Critical Minerals, Lithium, Nickel Drives Demand & Geopolitical Tensions for the Clean Energy Transition

• Lithium and cobalt prices remained rangebound by end of 2024 due to seasonal demand lull and trade policy uncertainty, despite strong investment in critical minerals.
• Australia's Clean Energy Finance Corporation (CEFC) invested $75M in Resource Capital Funds to decarbonize mining and strengthen Australia's critical mineral supply chain for the clean energy transition.
• Demand for critical minerals is surging due to the energy transition, leading to a wave of resource nationalism and protectionism across 72 nations.
• Western countries are implementing policies to secure critical mineral access, restrict rivals, and encourage domestic production and processing from non-European sources. Key risks include China's dominance, complex trade landscape, and balancing economic competitiveness with sustainability standards.
• Nano One Materials, Canada Nickel, Power Nickel, Lifezone Metals, Rome Resources , and Ionic Rare Earths prepares projects coming into 2025 with the volatile yet highly demanding market in the transition towards clean energy technology.

The global shift towards clean energy technologies is driving unprecedented demand for critical minerals such as lithium and nickel. As nations race to secure access to these strategic resources, investors have a unique opportunity to capitalize on the long-term growth potential of the critical minerals sector.

Lithium and Nickel: Powering the Electric Vehicle Revolution

Lithium and nickel are essential components in the lithium-ion batteries that power electric vehicles (EVs). With EV sales surging across major markets, demand for these metals is expected to quadruple by 2040, according to the International Energy Agency (IEA). Lithium demand is projected to rise 29% to 1.2 million metric tons LCE, but S&P Global Commodity Insights analysts forecast the market will still see a 34,000 ton oversupply in 2025^[3]. Oversupply is forecast to persist through 2027 due to upcoming lithium supply cuts.

Despite near-term price volatility, lithium investment has remained strong in 2024. Major miners like Rio Tinto are making significant moves to become top lithium producers, with the company allocating its largest exploration budget to lithium and investing heavily in projects like Salar del Rincon in Argentina.

"With the production cuts announced so far having primarily been about slowing future growth rather than immediate production, strong mine supply growth is still expected in the short-term, namely 24.7% in 2024 and 17.4% in 2025," Macquarie analysts said. "This suggests lower prices will need to persist for longer in the absence of any further price-induced cuts that rebalance the market sooner than our forecasts indicate," ^[4]

Nickel, another key battery metal, is also seeing robust demand growth. The increasing popularity of nickel-rich battery chemistries in EVs is expected to drive nickel consumption in the coming years. While nickel ended 2024 weak, the supply/demand setup points to a tight market and higher prices in early 2025. Indonesia's dominance, steady steel and EV battery demand, and potential undersupply create a compelling case for a significant nickel rally ahead.

Mark Selby, CEO of Canada Nickel, sees prices jumping to $20,000/ton by February 2025 despite recent softness. Key drivers include:

• Indonesia's growing control over supply as the "OPEC of nickel", on track for 2/3 of world supply in 2024
• Constrained global supply growth with mine shutdowns and the Philippines' seasonal slump
• Robust EV-related nickel demand, especially for NCM batteries in Europe

Government Policies Fueling the Critical Minerals Boom

Governments worldwide are implementing policies to secure access to critical minerals and strengthen domestic supply chains. In Australia, the Clean Energy Finance Corporation (CEFC) has invested $75 million in Resource Capital Funds (RCF) to decarbonize mining operations and position the country as a leader in sustainable resource management.

Jacqueline Lane, CEFC Director for Western Australia and Resources, emphasized the urgency:

"The world urgently needs a strong supply of critical minerals to power the clean energy transition. By investing in decarbonization in mining, we are not only supporting global net-zero goals but also securing Australia's position as a leader in sustainable resource management." ^[1]

The European Union and North American allies are also ramping up initiatives to safeguard critical minerals. Frameworks like the European Raw Materials Alliance (ERMA) and the Critical Raw Materials Act aim to boost sustainable mining, recycling, and reducing reliance on external sources. The US has enacted the CHIPS and Science Act and the Inflation Reduction Act to promote domestic production and restrict Chinese involvement.

Jacqui Murray, Resource Capital Funds (RCF) Partner and Head of Fund, added in financing projects to align with decarbonization and ESG standards:

“The world is undergoing a paradigm shift in demand for metals and minerals. Our collaboration with CEFC allows us to advance decarbonization in mining, ensuring these materials are produced sustainably.” ^[1]

Resource Nationalism and Geopolitical Risks

The scramble for critical minerals has led to a surge in protectionist policies not seen in Western democracies since the early 20th century. Verisk Maplecroft's Resource Nationalism Index highlights a sharp increase in interventionism across 72 nations^[2], driven by concerns over national security and supply chain stability.

China's dominance in the critical minerals space poses significant geopolitical risks. The US and its allies are engaging in tit-for-tat measures to limit China's access to advanced technologies and critical resources. Investors must navigate a complex landscape of trade barriers, investment controls, and sustainability standards.

Nano One Materials

Nano One Materials expanded its patent portfolio in 2024 with 11 strategic patents, including 7 new grants, bringing its total to 48 patents with 56+ pending. The patents cover innovations in its One-Pot process, M2CAM technology, kiln design, high-voltage LNMO cathodes, thermal processing, and coatings. Nano One's growing IP strengthens its position as a leader in sustainable battery materials manufacturing.

Dan Blondal, CEO, underscores the strategic importance of creating resilient, regional supply chains to meet global energy transition demands.

"The U.S. Department of Defense and other governments are investing in building secure supply chains for critical minerals and battery materials, not just for immediate defense or industrial needs but to create a sustainable economy that supports the broader energy transition. It's about decoupling from risky supply chains and building local ecosystems that unlock upstream value, whether in phosphorus mining, iron supply, or other critical inputs."

Partnerships with Sumitomo Metal Mining, Rio Tinto, and Worley validate its technology. As the sole facility of its kind outside Asia, Nano One's pilot plant in Quebec provides a competitive edge in supplying the Western battery supply chain.

Canada Nickel

Canada Nickel is rapidly advancing the Crawford nickel sulfide project towards construction in 2025. Crawford is potentially the world's largest nickel sulfide resource in a tier-1 jurisdiction. The company has attracted investments from Anglo American, Agnico Eagle, Samsung, and most recently a landmark $20M from local First Nations group Taykwa Tagamou Nation - the largest such investment in Canadian history. With its Environmental Impact Statement filed, Canada Nickel is on track for permitting within 365 days. The experienced team, strategic backing, and strong First Nations support position Canada Nickel to help meet surging demand for nickel in the electric vehicle battery supply chain.

Mark Selby, CEO, emphasizes the need for government involvement and tailored funding solutions to overcome the "valley of death" in project financing, ensuring critical mineral projects are realized to meet the demands of the global energy transition.

"If governments want lots of critical minerals projects to start being built—which is where the economic activity begins—they're going to have to find ways to provide funding to do it, because the private markets just aren't stepping up for many commodities given current prices."

Power Nickel

Power Nickel has delivered a massive high-grade nickel-copper-PGM-gold-silver discovery at the NISK project in Quebec where drill intersections include 8m @ 1.5% Cu and 1 oz/t PGMs, and up to 32m @ 7% CuEq. Power Nickel has attracted C$20M from billionaires Robert Friedland and Rob McEwen, along with interest from major miners. With 3 rigs turning and a goal of delineating 15-20Mt @ 5-12% CuEq, the Lion Zone discovery has potential to be a world-class magmatic sulfide deposit like Norilsk and Voisey's Bay. Upcoming catalysts include drill results and metallurgy to unlock the immense value.

Terry Lynch, CEO, highlights the geopolitical and economic urgency for North America to strengthen its critical minerals supply chains to support the energy transition and ensure economic security.

"The Americans & Canadians recognize that they've let the Chinese win the supply chain race, and they understand that this lack of support has put our economies in jeopardy. While the branding or names of programs like the IRA may change, I have no doubt that support for critical minerals in both the US and Canada will continue because it's essential to secure our economies and meet the growing demand for green metals."

Linchpin on Critical and Rare Minerals from Non-European Sources

Policies and rising resource nationalism, signal a challenging global landscape for investors and may exacerbate economic divides in the race for minerals essential to green energy and advanced technologies. The European Union is intensifying efforts to secure critical raw materials through initiatives like the European Raw Materials Alliance (ERMA) and the Critical Raw Materials Act, to also focus on sustainability and reducing reliance on non-EU sources.

Lifezone Metals

Lifezone Metals boosted the high-grade nickel resource at its Kabanga project in Tanzania by 20%, adding 3Mt @ 3%+ Ni to reach 46.8Mt @ 2.09% Ni. Over $200M has been invested to date. Lifezone has a clear financing pathway with BHP as a strategic partner, support from the U.S. Development Finance Corp, and a Japanese offtake MOU. Lifezone has also demonstrated its ability to refine Kabanga's nickel into battery-grade material. A secondary recycling JV with Glencore provides another avenue of growth. With exponential nickel demand growth from EVs, Kabanga is well-positioned as a potential large, high-grade, low-cost nickel operation.

Chris Snowalter states the importance of aligning geopolitical strategies with sustainable development to secure critical mineral resources essential for the global energy transition.

"The focus on security of battery supply chains is incredibly consistent across the aisle, with bipartisan support in the U.S. and international collaboration through initiatives like the Mineral Security Partnership. Projects like Kabanga are case studies in how emerging markets can align with Western interests to secure critical mineral supply chains, providing clean, green processing solutions to meet global energy transition needs."

Rome Resources

Rome Resources raised £4.2M from strategic investor Stanvic Mining to accelerate its tin exploration in the DRC. Funds will be used to advance drilling at the Kalayi and Mont Agoma prospects, conduct geophysics and regional exploration, and strengthen the balance sheet. Rome is nearing completion of drilling at Kalayi with a maiden resource expected, and drilling at Mont Agoma is testing the depth extent of high-grade mineralization. CEO Paul Barrett sees potential to expand the tin play regionally. With tin's critical role in electronics and clean energy technologies, Rome offers exposure to a vital metal at the forefront of the green revolution.

Ionic Rare Earths

Ionic Rare Earths (ASX:IXR) is pioneering sustainable magnet recycling in the UK with government backing. IRE expects a substantial UK government grant in Q1 2025 to fund its Belfast plant, providing the UK sovereign capability for magnet rare earths to secure its auto sector and over 1 million jobs. The project leverages IP, grants, partnerships, and offtake interest to minimize capital needs.

IRE's recycling technology offers a sustainable, less geopolitically risky alternative to mining. Government support validates the project's importance. The licensing model enables rapid scaling to expand to the US, Brazil and other markets at lower cost. Demand is underpinned by vehicle electrification and renewable energy. Investors gain exposure to critical heavy rare earths like dysprosium and terbium. The rare earths recycling opportunity is tied to growing magnet production for EVs and wind turbines.

The Investment Thesis for Critical Metals

• Invest in companies with exposure to lithium, nickel, and other critical minerals essential for the clean energy transition
• Target miners and processors with strong ESG credentials and sustainable practices to mitigate regulatory and reputational risks
• Consider geographic diversification to reduce exposure to resource nationalism and geopolitical tensions
• Monitor government policies and initiatives that could impact the critical minerals sector, such as subsidies, trade barriers, and partnerships
• Look for opportunities in domestic processing and refining to capture value along the supply chain

In conclusion, the critical minerals sector offers compelling long-term growth prospects for investors. As the world transitions to a low-carbon future, demand for lithium, nickel, and other strategic metals is set to soar. While geopolitical risks and resource nationalism pose challenges, companies that can navigate this complex landscape and align with sustainability standards are poised to benefit from the critical minerals boom. By investing in the building blocks of the clean energy revolution, investors can position themselves for success in the decades to come.

References:

1. Skillings Mining Review (December 2024). Decarbonization in Mining: CEFC’s $75M Investment in Critical Mineral Supply Chain
2. Jamasmie, C. (December 2024). Global Scramble for Critical Minerals Fuelling Protectionism
3. Silva, E. (June 2024). Lithium prices find stability in 2024 YTD with new pricing floor
4. Sadden, E., Holman, J. (December 2024). Global Surplus, Declining Prices Weigh on Europe's Lithium Ambitions