Fireside Chat: Investing in the Critical Minerals Driving the Energy Transition

A global clean energy transition is underway. Significant investment in energy infrastructure will be required over the coming decades as we evolve how we generate, transmit and store energy. Critical minerals will be essential. We believe investing in the mining companies that produce critical minerals may offer attractive investment opportunities, as discussed in this video with Ed Coyne, Senior Managing Director at Sprott, and Steven Schoffstall, Director at ETF Product Management.

Video Transcript

Ed Coyne: Hello, my name is Ed Coyne, Senior Managing Director at Sprott Asset Management. With me today is Steve Schoffstall, Director of ETF Product Management at Sprott. For those that are not familiar with Sprott, Sprott is a global firm with a focus on precious metals and real assets. We have over four decades of experience and over $20 billion in assets under management [as of 9/30/2022]. We are a publicly traded company, and we trade on both the Toronto Stock Exchange and the New York Stock Exchange under the ticker symbol “SII”. Most investors are familiar with us through our gold, silver, platinum and palladium investment options, but today we are going to talk about energy transition materials. With that, I would like to turn to Steve to really define what that means for us as a firm and where we are seeing opportunities in the future. Steve, thank you for joining me today.

Steve Schoffstall: It's great to be here, Ed. When we talk about the energy transition, we are really focused on the global structural change that will transfer our reliance on fossil fuels to cleaner energy sources. One of the things that appeals most to us in this part of the investment landscape is that you don't necessarily have to believe in the merits for moving to renewable energy to appreciate that there is an opportunity in that space.

Ed Coyne: The opportunity is critical. So many investors are looking for ways to allocate to this space, but they don't know where to go. When we talk about energy transition materials, you hear the word “minerals” and you hear the word “metals.” Let's dive into that. How should people think about this part of the market? How can they allocate to it? Let’s talk about minerals first. How should we be thinking about that space?

Steve Schoffstall: Critical minerals come up a lot when you are reading and learning about energy transition. We define critical minerals as those natural materials that you need for the transmission, the generation and the storage of clean energy. More specifically, we focus on pure-play companies that are at the beginning of the supply chain. When we do see that increased investment coming into the space on a global scale, those pure-play companies are where we will see a lot of opportunity.

Ed Coyne: There is no question that this is at least part of our future. People get confused because they think it’s either this or that. It's either oil and gas or it's battery technology, or it's wind technology. The reality is we need them all. From an opportunity standpoint, we know that all these different minerals and metals are used for battery technology, but what other technologies out there should people be thinking about besides batteries? That is what most investors are talking about today. What other opportunities are out there and available for investors who want to allocate to this space? What other uses are there?

Steve Schoffstall: When we think of critical minerals, we tend to lump those into three different buckets. The first is energy generation. When you look at that side of the equation, you think of uranium. We have a well-established presence in uranium. Silver can also be used in energy generation, particularly when it comes to solar generation. Silver paste gets applied to solar panels so that they can capture energy from the sun and generate usable electricity. In addition, rare earths elements are really helpful not only in making electric vehicles, given their magnetic properties, but also to wind turbines.

When we look at the transmission aspect of the critical mineral spectrum, copper plays a significant role. In fact, copper stretches across all three buckets that we talked about. Copper is useful in the transmission of clean energy, and anywhere you start to see energy — from solar panels or wind turbines — enter the grid, copper is going to play a key role.

On the storage side, you already mentioned the battery materials. The majority of people are familiar mostly with lithium, a component of a lithium-ion batteries, which are important to EVs (electric vehicles). There are a few other metals that we consider in the battery technology space. Nickel, cobalt, graphite and manganese all have a role in propelling the EV evolution forward.

Ed Coyne: Thank you, Steve. For those that are interested to learn more about Sprott, we encourage you to go to sprott.com, and for those that want to learn more about our full suite of products on the ETF side, we encourage you to go to sprottetfs.com. Thank you for listening.