Cobalt is a blue metal, nickel is a yellow metal, and lithium is a silvery-white metal. These and at least a dozen other mining commodities are now commonly referred to as “green metals” due to their substantial involvement in the development of environmentally friendly technologies such as electric vehicle (EV) batteries and wind turbines.
They are really popular. In Canada, where the federal government has announced a bold aim to reduce emissions by 40% below 2005 levels by 2030, there is a significant drive to enhance both production and procurement of crucial clean-energy metals.
On a worldwide basis, the race to dominate the green metals field is hot, with several countries vying for top positions in the world’s lithium-ion battery supply chain, including Canada.
“What we’re seeing is a strong push for greater electrification, particularly for transportation, driven by concerns over climate change and decarbonization,” says Michael Faralla, head of global mining investment banking at TD Securities. “Along with that, we’re seeing more interest in building infrastructure – such as power generation, distribution and charging infrastructure – that supports electrification. So there’s definitely a renewed focus on the metals that go into these technologies.”
This is encouraging news for mining and sustainable energy industries. For investors, the increased and rapidly expanding demand for green metals means new chances to invest in mining firms and projects.
“We’re going to see, and have already seen, a strong price response – for example, nickel prices have doubled and tripled over the last year, and lithium prices are up significantly, four or five times from where they were five years ago,” says Mr. Faralla. “Prices in the short term are very strong, and there’s a view that in the long term, prices might go up even more, which is good for investors.”
Aluminum, cobalt, copper, graphite, lithium, molybdenum, and nickel were mentioned in a 2020 World Bank research as key to a greener global economy. Some of these metals are employed in a variety of sustainable energy generation and storage technologies, while others have fewer applications.
According to Mr. Faralla, investors should focus on mining commodities that are crucial in today’s most prevalent electrification and clean energy transition technologies. “Copper, for example, is incredibly significant because it is central to power generation and distribution infrastructure, as well as a major component in electric vehicles,” he explains. “There’s also nickel, which is a key component in the battery chemistry used by major electric vehicle manufacturers.” And, of course, lithium serves as the foundation for all lithium-ion batteries.”
Mr. Faralla claims that cobalt and manganese are also employed in batteries, but to a smaller extent. While it’s important to be aware of the lesser-known rare earth metals used in items such as magnets and electric motors, he adds that it’s often more difficult for ordinary investors to gain exposure to specialised metals.
Investors should pay attention to demand cycles. The minerals that go into the mix may change as battery chemistry improves, but EV manufacturers are unlikely to want to change their battery chemistries every couple of years, according to Mr. Faralla.
Investors should also plan for the formation and growth of a secondary supply market for green metals, which is likely to occur in the coming years. Recyclers will assist build a circular economy in green metals by recovering these components from retired first-generation EVs, potentially lowering the need to mine from primary sources.
Mr. Faralla believes that research is essential for green metals investors, regardless of whether they support primary or secondary supply markets. Mining is an inherently hazardous business, so it’s critical to select projects with high-quality resources that are likely to be commercially viable not only in today’s good price environment, but also years down the road.
“Secondly, look for a solid management team with the expertise and track record to move these projects forward,” Mr. Faralla advises. “Finally, if you’re supporting green metals because you think ESG is an essential investing criterion, you’ll want to look closely at how mining firms function in terms of carbon footprint, how they manage environmental hazards like water use and tailings, and how they treat people.” These are variables that can influence whether a metal is truly green.”