Natural resources has had an awful press recently – in reality, it always has done. 

Memes and videos of students and activists defiling artworks and gluing their hands to the wall, spraying paint onto car showrooms, or travelling from all over to attend large protests fill social media and the screens of mobile phones and laptops. The rail against climate change, pollution and carbon emissions. Quite right. I support that aim wholeheartedly.

The irony not lost on some, however, is that the very thing they are protesting about makes the things that have enabled their protest - cars, trains, buses; the phones used to film the event and post to social media exist only thanks to the industry they rail against; the glue, the clothes, the paint, the shoes, the banners, the flags…you get the idea.

Without natural resources to make these everyday items, life would be very different.

The trouble is that miners and oil companies have a chequered past. There are examples where things have gone badly wrong. One only needs to look to the large tailings dam failure in Brazil a couple of years ago, or the destruction of aboriginal cave art by one of the world’s largest miners.

It all goes to create a perception that this is an industry headed up by a mix of grizzled boorish yee-haws and faceless institutional conspirators: the purest expression of oppression and collusion between government and big business possible. An industry so dastardly it recognises only the profits element of the triple bottom line. 

So, it is easy to see why some might want to stop all mining, stick it to the man and save the planet. But perhaps it’s not the mines or oil fields themselves that we need to protest against; rather, the decisions made by the management teams. They should be held accountable.

It’s fair to say that the reality of mining is far removed from the perception. This is a nuanced industry, and those agenda-driven interests that seek to impose a ‘one-size fits all’ narrative upon it do us all a disservice. 

Spoiler Alert! Actually, mining represents our best chance to get climate change under control.

The Electric Vehicle (EV) Revolution 

EVs are the perfect relatable example to evidence mining’s force for good credentials and its status as progressive. And since we should always invest only in what we understand, it’s either a great place to start, or warrants serious consideration as a new component in your existing investment portfolio.

EVs rely on minerals such as copper, nickel, cobalt, lithium, graphite and manganese, which are the critical components of the batteries that power the electric motor and turn the wheels. No internal combustion engine, so no hydrocarbon inputs. Green. Clean. Easy.

The problem – and it’s a big one - lies in securing sufficient supplies of these critical minerals to meet ambitious targets set by governments, and in turn imposed upon automakers. 

Polices, Incentives and Red Tape

The International Energy Agency asserts that the typical electric car requires six times the mineral inputs of a conventional car. However, green policies designed to appeal and appease have unfortunately had the added effect of creating so many hoops for miners to jump through, it is proving extremely challenging for them to progress to production.

This means access to the very minerals needed to transition to net zero – a key shared policy across numerous political blocs - is being obstructed by those self-same forces. 

Lawmakers then, must ask themselves which is more important? To continue to empower siloed interests to bog down projects in years of red tape? Or, to look at the bigger picture?

Paris Agreement ambitions are undeliverable unless an enabling environment is created for the mining sector. This will undoubtedly be an uncomfortable and inconvenient truth for some, but the longer the laggards are allowed to rule the roost, the longer the path to net zero will take and the more negative the impact climate change will have. 

Covid-19 showed us what can be done and how quickly by policymakers working in concert with industry when faced with an existential threat. However, unlike rolling out a vaccine, simple logistics dictate it can take up to 20 years for a mine to produce what’s needed - even with the greatest will in the world.

Demand exceeds supply even now and this disconnect is set to get significantly starker over the next 5 to 10 years as EV makers seek to ramp up production to meet the challenge they’ve been tasked with. 

Answering this clarion call from government and society has already translated to soaring prices for these metals and stiff competition for resources. This has seen geopolitical manoeuvring to court producing jurisdictions, and automakers such as Tesla and GM looking to secure supplies directly in a previously unheard-of vertical move up the supply chain, so desperate is the situation. 

Here then, lies opportunity for you, the investor. While metal prices are high, many of these battery metals stocks are perversely discounted at present, due to a perfect storm of prevailing global economic conditions and a risk off environment.

Yet, the demand for these metals is overwhelming. So, while the herd are rendered inert and fearful to the occasion by doom and gloom headlines, the smart money knows a good thing when it sees it.   

Ethical Mining

Although not all miners wear a halo over their hard hat, most understand the importance of being responsible corporate citizens. ESG has been a force for good in highlighting the need to be accountable for the way they run their businesses.

Whilst, like all aspects in life, there will be outliers, mining companies are adhering to stricter governance rules, are aware that social licence to operate is critical, and that the protection of the environment in which it operates is ultimately the minimum commitment it must make. 

Always be mindful that every stock tells a different story, but so long as you’ve done your homework and sought guidance from the right sources, the battery metals market offers up select investment opportunities with fabulous scope for outsized returns. 

And what could be a more noble calling for an industry than to provide the means to help conquer an existential threat? Could there be a more profound example of big business being at the service of the people? So, invest with your head held high. You are part of the solution.

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