Name: Critical Materials in an Era of Energy Security and Defense
Uploaded: 2026-05-14T18:41:27.699Z
Duration: 58 min 32 s
Description: Critical Materials in an Era of Energy Security and Defense

Transcript for "Critical Materials in an Era of Energy Security and Defense": Good afternoon and good morning, everyone. And welcome to our webinar on investing in critical minerals. My name is Ed Ware, and I lead the Nasdaq wealth specialist team here in The Americas. Our team's mission is to deliver best in class educational content into the wealth space, and I have the pleasure and honor and honor of being your moderator today. For those of you watching the news cycle around the transition to renewable energy and wondering if there's an investment opportunity here, this is the webinar for you. The best days for me here are the ones where I get to teach and learn, and today is one of them. Alright. Let's get the housekeeping stuff out of the way upfront. Educational resources. We'll start today's program with a gift of knowledge. Please see the button labeled docs on the right side of your screen for some excellent thought leadership relevant to today's topic. CE credit. For those of you watching this webinar live, getting your CE credit does not get any easier. All you need to do is stay on today's program for a minimum of fifty minutes. If you do the bare minimum, however, you won't benefit from the interactive portion of today's program. For those of you in the on demand audience, we're gonna keep you honest with a brief 10 or so question knowledge test in order for you to receive CE credit. Q and A. We got a lot of ground to cover today but I will do my level best to carve out some time after our prepared comments to let you pick the big brains of our presenters. Please type your questions into the Q and A box on the right of your screen. We will provide some time after Steve's comments for our presenters to take your questions. In the event that we don't get to your question today, we will respond to them via email after the webinar. Survey. Another survey. I know. Stay with me here. We're asking you to fill this out because we at Nasdaq are a learning organization and we want to do better. You entrusted us with your time today and we take this obligation very seriously. Please give us your feedback and we will use it. Alright. We have two very excellent and very informed speakers today. Steve Schopstall is, joined Sprott Asset Management USA in April 2022 with more than twenty years of experience in the ETF industry. He leads Sprott's ETF strategy including the creation, launch, and ongoing support of Sprott's US listed ETFs and European listed USETS ETF strategies. Before April 2022, he was the Senior ETF Product Manager at ProShares Advisors where he was responsible for the launch initiatives and lifecycle management for more than 200 ETFs and mutual funds. Before that, Steve was at Vanguard and had responsibility for ETF product management and capital market functions. Before ProShares and Vanguard, Steve started at ProShares Advisors in the portfolio management group after earning a Bachelor of Science in Finance and an MBA from Penn State University. Next up, we'll have Sarah Marshall, and she's an senior index insight strategist here at Nasdaq with over a decade of experience in the industry. With her mad expertise and point and figure and relative strength analysis, Sarah provides a unique perspective for uncovering market insights and crafting innovative investment strategies. A dedicated advocate for data driven decision making, she remains steadfast in her commitment to empowering clients and investors of all levels to confidently navigate the complexities of financial markets. Previously, Sarah spent eight years at Dorsey Wright, culminating in her role as an asset management research senior analyst. Dorsey Wright became part of Nasdaq in 2015, and we're all glad that Sarah's on our team. Now on today's program. Today's agenda will consist of three ish sections. In the first section of today's program, Steve will spend some time orienting the audience to to the demand drivers for the various resources that are enabling the global shift towards renewable energy. He may also throw in some additional education for free about how national defense technologies that are also driving demand for critical materials. Sarah will then provide some brief comments with regard to the importance of index construction when investing in these relatively new markets. Steve will then take back the floor and give you some actual solutions that you can employ to capture supply and demand dynamics of critical materials in your portfolios. So with those comments out of the way and without further ado, take it away, Steve. Hey. Thank you, Ed. And, happy to be here and and and talking all things critical materials. For those that aren't aware of who Sprott is, we're a $65,000,000,000 asset manager. We're based in Canada, but we have offices throughout The United States. We're probably most well known for our physical trust covering things like gold, silver, platinum, and palladium. We also have the largest physical uranium fund in the world, which stores physical uranium. It's about $7,000,000,000 of assets, as well as the only physical copper trust in the world, which is also, available to investors, you know, whether they're retail or institutional. We've spent, you know, the last four years now, really building out our ETF pipeline. We now have 13 ETFs in The United States. It's about 7,000,000,000 in assets. You know, as a specialized provider, Sprott really focuses only on precious metals and critical materials. That's where you'll find our ETF exposure. We're we're excited today to today, talk about a few of those funds and a critical materials opportunity. So with that, we'll, we'll dive right in. So we'll take a look at at some of the things that are are driving demand in critical materials, and the first really is around, surging energy consumption and in particular electricity. When you start looking at the the growth of electricity from a global perspective, we're expecting to see about a 157% increase in electricity demand out through 2050. A lot of this is, being ramped up by two different forces at play. One would be if you were looking at developing economies, you would see that they're starting to have an increased standard of living. Things like air conditioning, more, network connectivity, those types of things are really driving demand from developing economies. And when you start looking at more developed nations, it's really around artificial intelligence, electrification, and the reshoring that's happening in the energy space. One of the the areas where we're really seeing a significant build out, is in nuclear energy. This has to do with because, you know, nuclear energy provides reliable base load power. So not only is it clean, but compared to wind and solar, it provides an always on, electricity capabilities. The United States currently is the largest nuclear power, for energy purposes, with China quickly approaching. One of the reasons why we see China building out nuclear capacity is because they are very energy dependent, as has been all over the headlines with the ongoing, conflict in Iran. A lot of their, oil imports have been, significantly disrupted. If you were to look at the the pace at which China is building out their nuclear capacity, they're adding about four to six new reactors a year that are going through their pipeline. So these are reactors that are going through from the approval to to the planning and going into the construction phase. So very significant growth, that we're seeing out of China. And given the the growth that they're doing, on the nuclear space, they've gotten very fast and efficient at launching new nuclear reactors. When you look at a lot of the western economies, you can see the white boxes here for The United States, where we have a number of proposed reactors. A lot of these proposed reactors are around small modular reactors, which are those next generation type reactors. They could be much smaller, in in in size. They can also be plugged into existing infrastructure. So for example, if you had a a decommissioned coal power plant, you could put an SMR onto the, the location of that that decommissioned plant, hook it into the grid, and and now you have power that's ready to go. Those SMRs are, you know, currently being developed. There's several technologies at this point, with most estimates having them starting to be rolled out commercially, around 2030 or 2031, and it's expected that they will ramp up considerably, post, post that time period. Another, metal that we're seeing that is getting a lot of attention, is copper, and we'll talk a little bit more on on some of the individual metals as we get closer to the end of the presentation. But copper is is one of those metals that really is needed across all aspects of the economy, whether it's, residential real estate, commercial real estate. We see it in high, technology uses, artificial intelligence, and just everyday life. Chances are that if there's electrical current moving through a device, that copper is what's, involved in in usually in large quantities. What we're seeing from a lot of these growing economies, thinking India, China, Brazil, They're consuming massive amounts of copper, and that is really contributing to, the overall demand for the the copper picture. We'll take a a little bit deeper look on copper as we move throughout. Another aspect of the supply chain that's really started to take hold over the last three or four years, and even more so in the last year, is around energy security. When you look at, clean energy, one of the reasons that, you know, China is a great example of this, why we're seeing them build out clean energy in such large quantities is not necessarily for the environmental purposes, but because by having clean energy and renewable energy like, nuclear reactors, they can reduce their energy dependence on other parts of the globe, particularly, those parts that are subject to supply disruptions. You know, no nothing evidence, you know, how important energy dependent, independence is, perhaps more than we've seen for Germany. You know, after Russia invaded Ukraine, they actually had to reignite their coal plants, after they started decommissioning and closing down their nuclear power plants. There's some signs even within Germany and many European countries, where they're doing a one eighty, and really reconsidering their, opposition to nuclear energy. So this is an area, not only for nuclear energy, but as other critical materials are concerned, that we expect to see considerable growth coming, you know, over the next several decades as companies seek energy independence. One aspect of the, energy independence, our discussion, really focuses on China's control of a lot of different critical materials. So in some cases, China has, if you were to look at rare earths, for example, they're going to be mining about 70% of the rare earths. But when we start looking at downstream production, the, the refining capabilities, the magnet production, it's over 90 of that market that they control. Other metals like lithium, copper, nickel, and and the other battery metals, cobalt, graphite, manganese, all of these have very significant, influence from China. And you'll you'll notice for nickel, for example, a lot of that is, based on the blue line that we have in there. The blue shaded region, actually comes through Indonesia. A lot of those Indonesian mines, have Chinese influence, whether from the refining capacity, capabilities or the direct mining themselves. China spent a you know, the better part of thirty years now, thirty five years or so, really building out their supply chains as it relates to different commodities. And because of this, we're starting to see, you know, not only governments, but also private companies are acting. Last, you know, recently, JPMorgan announced a 1,500,000,000,000 initiative, in which they were going to start, you know, providing investment for various aspects of the economy that are essential to The United States energy security and and economic security. Within that, there's about 30 different points that they're looking to invest in. Of those, about four of them are directly impacted by critical materials. One would be through the mining and processing of critical materials. Nuclear energy is specifically called out as is, solar wind and then also battery storage. Not necessarily just EVs, but battery storage that's used for the grid. Another thing, that we're really starting to see shape up, you know, the the critical materials markets is what we're seeing out of governments and the actions that they're taking. A lot of this is being led by The United States, not just in in volume of dollars, but also in volume of deals. If if you were to go back, you know, during the Cold War, you would see that The United States was primarily focused on stockpiling and how they can procure all of these critical materials rather than increasing domestic supply chains. There was a a recent BMO Capital Markets report that was released, and they went through and looked at all the, actions by the, Trump administration over the last sixteen months or so. And they found that there are now about 60 projects, that have gotten about $18,600,000,000 in funding, as it relates to critical materials. We're we're seeing a number of initiatives that, you know, we typically don't see coming out of the United States government. Things like direct equity stakes in in companies that are producing these critical materials. MP Materials is probably the, the most well known of this where the the government provides funding. They take an equity stake and, are looking to, go from mines to magnets, as they call it, for rare earths production. Lithium Americas, and and Trilogy Metals are just a few of the others that have seen significant, investment from from the US government. As part of some of these, different actions, we're seeing price floors in some cases as it relates to rare earths that are giving companies, you know, some consistency and some insight into longer term prices for, rare earths in this case, and and those price floors are about two times, the going price of rare earths at that time. So what this does is give these companies some certainty that they can invest in The United States. They understand that over they'll they'll have, insight into what the the minimum prices will be, for, you know, in some cases up to about a decade. On top of that, we're seeing, you know, the Department of War and other agencies, stepping into agree to buy 100% of the output, over a period of ten years. And this, again, is all around, creating an environment where investment and capital can really flow into the critical material supply chain. And and then also, you know, through various infrastructure projects. Again, this is all around, not only the materials are going to be needed to build out the infrastructure, but in Trilogy Metals case, where, you know, where they're looking to build access to the mining sites, so that copper can be mined domestically. This is becoming increasingly, important when you look at what China has been doing, particularly around rare earths. This is an area where they've really gotten a dominant stake, and and we've seen them exhibit their, or push their influence over the last, couple decades in this case. We'll talk a little bit more about rare earths as we move through, but, that's becoming an increasingly important aspect as it relates to, energy security and, trade negotiations as well. So there there's another aspect where, critical materials actually flows outside of, you know, clean energy, and then also energy security, and that's related to defense. There's a renewed interest in defense spending. Just last year, we saw that NATO outside of The United States, has agreed to double their defense spending from two and a half percent of GDP up to 5% of GDP. They committed to do this out through 2035. What we're really seeing, if we look at the chart on the right hand side, that lighter blue line is the increase in global defense spending. And it, last year, reached a record over $2,600,000,000,000. So very significant amounts of capital being spent from, the defense industries on a global basis. And what that's really doing is is a lot of this is being geared toward, securing critical materials as we see, you know, defense departments across the globe are looking for ways to stockpile, you know, various critical materials and other metals that are needed, in addition to expanding, the industrial base and military infrastructure as well. When we look at, you know, kinda how this fits into the bigger picture as far as defense goes, if you were to look at the three main drivers of, strategic investments that we're seeing, It would be, defense energy transition, or you could call that energy security as well, and then artificial intelligence. The spending or or investments just in these three, industries alone is up 78% since, 2020 on average. Going out and looking at the bar chart here on the right, we can see that the the combined spending just for these three areas of the economy are now about $5,300,000,000,000, just last year alone. So this is a very significant change, for a lot of these critical materials, and and we'll discuss, in copper's case, you know, a very point and example at, exactly what that means for demand expectations. But the main takeaway here is that we have a shift in structural demand, that didn't exist five or even ten years ago, where we have the defense energy transition, artificial intelligence are really providing structural demand levers and and increased investment going forward. So it's probably a good, opportunity just to touch briefly on on AI data centers of what that means for critical materials. This is an area where we see The United States and China really battling it out, to see who's going to be the artificial intelligence power. A lot of that, you know, is related to the global data centers that are needed to run these, powerful, AI build outs. With that, we can see that there's expected to be about a four times increase in data center power demand from, just the AI data center component. So very significant driver, in electricity demand, and that's one of the large contributing factors to that overall 157% increase that's expected. These are very energy intensive, data centers. So for things like cooling and just the compute raw computing power that's needed to power these, AI data centers is, you know, very energy intensive. And and what we're seeing is that, a lot of these hyperscalers, so those large data centers and AI companies, they can, like, Apple, Meta, Amazon, and others are really leaning into, not only, cleaner alternatives because in a lot of cases, they do have corporate mandates where they need to have these, get their energy from clean energy sources. But what we're seeing is increasingly they're turning to nuclear energy. They're doing this in, several ways. One would be, you know, buying, nuclear generated power now. Another is investing in plant restart ups. There's, you know, 3 Mile Island, in Pennsylvania. There there's some other nuclear sites, throughout The United States where they're looking to bring those back online so that they can power the data centers. And then also we have, Talent Energy in, Northern Pennsylvania. It's the picture there in the top right hand side. You can see the Amazon data center is built right on property or right next to it, so it has easy access to nuclear energy. We're also seeing considerable investments from a lot of these companies, directly into SMR technology, and we expect to see that they're, you know, anticipated to add, growing amounts of nuclear energy as it becomes much more plentiful, as we're moving through the next, coming decades. So that's kind of the macro drop of of critical or the the macro demand drivers for critical materials. But if we were to look at critical materials, this is one of those terms that, depending where you look, could have some definite different definitions. The US Geological Survey has their own definition of critical materials as does, every other country in the European Union. But typically when we talk about critical materials, there's a few things we're looking for. So these would be, materials that are essential for energy security, and also really much tied to the generation, transmission, and storage of energy. So on generation, we think of things like uranium silver, which is a unique metal because it's a dual metal. It's both a precious metal and increasingly becoming an industrial metal, and rare earths. Rare earths are used in, you know, things like wind turbines and EVs. For transmission, there's no metal that's used more than copper, for transmitting electricity. And and as I mentioned earlier, anywhere you see an electrical current, you're likely to find copper. It really does bridge the gap between generation, transmissions, and storage. You'll find it in all three aspects of of, critical materials. And then finally, we look on the the storage side, typically called battery metals, lithium, nickel, manganese, cobalt, and graphite, all essential to, different battery chemistries, whether it's electric vehicles or if we're starting to look at, you know, the the grid storage that we're seeing. So taking you know, we looked at the, the spending and investment that we're seeing from a defense, standpoint. When you look at the energy transition, this is an area that really reached an inflection point back around 2020. That's where we've really started to see a ramp up in the annual spending on a global basis. Again, this is led by China, as they're the the number one, spender for energy transition and clean energy. But this also includes things like not only producing energy, but also transportation and and building out the grids as well. Just last year, alone, we saw about $2,300,000,000,000 invested, in the energy transition. So very significant source of that structural growth that really, in most cases, sits outside of, global economic health, which is what we're typically used to seeing for a lot of commodity cycles. When you look at a lot of the critical materials, and we we won't run through all of these, but the the main takeaway here is, you know, one is that electric vehicles are, you know, dependent on many different critical materials, and then also that copper is is, a key piece of many different aspects of of the energy transition and clean energy technology and and, you know, there's, no one metal that, you know, is required. It's, you know, really a basket of metals that's needed to, fuel the the growing demand for electricity. So, you know, just taking a a quick look here at at what we're seeing from, growth projections for demand, the the lithium projections. And I I would say, you know, if we look at the the lighter blue line, as opposed to the, the the taller darker blue, that's probably a more accurate estimate. So these are two cases. One would just be a if we were looking at current stated policies by many governments, this would be the demand, growth that we're expecting to see for these metals. If you were to look at copper, you'd say, well, there's not a significant amount of growth there. The reason it looks so much smaller than lithium, for example, is because that's the third most mined metal on Earth, and that market is already so large that, you know, just a a 100% growth or or even 50% growth for that matter would be a very significant amount of copper that needs to be mined outside of what's happening at this point. One of the things that that tends to get lost, for a lot of US investors is the importance of EVs. You know, we our our view is that we would expect to see hybrids and in some cases, plug in hybrids act as a bridge between, you know, gas powered vehicles and EVs. I think we've really seen in The United States, at least, the EV market has pulled back considerably. But that's not the same thing that we're seeing in other parts of the globe. When you start thinking about the European Union and China, areas that are much more urbanized, where they're not, you know, used to the American culture where, you know, we take a a four or five hour drive somewhere, you know, things are much closer. You tend to see a lot of adoption of EVs, and in some countries, new car sales are rapidly approaching a 100%. So it's a a very significant driver of growth, particularly internationally. This year, it's expected that there'll be an additional 24,000,000 EVs that are hitting the road. And why this is is, such a significant factor is when you look at the, growth the amount of materials that are needed for electric vehicle, if you were to look at, just your conventional average everyday, gasoline powered car, it's about 34 kilograms, so about 70 pounds, give or take. EVs would require, you know, over four hundred and fifteen, four hundred and twenty pounds or so of, the same materials that are, within, e gas powered cars, but also other metals too, things like rare earths that you would see, that are often found in the the the motors, for the EVs and and, things like, graphite, which you would find in the battery metals in a lot of cases, that don't exist in gas powered cars. We do see those in in EVs. So just taking a, a a quick look at a few of the critical materials and and what, you know, what we're really focused on and and some of those that I laid out. We'll we'll first take a look at at uranium. This is a market, where if you look at the production, a lot of it comes through Kazakhstan. So they're going to produce about 40% of, global uranium. A lot of that then gets sent off to Russia where it can then, go through the enrichment process that's, you know, then sold throughout the globe for use in nuclear reactors. Canada is, very much a, a growing player. They're they're very uranium rich, and we see a number of, projects that are, you know, close to coming online and moving through the pipeline, where they're really increase their output, for uranium, which will benefit, a lot of these mandates that we see from US and allied countries that are looking to source materials, from allied nations. So very significant, period of growth there we'll see. An interesting note about, Kazakhstan. You know, this is a a country that China is really trying to improve relations for. And if we were to look across the globe and and look at which countries are buying uranium, typically, what we're seeing as we see with other critical materials, that China is really leading in their stockpiling of uranium, very much building out, those stockpiles. Whereas we see oftentimes a lot of other countries and utilities in other countries, are are in a wait and see mode. They're waiting for uncertainty to to leave the markets. They're waiting for prices to come down, which have increased quite significantly over the last four or five years. Our view is that given the structural demand, that we're seeing for uranium, we don't anticipate that, those prices would come down in a significant way, and we're actually seeing, you know, prices moving much higher. If we were to take a a look at the supply and demand characteristics for uranium, the main focus here is that, you know, supply rather is expected to peak here in the next, you know, six or seven years or so. At the same time, we're expecting to see demand continue to outstrip supply. So there is some secondary supply and some inventories that can be pulled on for the next few years, but what we're going to need to see is increased production. One of the ways that production can be increased is if we make the permitting process much easier, where these companies can go in and instead of having ten or fifteen years to build a mine, we see that timeline significantly shortened. We do see in The United States and in Canada specifically, both of those countries are working not just for uranium, but other critical materials to really reduce their hurdles and and the length of time needed, to get a new mine up and running. But specifically for uranium, it's anticipated that, we'll have a cumulative supply deficit of about 1,400,000,000 pounds out through 2045. To put that in perspective, we'll we'll produce probably around a 170 to a 180,000,000 pounds, this year alone. So as we see China, The United States, India, and other countries expanding their nuclear fleets, this is an aspect that we expect to see that needs to be addressed, moving forward. I've mentioned copper a few times, very similar story. If you were to look at the upper right hand, aspect part of this slide here, a similar supply and demand, outlook that we see for uranium and where last year, we actually entered a supply deficit. This was about two to three years earlier than what many other, in, you know, investment houses, were anticipating. Some had it in 2026, 2027, or 2028. We had a number of supply disruptions last year at major mines, that really knocked out a lot of production. The one of the largest mines, actually, two out of the the five largest mines We're completely offline by the end of the year or or mostly offline, and we're seeing that what we tend to see is not only do we have about a 5% disruption rate, in in copper mining on any given year, the industry is also having to work with declining ore grades, which means they have to extend the life of existing mines, and the material that they're moving isn't as, or rich as, you know, it once was. So what this does is it makes it much more difficult to not only meet current demand, but also to grow to meet future demand. A lot of the, mines that are being discovered, if we were to go back over the last ten years or so, you know, it's just a fraction of those mines are actually what we would consider major deposits. So this is an aspect of concern. And one of the reasons why we see copper, even though we start to see, you know, this this overarching feeling that the global economy could be softening, copper, you know, unlike what we've seen in the past where it would have reacted negative to negatively to that, scenario, is actually, adding near all time highs here in the last few weeks. That's because there's a structural demand through things like, that we've been discussing, defense, artificial intelligence, and and energy transition that have really built in a demand that wasn't there, you know, ten years ago. So we're seeing a a significant change in the way that copper is, reacting. It's no longer just a barometer of global economic health. It it's really becoming a strategic asset. And and if we were to look throughout history and just take a look at how copper has, acted over other periods of economic expansion, you know, we're we're currently in a, industrial electrical industrialization, energy, type expansion in the economy that we're seeing now. But about every twenty five years on average, we see that the demand for copper doubles. We saw that as China was building out their industrial base, over the, you know, the nineties and and early two thousands, and we expect that this is, you know, this this continued upward trend, what we're seeing from demand, is is expected to continue well into the foreseeable future. Like to spend, just a few minutes on on rare earths. This is a aspect of the the critical materials market that is probably, the least well known, by by most, but is probably the most reported on, in the press. It's it's a very important aspect, of of the global economy and it's, becoming increasingly important as we see that, China has started slapping export controls on a lot of these, materials where they're controlling in excess of 90% of the market in a lot of cases. You know, we are seeing a surging demand for rare earths, typically and what rare earths are is their subset of critical materials. There's 17 different metals that are chemically similar. Because they are so similar, it's it's very, technology intensive and very difficult, to separate these metals. So the separation aspect is very expensive, very time consuming, very intricate. This is an aspect of the market that The United States used to be the the leading producer of rare earths back through the nineties, and China was really able to take over, the production of rare earths where they now control that industry. So this is one that, you know, continues to be a very hotly debated point of contention amongst US and China relations, but also to other aspects of the world as well. If we start looking at some of its uses as it relates to defense, a lot of the things that our military depends on is very much in need of rare earths. They tend to have very strong magnetic properties that can operate at very high temperatures. So it makes them extremely important for things like, fighter jets and and, missile guidance systems. But also when you start looking at missile interceptors, they're extremely important for that as well, given their magnetic properties. So this this is an area that is becoming, of increasing concern. We've seen, you know, the investments by the US government as I showed on another slide in MP Materials. There's Sierra Verde in in Brazil where The US, has been, making some investments and that that looks to be acquired by USA rare earths in a deal that or or the potential for a deal that was announced here in the last few weeks. So this is an area that we're seeing that you know, China in the past has really weaponized, their hold on rare earths. We saw back in 2009, where they they limited all exports to Japan. That led to a 26 times, increase in the price of rare earths. And and what we tend to see is, you know, as China puts export controls on a lot of these critical materials, what that can do is cause prices to rise. When prices rise, we see countries try to stand up domestic production. When that happens, China can then flood the market so that it's no longer profitable for them, to increase that production. That's why things that we're seeing, coming from, you know, private companies like JPMorgan with their investments and government investments is so important, to helping crowd in that, the the, that capital let's say to really build out our industry. Another aspect of, rare earths that I think tends to get underutilized or under discussed, because it tends to focus so much on, the defense aspects, is that is really is used in in your everyday life. And anytime you look at your cell phone, the thing that vibrates, whenever your your phones won't vibrate, those are rare earths magnets that are actually making the phone vibrate. We also see rare earths are used in the, the visual displays, the color bright light brightness and things like that. So very much used throughout everyday technology as well. This isn't just a defense aspect, but we see it in clean energy. We see it in everyday technology as well. Its uses are pretty far and wide, MRI machines and other things like that as well. Another area where we're seeing significant growth as of late is lithium. We've really seen, prices. If you were to go back three years ago, prices were trading at, for for spot lithium were somewhere around $80,000 per ton. They then fell down below $10,000 per ton. Over the last six months or so, they've really started to climb rapidly higher, and we're seeing, now they're trading around I believe it's around 26 or $27,000 a ton. So a lot of attention is again being paid to lithium. That's one of those aspects is because we're seeing the, the growth in EVs that we're seeing from overseas markets, but also the battery energy storage systems, which are those systems that are used to back up the grid. We're seeing significant growth there. We're also seeing some production cuts as well, which is supportive of the price. And because of that, we've seen lithium prices move considerably higher in the last six months and and the underlying, lithium mining companies as well, have been performing quite well over that time period. So just one more, metal before I, kick it back to Ed here. It's silver. So this is, you know, principally thought of by many as a precious metal because it's, you know, historical uses as such. But when you start to look at how it's being used, it's increasingly being used as an industrial metal. It's about 59, 60% are now is actually being used for industrial purposes. Silver has over 10,000 uses, whether it's, you know, just from investments or if we see it, used in, you know, semiconductors. It's it's the most conductable metal on Earth, copper being number two. And so anytime you have these very, energy intensive applications like, data centers and semiconductors, you tend to find silver in there that is, what's what's moving the electricity around. Another aspect is that if you were to look at the way that silver is mined, and Sarah will touch on our our pure play methodology, 74% of silver is mined as a byproduct metal. So what that means is that, you know, a miner could be mining copper and with the copper, they're also producing small amounts of silver. That's how 74% of silver hits the market. So identifying those pure play companies that are just in the business of mining silver, is, exceedingly important, if you're looking to get exposure, to those miners. And what we look at at silver, it's, it's you know, given what we've seen in the prices of silver where I think today around 85 or $86 an ounce, The all in sustaining cost of mining silver, for those pure play miners is about $14.58 per ounce. If you were to look at the margins, it's about an 80% margin that these companies are operating at, assuming sub $72 silver prices. We're considerably higher than that. It's allowed a lot of these mining companies to see something similar for copper miners, which they're operating at over 60% margin as as copper prices are record highs. This has really helped a lot of these mining companies, as their balance sheets have improved, and their investability. It's really helped them weather these higher gas prices, and oil prices that we've been seeing so that they can continue those operations. And just one last note on the, pure play aspect of silver. If you were to look at the 10 largest silver producers in the world, zero of them are primary silver producers, Meaning that they have less than half of their revenue coming from mining silver. So a very important aspect to, what we see at the silver market. And with that, Ed, I'll, I'll take a pause and and kick it back over to you. Thank you Steve. I really remain impressed by the emphasis and resources Sprott places on investor education. However, kick your mute button off for a second. As moderator I'm gonna change things up quickly. There's a question in the q and a, about your points about, I think it was, planned and proposed reactors. Is there a practical difference for today's audience? Yeah. So so proposed would just be reactors that they're, you know, looking to bring online. Plan would be there's some plan to bring them online. Right? So it's one thing to say we wanna have a 100 reactors. It's another thing to say here's a plan to bring a 100 reactors, up and running, and then you have the under construction, which are already moving and likely to see completion. Got it. Thank you. Alright, Yep. Sarah. Can you please walk our audience, through the importance of index construction when investing in critical materials? Absolutely. Thank you so much, and thank you so much, Steve, for that great context and and just overall investment thesis. I'm Sarah Marshall. I am a senior index strategist on the index insights team at Nasdaq. I'm gonna walk you through how the rules based NSETM index is actually built and how it's construction constructed, what goes in, what goes out, and just the overall methodology behind the strategy. I'm gonna try to keep it concise so that we can get to questions at the end. But let's just start with what the index tracks. So what is the index actually aiming to capture? The index is tracking the full value chain of the companies tied to critical materials that, Steve just discussed. So the metals that are essential to electrification and the energy transition, and and everything that we just learned about. And when I say full value the full value chain, we're looking at, you know, every step so that the mining, the exploration, the refining, the recycling, the investing. And we're looking at the nine critical materials here. So uranium, copper, lithium, nickel, cobalt, graphite, manganese, rare earths, and silver. So we're looking at, you know, the companies that, that find these materials that dig them up, process them, and even companies that are investing in them. So quickly, what qualifies with this index? And it is a rules based index, and so these are just some of the the high level rules. So, again, those nine eligible materials that I just went over, related to energy, defense, and, you know, electrification metals. And who's eligible? So we're looking at producers, developers, explorers, refiners, smelters, recyclers, and companies investing via royalties were royalty streams, debt, or equity. And so those, names that are eligible, those are being determined by Sprott, and they are kind of our our third party research provider, and partner on this index. So they are the ones the subject matter experts that are, you know, going and classifying those names and then the intensity threshold as as Steve mentioned. So the names that are, eligible for this index must have an intensity score of at least of 50% or more, from revenue from these eligible materials. If there, is not a a revenue stream or if it's just not appropriate in that particular metal to, to have that sort of revenue threshold, this would include cup the junior sorry. Junior mining companies involved in the development and exploration of critical materials. They they are assigned a revenue, a intensity threshold score, excuse me, at 5050%. We do have some liquidity, floors and thresholds for new and existing names in the index, and the this is a global index. So, eligible for across 45 different exchanges. Right now, there are about 20 company or 20 countries represented with Canada being the top, the top name at about 37% followed by Australia and, United States. So the weights are set, by using that intensity that intensity score that I discussed that Sprott assigns. So we're gonna take the free float market cap multiplied by the intensity score. So the larger, more focused companies, weigh more. So those that are that are, involved more in those critical tier materials and their bigger companies are going to receive a larger weighting. Each name has a there is a cap. So, in a single stock, we'll get is, a rebalance will have a weighting of 4.75 or higher. You know, names will drift outside of this, outside of a rebalance, but that's why we have a semiannual rebalance reconstitution that, you know, brings those weights back down. Each material is capped at 25%. And, again, those weights will drift between resets. Right now, uranium, is one of the the top and I believe is right outside of that 25% threshold. So upon the next rebalance, you know, we'll bring that back down to those those caps. And, again, semiannual, reconstitution and rebalance, which, it's all gonna happen together in June and and December. And so, again, the current exposure right now, a 124, companies spanning eight critical materials and 20 countries. At the, material level, again, uranium leads and at the country level, and we're we're seeing Canada. In terms of ICB industry exposure, we're looking at about 93% basic materials, about 7% energy, and just a sliver there of utilities. And just looking back at live index performance, this index was, started in December 2022. And so since that time, we've seen the index on a price return basis gain a 111%. Right behind there, the benchmarks here shown are gonna be the S and P 500 with 81%, the rare earths UBS rare earths and critical minerals, index there with 28% and then 5% with the Bloomberg Industrial Metals benchmark. So, yeah, like I mentioned, a 111% cumulative return with about 25% annualized return, over the last, let's call it four three and a half years. So, again, just the met overview of the methodology, rules based, four moving parts, what's in, who counts, how they're sized, and when they reset. So the nine eligible materials that we discussed, and let Steven over in great detail. The inclusion again is based on a Sprock classification and the intensity score of at least 50%. We're looking at the whole value chain in scope, and the intensity score is gonna filter for that exposure. A theme adjusted free float weighting, so using the free float multiplied by the intensity score is how those weights are determined with a single stock cap of 4.7525% per, material at rebalance. And again, the reconstitution is semiannual, and reconstitution. So when that basket is refreshed, that's gonna happen in June and December, and the reference dates are as of the last trading day, in May and November. So that is, again, those high level rules for for the index methodology, and, Ed, I'll throw it back to you. Thank you, Sarah. As always, you must know what you own and understand the power of a rules based allocation within a portfolio. Alright. Now Steve is gonna take us home with some examples of investable solutions offered by Sprott that are designed to deliver economic exposure to the market Steve covered in his earlier comments. Alright, Steve. The floor is yours again. Alright. Thanks, Ed. And we'll we'll close it out here so that we can have time to get to those questions. I mentioned 13 different ETFs that we have listed in The United States. Today, we're talking about SCTM, the Sprott Critical Materials ETF. This is going to be that one ETF that for investors that might only if you're an advisor and only have one ticker that you can allocate to a theme, we see that this is a fund that a lot of advisors own, as their their one ticker solution where it does give access up to those nine different critical materials, for investors that want to take a more tailored approach or might have a a view on any one, individual, critical material. We have a number of different, strategies whether it's uranium based, copper, lithium. The Nickel Fund is the only, Nickel Miners ETF in the world. And one thing that the all these strategies have in common is that they are pure play strategies. There's some different rules that underlie each of, each of the indexes given the the relative size of each individual market. But I'd also like to draw your attention to Rex c, r e x c. This is the Sprott rarest and and, rarest x China ETF. We launched this just a month ago, actually a month ago today. This is the only ETF, that, focuses on rare earths exposure. So while you look at SCTM, it has about a 14% exposure. REXI is going to give you about a 96% exposure to rare earths, far surpassing any other competing strategy on the market. And with that it also does have an ex China overlay. We'll talk just briefly about that when we run through the fun details. But looking at, SCTM, this is a pure play critical materials ETF. Some strategies that you might see out there might just have a, a revenue test where it's you know, as long as they have a a positive revenue, you know, they'll consider that a critical materials fund. Whereas SCTM has that 50% threshold. These are metals that we believe have a very favorable, long term, investment thesis, principally through, you know, imbalance supply and demand dynamics. The the funds actually grown quite a bit since we've, put these slides together. So the assets are actually, at 700,000,000. Having started the year around 250,000,000. So this is a, fund that's now been out for, over three years. So it's had that three year track record. So very, very much used by a lot of advisors that are looking for a one ticker solution. It is the biggest, cohort of of users of that we see of that fund. Won't spend much time on on this as as Sarah covered a lot of these, statistics, but what you'll see, it is Canadian and Australian based. I will note that, you know, the China exposure is extremely low. We do not, in our critical materials funds, allow any China a shares investments, and that's also true here, which is why you see that very low China exposure. A lot of other strategies will have very considerable, exposure to China. Also with a, a large cap tilt in this index, about 52% in large cap and about 31% in mid cap, but you still do have that meaningful small cap exposure. And we've actually seen this as one of those, industries where we've seen the market caps for these companies, as evidenced by their performance, increase quite considerably. We'll just flash the, the performance for one second here. And then moving on to the Sprott Rare Earths ex China ETF. As I mentioned, this was launched a month ago, with 2,000,000 in assets. We're currently about 42,000,000. We've seen a lot of interest, from not only investors, but also, domestic and international press. So we've been doing a lot of discussions there as this is truly a unique offering, in the market where not only does it have that pure play focus, but it also does have that ex China component. This ex China component is gonna be much more rigorous than what we're seeing with our other strategies in the lineup where they limit China a shares. What you'll see out of, Rex c is that it can't invest in China a shares, b shares, h shares, and then there's also, depository receipts and, all these other, smaller Nuance share classes that are also prohibited. Things like red chips and, P chips, which can't be invested in. So it is truly an ex China ETF, and it does have that focus on rare earths, which is very much a differentiator from the market. One of the things I would advise you is as you're comparing investments, and we see this particularly with rare earths, is that you really need to look under the fund to understand exactly what it holds. Some of the other, strategies will market themselves as rare earths, strategies. In some cases, we're seeing less than 10% rare earths exposure in those cases. Or, you know, there's other strategies that are primarily lithium funds being marketed as rare earths funds and have about a a 30% allocation to China. And so I would just, you know, caution you as you're looking at these different critical materials investments, really take a look under the hood and understand what you're earning because there are significant differences that the pure play methodology really gives to investors, really reduces that unintended exposure. And I don't think you can see that anywhere more than than in a rarest exposure, where it is so nuanced and so small. This is a fund that is principally invested in Australia, followed closely by The United States and Canada. You'll see a very significant small cap component to this. This is an industry that is growing rapidly. We looked at launching this fund, you know, eighteen months ago, and the industry wasn't large enough yet. And as we were working on this yet again, the industry had grown to such a size, not only a number of names, but also liquidity and market cap, where we were comfortable launching a a strategy and bringing that to market. So with that, Ed, I'll flip through, there's no performance here because it's only been out a month, but you can move move over to our website and see that updated at any point. But then I'll flip through the, disclosure slides here, to satisfy compliance, and I'll hand it back to you for questions. Alright spot the typo folks. Alright everybody that's a wrap for our prepared comments today. Part of my duties as moderators to parse out the many questions that have come in. We have time for just a couple at this point. I'm looking at the clock. Steve, you brought up the conflict with Iran earlier. It's in the news constantly. I think we gotta start with this one. How has the conflict with Iran impacted the market for critical materials? Yeah. I I think, you know, there's there's some impacts that might be felt, down the road. Right? So one of the things is around sulfuric acid, which is a lot of that is produced in The Middle East, but we also see it produced in China. United States is a large producer. That could have impacts, but those would be, take longer, to materialize, in our view in many cases. But I think what it really did probably first and foremost is if the Russia Ukraine war wasn't enough to show how important energy security is, if, COVID wasn't enough to show how important securing supply chains is, Hopefully and and I think what we're we're seeing through policy at this point is that the The US Iran Conflict is really shining a light on how important it is to become energy secure as we're seeing those, those crude oil shipments being, turned off. We're seeing a lot of countries, really scrambling to find ways to, you know, fuel their jets, for example, or or keep the lights on. So I think that's probably the biggest thing we're seeing in the near term is just how important energy security is. Alright. I I would like to ask one more question with the time we have. It's right back to you, Steve. With so many lit different lists of critical materials, how does Sprague determine what medical what metals are critical materials? Yeah. So if you were looking at the, the US Geological Survey, you'd see there's a a much bigger list. They vary by country. As an asset manager, there's a few things we're constrained to. One is, you know, we wanna have a pure play benchmark series. And so with that, there's certain diversification requirements and size of the market that that have to be met. A lot of the, smaller critical materials just aren't, investable on their own. But then probably even more importantly, if you were to look at the, you know, the nine that we've chosen to focus on, not only are they investable, but these are metals that in our belief, have variable favorable long term supply and demand, disruptions that that are are likely to happen. Because of that, we expect to see significant investor potential over the next, you know, coming years and decades. So with that, that's that's really where our focus has been. We think that by focusing on these nine different critical materials, you're really capturing a lot of the market. Also, some of the other critical materials can have lots of uses outside of the ones that we were talking about today. If you were to think of aluminum, for example, you could argue that's critical to a lot of these different technologies and and wind turbines and and military. And and that's certainly true, but its uses are so vast, that it still does have that, non, core strategic use, element that can can drive into it as well. Thank you. Well, alright folks, I'm looking at the clock and we need to, wrap up today's program. I would like to thank the presenters for their preparation for today's webinar. I would also like to thank Jasco and Luis Wei from our Nasdaq marketing team for organizing today's webinar and most of all you, the audience, for your time. We hope we exceeded your expectations today, so please let us know in the survey. And this concludes today's webinar.