Investing in Lithium
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About lithium
Key takeaways:
- provides exposure to the green transition
- crucial in the production of green tech
- demand is expected to rise in the coming years
- diversifies an investment portfolio.
Lithium is one of several metals crucial for the green transition. Being a vital metal in batteries and with the ongoing electrification of society, the demand for lithium is expected to continue to rise. The opportunity to invest in lithium and other metals that improve the lives of future generations, while diversifying your investment portfolio, makes lithium investing in 2023 very appealing. You can start investing in lithium through our funds AuAg Essential Metals and AuAg Precious Green.
Lithium, a member of the group of alkali earth metals, has many uses. For example, it exhibits good electrical conductivity and easily combines with other metals. Its properties allow batteries to have high energy density and longer durability compared to their predecessors. Lithium-ion batteries are the most common type of batteries made from the metal and are used in mobile phones, computers, and electric cars.
Investing in lithium as a part of your portfolio
Investing in lithium and other raw materials required to create a green future can be an effective strategy to diversify a portfolio that is primarily composed of traditional assets such as stocks and bonds. Investments in commodities like metals also provide some protection against monetary inflation. By owning the commodity directly, or investing in the companies that extract it, you can get pure exposure to a future price increase in the commodity. Investing in lithium can also be a good complement to investing in precious metals.
Tech-metals become more relevant and discussed as it's increasingly understood that we cannot accomplish the green transition without them. The creation of products like batteries, solar cells, wind turbines, and electric cars is enabled by metals such as lithium, copper, rare earth metals, cobalt, and others. Many of these products are essential for achieving global climate goals.
While we foresee a future demanding more of these essential metals, several other external factors need consideration. Geopolitical unrest in the form of wars and sanctions implies that countries must secure their metal supply. For example, China produces most of the world's rare earth metals, while Russia is responsible for a significant part of global nickel and precious metals production. This situation gives "metal-rich" countries like Sweden an opportunity to be part of the solution as they possess the necessary prerequisites to establish new mines and extract the metals we need.
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Diversify risk with lithium – invest in lithium mining
By investing in lithium via, for example, lithium investment funds exposed to companies extracting the metal, the investor can gain exposure to the green transition. Lithium funds provide diversified exposure to lithium through investments in mining companies active in the extraction of the metal. Funds intending to invest in lithium are usually daily traded funds that allow investors to invest in fund shares to get a broad exposure to the lithium industry.
How can you invest in lithium?
Commodities are often traded through CFD trading, i.e., by speculating on price changes. Lithium, however, is an exception not found on the commodity market. To allocate the portfolio towards lithium, you can instead invest in lithium through:
- Stocks: Invest in lithium by purchasing shares in the companies that extract the raw material.
- Funds: Invest in lithium through lithium investment funds that give direct exposure to the raw material, or the companies that extract the raw material. There are different types of funds. When you invest in lithium funds, you pay a fee for an expert (fund manager) to select underlying assets. There are two types of funds:
- Exchange-traded fund: Often actively managed, which means that an expert reviews the holdings and rebalances regularly.
- Exchange-traded fund: A basket of securities that follows an index and trades like a stock.
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Why invest in lithium with AuAg Funds?
AuAg Funds has been around since 2019, and we invest in the two megatrends "the green transition" and "monetary inflation". We are convinced that metals and elements are crucial in the transition to a sustainable world and we want to be part of the solution. Therefore, we invest in lithium mining companies with a good portfolio of mines - mines that extract a high proportion of lithium and are also best-in-class in their sustainability work.
Secure the resource
Due to geopolitical unrest and the trend of deglobalization, it is becoming widely acknowledged that it is important to invest in lithium to secure access to necessary raw materials. Through our fund AuAg Essential Metals, you invest in the most promising mining companies in the safest jurisdictions.
Create greater net effect
Metals like lithium are a prerequisite for the green transformation, but at the same time, the mining industry accounts for a significant part of the emissions. By investing in the lithium mining companies that have come the farthest in their sustainability work, excluding those who lag behind, and rewarding those working to become more sustainable, we can create an even greater net effect for the world. To ensure that the mines are sustainable, we choose the mining companies with the highest ESG risk rating.
The mines we invest in are state-of-the-art, and many of the mines have their own solar cell parks and use solar-powered "microgrids" and fuel cell trucks. In addition, autonomous vehicles are widely used in the mines to increase safety for the employees in the mine.
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AuAg Funds
AuAg Essential Metals
We make it possible to allocate your portfolio towards lithium by investing in the AuAg Essential Metals fund. AuAg Essential Metals is a commodity fund focusing on the metals that will be needed in a high-tech and green future. The fund provides exposure to a broad metals portfolio, both industrial and new-tech metals, and consists of 25 equally weighted holdings.
AuAg Precious Green
We also make it possible to invest in lithium through the "AuAg Precious Green" fund. Through the fund, the investor gets access to lithium through stocks in mining companies that extract metals necessary for green technology. The fund also invests in green tech companies that are essential for the green transformation, and in physically allocated precious metals, mainly gold. The low correlation of gold to the broad stock market index allows the creation of a portfolio with a high risk-adjusted return.
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Benefits of investing in lithium
There are several advantages to investing in a commodity like lithium including:
- Exposure to a commodity, which brings diversification to the portfolio.
- The opportunity to invest in the transition to a green world, where the demand for lithium is expected to increase as we move towards a more electrified society.
- The opportunity to contribute to a better world for both fellow human beings and future generations.
Lithium is one of the metals where we have a greater demand than the volume produced each year, according to the IMF. Lithium is a critical metal for building batteries for electric cars, for instance.
According to the Geological Survey of Sweden, SGU, 23% of all lithium was used for batteries in 2010. In 2021, 74% of all lithium was used for batteries - a demand that is expected to increase in the coming years. Most major car manufacturers today have announced that they will phase out the production of traditional combustion engines and completely switch to electric power, and to produce an electric car today, approximately 8.9 kg of lithium is required.
Australia, Chile, and China are the largest producers of lithium. Portugal has Europe's largest lithium reserve. You can invest in lithium through funds like AuAg Precious Green and AuAg Essential Metals.
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