The debate over climate change is vigorous, no doubt about it. Yet, regardless of where you might happen to stand on particular issues, governments around the world are moving ahead with high-dollar green energy initiatives and your investment strategy must adapt to this.
In light of this, the mineral intensity of low-carbon technologies should not be overlooked. The time is now, not next month or next year, to pivot your portfolio in favor of assets that will reflect and capitalize on upcoming clean energy trends.
Among other changes, this means shifting your investment focus towards mineral assets that will encounter strong demand going forward. Silver is the clearest candidate here, as it will be needed for both electric vehicle batteries and solar/photovoltaic panels.
If you can believe it, according to the World Bank, 15,000 tons of silver will be needed by the year 2050 just from the demand for energy-related technologies. Moreover, the World Bank’s Minerals for Climate Action Report emphasizes that 350% more silver will be needed through to 2050 to meet the forecasted demand from electricity generating technologies.
Courtesy: World Bank
For essential minerals in general but particularly for silver, the World Bank’s analysis reveals a picture whereby annual demand in 2050 will be much greater than it was in 2020. Clearly, it’s not simply a one-off investment in silver that will be needed for the low-carbon transition.
Interestingly, there’s something about the year 2050 that governments seem to like as a target for their green-energy initiatives:
- In the United States, the proposed “Biden Plan” has a net-zero target set for 2050
- Japan has announced a goal of net-zero greenhouse gas emissions by 2050
- South Korea announced an objective of carbon neutrality by 2050
- South Africa proposed a vision statement for net-zero carbon emissions by 2050
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Meanwhile, China has set its sights for 2060 as a target for carbon neutrality. Yet, it’s the United Kingdom that’s taking the offensive with the most ambitious climate target of any country: a 68% cut to emissions by 2030.
So, how can investors respond to the global call to action for a more responsible policy and an accompanying demand for essential minerals? Personally, my first response is to add to my position in First Majestic Silver (TSX:FR, NYSE:AG), a well-establish silver producer with significant operations in mining-friendly Mexico.
First Majestic is guiding for 2020 total production of an astounding 6 to 6.4 million ounces of silver from its San Dimas Mine in Mexico. That’s impressive, but just as importantly, the company is mining responsibly:
The Sonora Mining Cluster recently recognized First Majestic’s Santa Elena Mine for leaving a positive social, environmental, and economic footprint in the host communities. The Santa Elena Mine also recently received the Socially Responsible Award from the Mexican Centre for Philanthropy.
Going forward, silver’s role in the new economy will only grow and First Majestic’s low-cost, high-output strategy will stand investors in good stead. CRU Consulting forecasts that the electricity generated from renewable sources will more than double from 2019 to 2025, and that’s bound to tip silver’s supply-demand balance in favor of much higher prices.
On the supply side of the equation, Covid-19 could actually help silver more than hinder it. Silver mine output is projected to fall by 6.3% to about 780.1 million ounces in 2020. Yet, the world’s governments aren’t going to slow down their green energy demands and the need for silver should remain intense for many years.
We have to give kudos to First Majestic for maintaining high standards even while staying on track for its aggressive silver mining targets. It’s proof positive that miners never have to compromise their principles as they can show equal respect to the community and the shareholders.
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