Where Investors Should Focus as Supply Crunch as Clean Energy Transition Strains Metals Markets

• Supply and demand dynamics of key metals, including lithium, nickel, cobalt, rare earths, uranium, copper and silver
• Lithium is oversupplied in the near term, but expect a turnaround after a couple of years of depressed prices
• Nickel and cobalt also face near-term oversupply, but environmental concerns and geopolitical factors could disrupt production
• Uranium demand is poised to double by 2050 with undersupply likely for the next 5 years despite current adequate prices
• Copper and silver face major supply constraints that will be challenging to overcome even with strong demand growth driven by electrification and renewable energy

Tier-One Metals Projects Offer Opportunity as Electrification Drives Demand

Lithium Dynamics

Lithium is currently oversupplied, so depressed prices will persist for the next few years. The rapid increase in supply has outpaced even strong demand growth. The world is now substantially oversupplied. Meanwhile, in five or six years, the bottleneck with regard to refined capacity, particularly in China, has changed.

However, expect a turnaround after a period of low prices. Many of the junior lithium exploration stocks with deposits that were marginal two years ago and are completely uneconomic today will go extinct, and the best of those deposits will be picked up. In a couple of years from now lithium will be regarded by some investors as a four-letter word. It's at that point, you will need to be bullish on lithium again. Contrarian investors should love nothing more than hate in the market, especially for lithium, simply because some investors misunderstood the timing of the narrative on the upside. Patience is, as always, needed.

Nickel and Cobalt Challenges

Turning to nickel and cobalt, we see similar near-term oversupply dynamics. Increased nickel production from Indonesia and the Philippines are key drivers in the short term, but a bifurcation between clean and dirty nickel, driven by car manufacturers, looks inevitable. There has been an incredible increase in the production of laterite nickels, particularly in Indonesia and the Philippines.

These environmental concerns will eventually disrupt this production. The political pushback in both the Philippines and Indonesia will cause those respective governments to insist on extraction practices that are less environmentally destructive and more expensive, leading to "tier one sulfide nickel deposits becoming extremely valuable assets.

For cobalt, geopolitical factors are a key constraint on supply beyond its importance to batteries. Cobalt is held back because it's produced in Congo, to a lesser extent in South Africa, and to a similarly lesser extent in Russia, which is to say that equipment manufacturers and users of cobalt on a global basis, be they Japanese, Chinese, American or European, are constrained in developing applications for Cobalt simply because of access to supply.

The Rare Earth Shift

On rare earths, we see a major shift occurring as Western nations aim to reduce their reliance on China amid geopolitical tensions.

The Chinese are now threatening to utilize Rare Earths as geopolitical tools in the supply chain, and what that means is that separate, and apart from environmental considerations, Western Fabricators and non-Chinese Fabricators (Taiwanese, Korean, Japanese and Indian Fabricators) are all rushing to secure Rare Earth supplies that make them more and more immune from economic Warfare emanating out from China.

This drives a push to discover and develop rare earth projects outside China. Rare Earth deposits aren't rare. We will find non-Chinese Rare Earth deposits, and we in the West will develop refining and fabrication capacity. This benefits non-Chinese rare earth miners through concessionary financing, which is often unavailable in other extractive industries. The discovery and development of tier-one Rare Earth deposits outside of China will reward investors.

The Uranium Bull Case

The nuclear power growth required to meet climate goals makes the uranium bull case completely impregnable through at least 2050.

Between now and 2050, the supply of uranium has to double. As we speak, we're in a production deficit without 52 plants under construction being completed and 150 plants in the permitting and financing stages being completed. We are in a supply deficit with regard to our existing nuclear Fleet."

Don't necessarily expect prices to rise much from current levels, which are well above the incentive price required to boost production, undersupply is still likely to persist for several years. Despite being above the incentive price, the time required to permit finance and construct mines is such that there is a real risk of price escalation over the next five years. The involvement of sophisticated investors and companies in the nuclear space is a positive signal.

The Electrification Metals

Shifting focus to copper and silver, the key metals required for electrification, supply will be unable to keep up with demand.

The truth is that we cannot increase copper supply for six or seven years. Meanwhile, production is falling for various reasons, pointing to issues at major mines like Cobre Panama and Resolution. To maintain current copper supplies, we need to discover and develop one Bingham Canyon (the largest copper mine in the history of the United States) every year for the next five years. We cannot and will not do it.

A worldwide recession or depression is the only thing that will prevent dramatically higher copper prices in the next five years.

The silver case is similar, with primary silver mines only accounting for a modest portion of the total supply. "Primary Silver Mines only generate 17% of silver Supply on a global basis, so increases in the supply of silver as a function of the price of silver are disconnected.

Much silver supply comes as a byproduct of base metals mining. Given the deterioration in the productive capacity around base metals such as copper, lead, and zinc, silver supply should be constrained.

However, investment demand is the key short-term driver for silver, despite growing industrial demand. The near-term price implications around silver have more to do with investment or lack of investment demand than industrial demand.

Overall, the mining sector is struggling to keep up with the demands of the clean energy transition across several key metals. While oversupply is likely in the short run for some metals like lithium, nickel, and cobalt, the long-term demand story appears intact. Uranium is already undersupplied and is likely to remain so for several years. Environmental and geopolitical concerns will likely be positive drivers for metals like nickel, cobalt, and rare earths.

The most acute challenges appear in copper and silver, where supply is already struggling to keep up with demand even before the full impact of electrification takes hold. Investors must carefully monitor these markets in the years ahead to determine the best opportunities in the face of these significant and persistent supply constraints.

The Investment Thesis

• Look for opportunities to invest in tier-one nickel sulfide deposits as environmental concerns disrupt production from laterites in Indonesia and the Philippines
• Consider investing in non-Chinese rare earth projects that can benefit from growing Western support amid geopolitical tensions
• Monitor uranium markets for opportunities if undersupply persists and drives further price appreciation, but be cognizant that current prices are likely adequate to incentivize sufficient production within 5 years
• Expect persistent copper and silver supply deficits to drive prices higher absent a severe global recession, creating opportunities for exposure to tier-one projects

Supply constraints will likely persist across several key energy transition metals in the years ahead. While oversupply is possible in the short term for a few metals, growing demand driven by electrification and decarbonization will be difficult for miners to keep up with.

Environmental and geopolitical factors are also likely to impede the production of some metals while supporting others. Investors must carefully monitor these cross-currents and trends to identify the best-suited projects and companies to benefit. While the long-term demand outlook appears strong, the path ahead will likely be volatile as the mining industry struggles to adapt to a rapidly changing world.

Canada Nickel Corp

Canada Nickel Company Inc. (CNC) presents a compelling investment opportunity for those seeking exposure to the rapidly growing electric vehicle (EV) and stainless steel markets. The company is focused on developing the next generation of nickel-sulphide projects, with its flagship Crawford Nickel-Cobalt Sulphide Project located in the renowned Timmins-Cochrane mining camp in Canada.

CNC is differentiated by its commitment to sustainability, as evidenced by its application to trademark the terms NetZero NickelTM, NetZero CobaltTM, and NetZero IronTM in multiple jurisdictions. The company is actively developing processes to produce net zero carbon nickel, cobalt, and iron products, positioning itself as a leader in the sustainable production of these critical metals.

Investors can benefit from CNC's focus on low-political-risk jurisdictions, particularly Canada, which offers a stable and supportive environment for mining operations. The Crawford Nickel-Cobalt Sulphide Project, the company's flagship asset, demonstrates significant potential for future growth and value creation. As the demand for nickel continues to surge, driven by the expanding EV and stainless steel sectors, CNC is well-positioned to capitalize on this growth. The company's emphasis on sustainable practices and its strategic location in a prolific mining camp further enhance its attractiveness to environmentally conscious investors.

In summary, Canada Nickel Company Inc. offers investors a unique opportunity to gain leverage in the nickel market through its next-generation nickel-sulphide projects, commitment to sustainability, and focus on low-political-risk jurisdictions. As the company advances its flagship Crawford Nickel-Cobalt Sulphide Project and continues to develop innovative processes for net zero carbon metal production, it presents a promising investment prospect for those looking to participate in the green energy revolution.

Energy Fuels

Energy Fuels is a prominent US-based critical minerals company that presents a unique investment opportunity for those interested in the uranium, rare earth elements (REE), and vanadium markets. As the leading domestic uranium producer, Energy Fuels supplies major nuclear utilities with the necessary fuel for carbon-free nuclear energy production.

The company's recent diversification into REE production, including mixed REE carbonate and plans for separated REE oxides, positions it to capitalize on the growing demand for these critical minerals in various high-tech applications. Additionally, Energy Fuels' ability to produce vanadium when market conditions are favorable and its evaluation of radionuclide recovery for cancer treatments demonstrate the company's adaptability and potential for future growth.

Energy Fuels boasts a strong domestic presence with its corporate offices in Lakewood, Colorado, and most of its assets and employees are in the United States. The company's two key uranium production centers, the White Mesa Mill in Utah and the Nichols Ranch ISR Project in Wyoming, provide a solid operational foundation. The White Mesa Mill, the only conventional uranium mill operating in the US, has a licensed capacity of over 8 million pounds of U3O8 per year and the flexibility to produce vanadium and REE products from various uranium-bearing ores. The Nichols Ranch ISR Project, currently on standby, has a licensed capacity of 2 million pounds of U3O8 annually.

The recent acquisition of the Bahia Project in Brazil further expands Energy Fuels' portfolio, with significant quantities of titanium, zirconium, and REE minerals. This strategic move showcases the company's commitment to growth and diversification. Investors can confidently trust Energy Fuels' extensive NI 43-101 compliant uranium resource portfolio, one of the largest in the US, and its numerous uranium and uranium/vanadium mining projects in various stages of permitting and development. This robust pipeline ensures a steady supply of critical minerals for the future. Energy Fuels' common shares are primarily traded on the NYSE American under the symbol "UUUU" and listed on the Toronto Stock Exchange under the symbol "EFR," providing investors with ample liquidity and access to the company's equity.

In summary, Energy Fuels presents a compelling investment case for those seeking exposure to the uranium, REE, and vanadium markets, with a strong focus on domestic production, diversification, and growth potential. The company's leading position in the US uranium industry and its expansion into REE and other critical minerals make it an attractive option for investors looking to capitalize on the increasing global demand for these essential resources.

Sovereign Metals

Sovereign Metals is developing the Kasiya Rutile-Graphite Project in Malawi, to create a large-scale, long-life, and environmentally responsible operation. The recently released Pre-Feasibility Study (PFS) confirms Kasiya's potential to be one of the world's largest and lowest-cost natural rutile and graphite producers, with a significantly lower carbon footprint than current alternatives.

The Kasiya deposit boasts a Mineral Resource Estimate (MRE) of 1.8Bt at 1.0% rutile, containing 17.9Mt of natural rutile, making it the world's largest known rutile deposit. The MRE also includes 24.4Mt of contained graphite, positioning Kasiya as one of the largest natural graphite deposits globally. The project benefits from excellent surrounding infrastructure, including roads, rail, and hydro-sourced grid power. Sovereign Metals is committed to sustainability and meeting high Environmental, Social, and Governance (ESG) standards. The project will utilize low-carbon power sources, implement a closed water circuit, and progressively rehabilitate tailings storage facilities. The company actively supports local communities and aims to be an industry leader in social responsibility.

Test work has demonstrated that Kasiya can produce high-quality rutile and graphite products that meet or exceed market specifications. The company has entered into non-binding Memorandums of Understanding with major partners in the natural rutile sector, reflecting the favorable feedback on the project's product quality. Using natural rutile in the titanium industry offers significant environmental benefits compared to upgraded ilmenite products, such as synthetic rutile and titania slag. By eliminating the energy-intensive upgrading process, natural rutile can save up to 2.8 tonnes of CO2 equivalent per tonne of product used.

The global titanium feedstock market is experiencing strong demand, particularly for high-grade feedstocks like natural rutile. With supply tightness and limited new projects in the pipeline, rutile prices have risen sharply, currently approaching US$2,200 per tonne.

In summary, Sovereign Metals' Kasiya Rutile-Graphite Project presents a compelling investment opportunity. It has the potential to become a leading producer of critical minerals while maintaining a strong focus on sustainability and ESG principles. The project's scale, low costs, and favorable market conditions position it well for success in the growing titanium and graphite markets.