studied for a BA in journalism at Cardiff University, and has an MA in magazine journalism from City University. She joined MoneyWeek in 2019.