Navigating the Net-Zero Materials Revolution: Risks and Opportunities for Investors in the Great Mineral Boom

The global transition to a net-zero emissions economy is driving unprecedented changes in materials supply chains, according to a recent report by McKinsey. These changes present risks but also opportunities for investors in the materials and mining sectors.

Demand for minerals and metals used in clean energy technologies like electric vehicles and wind turbines is expected to surge. Research by the International Energy Agency predicts that under current climate pledges, demand for lithium will grow by over 40 times by 2040 and cobalt and nickel demand will grow by over 20 times. However, analysis by McKinsey finds supply shortages could emerge for minerals like lithium, nickel, copper, cobalt, and rare earths as soon as 2030. Shortages could reach over 70% for some key minerals like dysprosium by 2030.

These mismatches between supply and demand could lead to price volatility and hinder the pace of the net zero transition, as emerging clean technologies rely on continued access to affordable mineral inputs. A report by the World Bank estimates that price spikes could increase the costs of decarbonisation by up to 10% globally.

However, investments to boost responsible and sustainable mining could help close the supply gap. McKinsey estimates that around $3-4 trillion in cumulative mining investments will be needed by 2030. Expanding mining capacity will require streamlining permitting, building out supporting infrastructure like roads and ports, and adequate access to power and water resources.‍

For Investors

These dynamics create risks but also potential opportunities. Price volatility could pressure manufacturers dependent on minerals as input costs rise. However, miners able to expand capacity could benefit from higher prices. McKinsey notes the top 20 mining companies achieved record cash flows in 2022 amid tight supply. Investments in new exploration and mining assets could also pay off if shortages persist. Overall, navigating these complex changes will require understanding the interconnected nature of energy and mineral supply chains.

• Demand for minerals like lithium, copper, cobalt, rare earths and nickel is expected to surge over 20x by 2040 driven by the transition to electric vehicles and clean energy. This creates opportunities for mining companies and investors
• However, analysis predicts significant supply shortages for key minerals by 2030 which could hinder the pace of decarbonisation. Shortages may be over 70% for minerals like dysprosium. This with drive up prices for all metals.
• Around $3-4 trillion in new mining investments will be needed by 2030 to help close supply gaps. There are opportunities for investors in new exploration, mining assets, and infrastructure development. Focus on companies with experienced management teams with a business plan to get the project into production. For that they need to demonstrate scale and economics.

Companies to Watch

‍Neometals

Neometals is an emerging sustainable battery materials company that has developed proprietary technologies to produce battery materials like nickel, cobalt, lithium, and vanadium from recycled lithium-ion batteries and steelmaking by-products. Through joint ventures, Neometals is commercialising LIB recycling operations, vanadium recovery from steel slag, and lithium chemicals production. These technologies aim to promote circular economic principles by recovering valuable battery materials from waste streams and reducing reliance on conventional mining. Neometals is actively developing and scaling up these operations through partnerships in Europe and North America.

Palladium One Mining

Palladium One Mining is a Canadian exploration company focused on discovering metals for green technologies, primarily nickel, copper, and platinum group elements. The company has made recent high-grade nickel-copper discoveries at its Tyko project in Ontario outlining a new nickel district over 20km of strike length. Palladium One also has an existing platinum group metals resource at its LK project in Finland. The company is well funded after strategic investments in 2023 and continues exploration at Tyko aimed at expanding known zones. Recent acquisitions have added projects and royalties, positioning Palladium One for further discoveries of metals critical to the energy transition.

Canada Nickel

Canada Nickel is emerging as a major player in the nickel mining sector through its 100% owned Crawford Nickel Sulphide project in Timmins, Ontario. Crawford is the largest nickel discovery since the 1970s and is located in an established mining jurisdiction with good infrastructure. Through over 20 transactions, Canada Nickel has also consolidated a vast regional land package 50 times larger than Crawford with 20 additional targets, demonstrating the potential for further substantial discoveries and resource growth. With its significant existing resource, low carbon production potential and exploration upside across its district-scale land holdings, Canada Nickel is well positioned to become a leading nickel producer.

Marimaca Copper

Marimaca Copper is a TSX-listed company with an exciting copper discovery - the Marimaca Copper Project in Chile's Antofagasta region. This is the only major new copper discovery globally in the past 5 years and is considered low risk with significant exploration potential. Marimaca's vision is to create value for shareholders by realizing the full potential of Marimaca, which could become one of the most significant recent copper-oxide discoveries, as well as exploring for other large-scale deposits in the region. The Marimaca deposit challenges accepted exploration wisdom as an intrusive-hosted system unlike the typical volcanic-hosted deposits nearby. Its prime coastal location near excellent infrastructure enables potentially low-cost development. As one of the most important new copper projects in Chile in the past decade, Marimaca is a high profile development opportunity in a country with limited new copper exploration success.