The information in this blog is general in nature only and based on SIX's internal research. We haven’t taken any individual person’s needs or objectives into account when preparing this information. Any mention of a company is not a recommendation to buy or sell. As always, do your own research or seek personal financial advice before making any investments or financial decisions.

1 minute read

The SIXth Sense 

• Demand for certain minerals and metals is predicted to grow to meet the growing need for more renewable energy and electric vehicles 
• Many Australian companies plan to supply the world with these materials, such as lithium, copper and rare earth metals

Largest energy transition mining stocks on the ASX

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Ticker | Company or ETF name  

PLS | Pilbara Minerals  

MIN | Mineral Resources 

VUL | Vulcan Energy

IGO | IGO 

RIO | Rio Tinto 

SFR | Sandfire Resources 

BHP | BHP Limited 

LYC | Lynas Rare Earths 

ILU | Iluka Resources

XMET | Betashares Energy Transition Metals ETF

ACDC | Global X Battery Tech & Lithium ETF

5 minute read

To avoid a climate catastrophe the world needs to get emissions as low as possible, in other words as close to real zero as possible. This means no new fossil fuel projects, and instead huge scaling up of low emissions technologies like renewables and electric cars that will replace existing fossil fuels.

This transition consequently is likely to drive a surge in demand for critical minerals that are vital for these technologies. 

It might seem counterintuitive for ethical investors to invest in mining. Mining is an industry with a long history of human rights abuses and ecological damage. 

For us to avoid the mistakes of the past and allow everyone to prosper sustainably, materials for the energy transition should be extracted with the consent of communities, responsible business practices, and laws that safeguard people and the planet.

These are the main minerals and metals that are predicted to power the energy transition and the companies that produce them.  

Lithium is crucial for an expansion in batteries that are used in electric cars, homes and energy grids. In the International Energy Agency's Net Zero scenario, lithium demand grows by 8 times between 2023 and 2040.

Australia is currently the largest producer of lithium in the world and has the 2nd largest reserves of lithium in the world- over 8% of it.

The following companies could be well placed to benefit from the lithium boom.

‍Pilbara Minerals Limited (ASX:PLS)

• 100% revenue from a lithium mine in the Pilbara region of Western Australia 
• Good relations with the Traditional Owners of the land in the Pilbara where it operates, an area rich in Aboriginal cultural heritage

Mineral Resources Limited (ASX:MIN)

• Earns the majority of its revenue from lithium, including the Mount Marion lithium mine, which contains the world's second-biggest high-grade lithium mineral resources
• Mainly mines lithium and iron ore, but it is exploring for gas 

Vulcan Energy (ASX:VUL)

• Mining company piloting lithium extraction from brine, a method that could be less environmentally harmful than traditional mining or evaporation mining 
• The company's flagship project is located in the Upper Rhine Valley of Germany, situated close to European electric vehicle makers 

IGO Limited (ASX:IGO)

• A company engaged in the discovery, acquisition, exploration and development of lithium and nickel 
• It owns 2 lithium assets, owning a 51% stake in the Greenbushes Lithium mine and a 100% stake in the downstream processing refinery at Kwinana, creating battery grade lithium hydroxide

Rio Tinto (ASX:RIO)

• Mining giant mainly producing iron ore and aluminum, but recently moved into lithium by acquiring Arcadium Lithium 
• However Rio has a reputation for environmental destruction and human rights violations 

In the IEA’s scenario, the share of global electricity generated from renewables needs to grow from 30% today to nearly 90% by 2050, mainly by growing solar and wind.

Copper is crucial for the continuing rollout of solar PV, a widely adopted energy source in Australia, where 1 in 3 homes have solar panels. 

‍Copper is also vital for wind power, particularly offshore. Wind power has rapidly expanded to become the 2nd largest source of renewables today, and along with solar can continue to do the heavy lifting to reduce power emissions.  

According to the International Energy Agency (IEA), if we want to reach net-zero by mid-century (2050), the demand for copper could possibly by rise 50%.

The following companies have a big focus on copper.

BHP (ASX: BHP) 

• A global resources company with operations in iron ore, copper, coal, petroleum and nickel
• It earns 25-30% revenue from energy transition minerals, including from the Olympic Dam Mine in South Australia, containing the 4th largest deposit of copper in the world
• BHP is also one of the largest global polluters since the Industrial Revolution and has been responsible for a number of environmental and human rights disasters 

Sandfire Resources Limited (ASX:SFR)

• Australian-based miner that operates copper and gold mines in Western Australia, Spain, the US and Botswana
• Major revenue source is copper for which demand is expected to grow to meet the need for more renewable energy and transmission lines 

Rare earths are a group of 15 elements that are key enablers for technologies looking to lower emissions. They’re used in permanent magnet motors, which convert the electricity stored in a battery into motion, for example, wheels on a car, or motion into electricity, such as on a wind turbine. The IEA predicts demand for rare earths could increase significantly by 2040 if the world is on track for net zero emissions. 

China has a monopoly on rare earth mining, producing 85% of the market in 2016 and Australia is the next largest producer with 10% of the market. 

The following companies specialize in mining them.

‍Lynas Rare Earths (ASX: LYC)

• An Australian rare earths mining company that is one of the world's only significant producers outside of China
• Its refining factory in Malaysia has been opposed by local activists concerned with the toxic chemicals polluting local water

Iluka Resources (ASX: ILU)

• An Australia-based company engaged in the exploration, mining and marketing of mineral sands and rare earths 
• Iluka’s mining and processing operations are located in South Australia and Western Australia, and it is trying to build Australia’s first rare earths processing facility

If you wanted to invest in a range of the minerals and metals companies listed in this blog, the following two ETFs target this theme: 

Betashares Energy Transition Metals ETF (ASX: XMET)

• Invests in mining companies across the globe producing copper, lithium, nickel, cobalt, graphite, manganese, silver and rare earth elements 
• Companies in the fund largely operate in Canada, the US, Australia and Chile 

Global X Battery Tech & Lithium ETF (ASX:ACDC) 

• Invests mainly in companies involved in battery storage technology and mining companies that produce metals used to manufacture lithium batteries
• Doesn’t invest in companies that produce weapons or fossil fuels