Nationalized Resources, Major M&A Bids And Rebounding Lithium Prices: Sprott Asset Management's ETFs Cover Major Critical Minerals

Sprott Asset Management, a subsidiary of Sprott Inc. SII, is a leading global exchange-traded funds (ETFs) asset manager with a specialty in precious metals and energy transition investments.

Sprott’s line of Energy Transition ETFs invests exclusively in key critical minerals, the natural materials necessary to create, transmit and store clean energy. Investing in these minerals is key to advancing the clean energy transition, a top priority for governments and corporations around the world. 

Around $1.1 trillion was invested in clean energy in 2022, making it the first year that clean energy investments have matched fossil fuel investments. While around two-thirds of energy globally is still sourced from fossil fuels, the net-zero goals in the Paris Agreement – signed by 195 parties – meaning that at least 80% of energy will need to become sourced by low-carbon alternatives to meet current objectives. 

Clean energy investment has received a boost recently from the moves made by several countries toward nationalizing their natural resources. Chile, which has the largest lithium reserves in the world and is the second-largest producer of lithium, has begun nationalizing its lithium industry. This follows Mexico’s decision to nationalize its lithium resources last year. Chile’s move will increase government spending on clean energy and will attract foreign investment. 

Another sign of what a market strategist called “long-term bullish news” in the sector is its aggressive mergers and acquisitions. The largest lithium producer in the world Albemarle ALB recently made a $3.7 billion buyout offer for mining company Liontown Resources LINR. However, Liontown’s board unanimously rejected the offer, stating that it substantially undervalued the company and its operations, popping the company’s share price and overall interest.

The last commodity cycle for M&A in critical minerals was 2006/7. During that time over $100 billion was used for acquisitions of companies involved in nickel, copper, and other minerals. Since the 2000s, the demand for critical minerals has gone up and is expected to continue rapidly increasing until 2040.

Sprott’s ETFs Hold Key Positions In Growing Market

Sprott Asset Management has a line of ETFs that the company believes have strong positions in the critical mineral market. Its Sprott Energy Transition Materials ETF SETM has 110 holdings and is the only pure-play critical minerals ETF on the market. 

Parent company Sprott Inc has decades of experience building relationships with key players in the mining industry. This means that SETM includes a roster of mining and other upstream companies. These are well-positioned in the industry, as Sprott says upstream companies are more likely to receive government investment during the transition to clean energy.

“2022 was a global wake-up call regarding the importance of energy transition and security,” said John Ciampaglia, CEO of Sprott Asset Management, when the company launched its ETFs in February of 2023. “Due to years of underinvestment, demand for many energy transition materials now outstrips supply. We believe mining companies focused on energy transition minerals are well positioned to benefit from the significant investments that will be required over the coming decades.”

Another fund is the Sprott Lithium Miners ETF LITP. The only pure-play lithium mining ETF, LITP is also composed of upstream mining companies. This placement will be key in coming years, as demand for lithium may increase by 40 times between 2020 and 2040. The price of lithium has also seen a continuing rebound after its recent dip — up over 70% since April 25th, and expectations are that the price could continue to climb as demand increases.

A third Sprott ETF is the Sprott Uranium Miners ETF URNM. Nuclear power, which is dependent on uranium, is a reliable and efficient source of energy. As such it may become a popular alternative for countries looking to replace fossil fuels. URNM had seen an 11.24% year-to-date (YTD) increase as of April 30, outperforming other commodities that declined more than 7%. 

Other ETFs from Sprott Asset Management include its  Junior Copper Miners ETF COPJ, Junior Uranium Miners ETF URNJ, and its Nickel Miners ETF NIKL.

Learn more about Sprott ETFs on its website. For more coverage by Benzinga, visit this link.

Featured photo by Artyom Korshunov on Unsplash.

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