Metals: the transition faces its limits

The depletion of deposits and the explosion in demand make the energy transition equation almost impossible to solve.

An increasingly voracious appetite for energy

Energy adaptation requires a dramatic increase in the consumption of base metals. Copper, zinc, nickel and cobalt are the invisible pillars of contemporary technologies such as electric vehicles, wind turbines, solar panels, smart grid infrastructure and the massive data centres needed to deploy artificial intelligence. The latter, whose rapid growth requires exponential computing power, is driving global electricity demand to unprecedented heights. Yet, at the very moment when humanity needs it most, the mining industry faces a devastating paradox: deposits are becoming depleted while demand is skyrocketing.

Deposits that are inexorably becoming depleted

The data illustrates the scale of the challenge. For example, the average copper content of mines in Chile, the world’s leading producer, has fallen from 1% in the 1990s to around 0.6% today. This deterioration means that almost twice as much rock now has to be crushed to extract a tonne of red metal.
The phenomenon affects all strategic metals. Indonesian nickel mines now exploit low-grade laterites, while African cobalt deposits present increasing geological complexities. This deterioration is not cyclical, but structural: humanity naturally began by exploiting the richest and most accessible deposits and now has to work harder for poorer results.

New mines, an illusory solution

Faced with this reality, opening new mines seems to be the most obvious solution. In theory, the Earth’s crust contains enough metals to last for several centuries, and exploration technologies make it possible to identify deposits that are deep or located in previously inaccessible areas.
Several flagship projects, from the Kamoa-Kakula mine in the Democratic Republic of Congo to the Andean copper and nickel deposits in New Caledonia, promise massive production.

But the operational reality is quite different: it takes an average of more than fifteen years between the discovery of a deposit and its entry into production. In fact, geological studies, environmental assessments, negotiations with local communities and initial investments (often running into billions of dollars) slow down the process considerably. Fifteen years to meet an urgent need: that is the paradox of industrial planning.

When society says no to mining

Furthermore, mining development is increasingly facing social and environmental resistance. Local populations oppose projects that threaten their water resources, agricultural land or cultural sites. Indeed, the communities concerned often prefer drinking water to promises of economic development.
As a result, the Tía María project in Peru, the Pebble project in Alaska and the Montagne d’Or project in French Guiana have all been blocked by citizen protests. In addition, regulatory requirements are becoming stricter, imposing more stringent standards for effluent treatment and waste management. These legitimate constraints increase costs and lengthen lead times.

Energy, the Achilles heel of mining production

Mining already accounts for around 8% of global energy consumption. And this proportion is increasing as ore grades decline, because processing twice as much ore requires twice as much energy.

Some estimates suggest that the energy cost of copper production could double by 2040, undermining some of the climate benefits of transport electrification.
Ironically, we are consuming more energy to produce the metals that are supposed to free us from it.

Innovation and recycling as safety valves

Fortunately, artificial intelligence is now improving the accuracy of geological exploration. In addition, in situ leaching processes are reducing the need for excavation, while recycling is advancing, with recovery rates approaching 50% for copper.

The circular economy could therefore provide up to 30% of the future supply of certain critical metals. But we must be clear-headed: even combining these advances, supply will remain below rapidly growing demand.

Changing the paradigm

Clearly, the development of new mines, although essential, will not be enough to offset the continuing decline in mineral grades and the exponential increase in demand.

This impasse therefore requires a complete overhaul of our relationship with resources, demanding greater restraint in product design, longer product lifespans and increased standardisation to promote recycling.

Energy adaptation cannot be achieved without a parallel transition to a truly regenerative economy, where the exploitation of virgin resources becomes the exception rather than the norm.

The challenge remains to convince a civilisation based on perpetual growth to embrace voluntary moderation.

Past performance is not indicative of future results. The views, strategies and financial instruments described in this document may not be suitable for all investors. Opinions expressed are current opinions as of the date(s) appearing in this material only. References to market or composite indices, benchmarks or other measures of relative market performance over a specified period of time are provided for your information only. NS Partners provides no warranty and makes no representation of any kind whatsoever regarding the accuracy and completeness of any data, including financial market data, quotes, research notes or other financial instruments referred to in this document. This document does not constitute an offer or solicitation to any person in any jurisdiction in which such offer or solicitation is not authorized or to any person to whom it would be unlawful to make such offer or solicitation. Any reference in this document to specific securities and issuers are for illustrative purposes only, and should not be interpreted as recommendations to purchase or sell those securities. References in this document to investment funds that have not been registered with the Finma cannot be distributed in or from Switzerland except to certain categories of eligible investors. Some of the entities of the NS Partners group or its clients may hold a position in the financial instruments of any issuer discussed herein, or act as advisor to any such issuer. Additional information is available on request. © NS Partners Group

When Energy Enters Its Internet Era – Highlights from SPHERE PODIUM event in Geneva

During the recent SPHERE PODIUM GENEVA event on May 13, 2025, Pierre Mouton shared a thought-provoking perspective on the future of energy investing in his talk: When Energy Enters Its Internet Era.

Drawing parallels between the digital revolution and today’s energy transition, he explored how the DGC Energy Fund identifies profitable, high-quality companies driving structural change, without falling into the trap of speculative trends.

Watch the video from Pierre Mouton’s talk and discover why active management and disciplined fundamentals are more relevant than ever in the clean energy space.

Protected: NS Macro Outlook & Investment Opportunities

Energy Transition: What can you do during this particularly hot summer?

Energy Transition

What can you do during this particularly hot summer?

Even if growth slows down, the theme of energy transition has plenty to appeal to investors.

Squaring the circle

Growth in the global economy remains modest and, with rising interest rates, is set to slow in the US, Europe and Asia. Against this backdrop, equities in growth sectors should be good investments, but their valuations are already demanding. Admittedly, there are some value sectors that benefit from very attractive valuations, such as oil companies and banks, but these two sectors are experiencing structural problems over the long term.

What’s more, although most investors support responsible investment, the world is still very polarised on the subject, and not everyone agrees to subject their investments to sustainability constraints.

So is it possible to find an investment theme that combines growth with reasonable valuations? Can we find investments that will be attractive to both ESG and non-ESG supporters? The answer is YES, with companies involved in the much-touted energy transition.

A topic on which everyone agrees

This is a very cross-cutting theme, bringing together the main companies involved in the energy transition. It is not replicable through a specific index, which requires good active management. Let’s summarise the most important sub-themes that will be present over the next 30 years:

Solar panel manufacturing, for large-scale operations or small rooftop installations. These investments include solar panels, inverters and batteries to store excess energy.
Manufacture of wind turbines for onshore and offshore installations. In conjunction with these, rare earth metals and copper will be widely used.
Nuclear power: Although nuclear power has its detractors, the fact remains that it is a continuous source of energy that compensates for the intermittent nature of solar and wind power generation and emits no CO2. A new group of mini-reactors should be available for industrial use by the end of the decade, which will increase demand for uranium.
Electric vehicles and their value chain: car manufacturers, chargers, battery manufacturers, rare earth metal miners, copper miners.
Energy savings, thanks to the use of better insulating materials and electrical equipment that optimises the energy consumed in households and businesses.
Producers of hydrogen, which will be used to produce green steel, cement and ammonia. We need electrolysers and fuel cells. Hydrogen will also be used to produce ammonia for fertilisers and as fuel for ships.
Carbon sequestration. In cases where it will be impossible to do without CO2-emitting fuels, carbon sequestration techniques will have to be used.
Companies that invest more and more money in non-CO2 emitting energies, whether for new investments or to replace existing installations that pollute, will be favoured.

United we stand

This summer, the film “Oppenheimer” was one of the box-office hits. It shows how, when the scientific community works together towards a very specific goal, it manages to achieve it quickly. More recently, this was also the case with the “Warp Speed” project, which succeeded in obtaining 2 vaccines against Covid-19 in less than 9 months. Meeting the “energy transition” challenge will be possible thanks to the efforts of the global scientific community, supported by public and private investment.

In the meantime, we as investors have a wide range of themes and companies that make good investments at reasonable valuations and are capable of appealing to all groups of investors.

© NS Partners Group

Chart of the Summer – A USD3 trillion investment opportunity for the energy transition

This economic shift is being referred to by many economists as “The New Industrial Revolution”. A glance at the chart presented by the International Energy Agency (IEA) clearly highlights the massive investment effort needed worldwide to decarbonize the economy. To visualize this investment opportunity, we embark on an imaginary journey where our guest will discover an array of interesting ideas and companies to invest in.

Mary turned on her Tesla, a marvel of electric car technology known for its eco-friendly design. The digital dashboard lit up, indicating a battery power level of seventy-five percent. Mary admired her vehicle, not just for its quick, quiet ride but also for what it symbolized – a step towards environmental stewardship.

She was accompanied by her co-pilot, a recent chemistry graduate. Together, they admired the sight of towering windmills dotting the landscape. These were Vestas windmills, renowned for their effectiveness in transforming wind power into clean electricity. The co-pilot noted that the motors and rotors of these windmills, much like those of their Tesla, relied on rare earth elements due to their unique magnetic properties.

Their journey took them past fields glittering with solar panels from First Solar, Canadian Solar and other manufacturers. These solar farms, managed by Iberdrola, captured sunlight and transformed it into energy. Amidst these farms were electrolysers, which used electricity to separate water into hydrogen and oxygen. This hydrogen was stored and later used to create ammonia, a clean and potent fuel. Some of this hydrogen was sent to a steel manufacturing company that use it to produce clean steel.

Nearby was a plant that used the ammonia to manufacture fertilizers, enriching soil to produce good crops. The ammonia was also loaded into ships, fueling their voyages across the globe without leaving behind a trail of pollution.

As the Tesla signaled the need for a recharge, Mary pulled into a nearby charging station. The station derived its power from a compact yet potent 200 MW mini-reactor nuclear power plant. The co-pilot explained how uranium, despite its contentious history, was critical for these nuclear reactors due to its immense energy-producing capability.

Upon reaching her modern, eco-conscious house in the countryside, Mary could see the solar panels adorning the roof. Connected to efficient Enphase inverters, these panels harnessed sunlight and converted it into electricity. Excess energy was stored in reliable Samsung SDI batteries, a crucial component requiring significant amounts of lithium, a light, yet energy-dense metal.

The house was also equipped with a state-of-the-art Johnson Controls heat pump system and a Schneider smart home system, providing not only comfort but also efficient energy usage.

This journey demonstrated several ideas to profit from this USD3 trillion investment opportunity. These opportunities will appeal to ESG investors, non-ESG investors, growth investors and value investors. Both developed and emerging countries are investing in these technologies, and current valuations do not yet reflect the expected growth.

Embark on a USD3 trillion investment journey, happy investing!

Past performance is not indicative of future results. The views, strategies and financial instruments described in this document may not be suitable for all investors. Opinions expressed are current opinions as of date(s) appearing in this material only. References to market or composite indices, benchmarks or other measures of relative market performance over a specified period of time are provided for your information only. NS Partners provides no warranty and makes no representation of any kind whatsoever regarding the accuracy and completeness of any data, including financial market data, quotes, research notes or other financial instrument referred to in this document. This document does not constitute an offer or solicitation to any person in any jurisdiction in which such offer or solicitation is not authorized or to any person to whom it would be unlawful to make such offer or solicitation. Any reference in this document to specific securities and issuers are for illustrative purposes only, and should not be interpreted as recommendations to purchase or sell those securities. References in this document to investment funds that have not been registered with the FINMA cannot be distributed in or from Switzerland except to certain categories of eligible investors. Some of the entities of the NS Partners Group or its clients may hold a position in the financial instruments of any issuer discussed herein, or act as advisor to any such issuer. Additional information is available on request.
© NS Partners Group

Protected: NS Investment Conference, 21 June 2023

Chart of the Month – Energy transition from the hedge funds point of view

Energy transition from the hedge funds point of view

Source: NS Partners

As part of our quest for alpha vectors, the research work of the past recent months has led us to identify energy transition as an obvious theme.

The generalized trend around that theme channels a massive investment momentum by following measures and objectives that are for some, already obsolete. In other words, many are rushing-in… but for the wrong reasons.

It is from this first observation that the opportunity emerges. Unbridled enthusiasm is a source of both value creation and value destruction. It is from this imbalance that we can generate a stable and consistent alpha.

The investment universe within this theme unsurprisingly extends from commodities to consumer goods (EVs, storage, transport, batteries, materials, etc.). This offers us a broad investment spectrum of about 5 vertical sub-themes that we can diversify through a selection of managers that we compiled on a matrix intended to ensure optimal granularity, articulated around the trading style, the sub-sectors biases and market capitalization segments. (see the risk-return profile Chart)

In addition, due to the relative exuberance that reigns in this universe, the ability to generate trading profit is accessible with less leverage (between 130 to 180) and less directionality (neutral to +30 net). Offering a favorable risk profile. Moreover, one of the dominant vectors of this investment strategy lies in the dynamic of innovation, which opposes the hopeless obsolescence of certain players or even certain sectors. Long-short strategies have fertile ground here for alpha generation, and low correlation to traditional markets. (see the correlation table of our selected managers)

Our selected investment universe to-date is composed of six managers in our “focus-list”, of which 2 can constitute already an energy transition position within a client portfolio, with a view to representing approximately 10-15% of the portfolio to start with, or up to 40% should the allocation be made of the 6 managers.

In conclusion of this overview, it is important to keep in mind that this opportunity is in front of us for a period of about 3 to 4 years before Governments come out of their moment of laxity if not of denial. From then, what is at stakes will be unavoidable and strategies will impose themselves. Approaching this phase, it will be wise to measure the risks associated with forced regulation of certain sectors, among few other challenges.

Past performance is not indicative of future results. The views, strategies and financial instruments described in this document may not be suitable for all investors. Opinions expressed are current opinions as of date(s) appearing in this material only. References to market or composite indices, benchmarks or other measures of relative market performance over a specified period of time are provided for your information only. NS Partners provides no warranty and makes no representation of any kind whatsoever regarding the accuracy and completeness of any data, including financial market data, quotes, research notes or other financial instrument referred to in this document. This document does not constitute an offer or solicitation to any person in any jurisdiction in which such offer or solicitation is not authorized or to any person to whom it would be unlawful to make such offer or solicitation. Any reference in this document to specific securities and issuers are for illustrative purposes only, and should not be interpreted as recommendations to purchase or sell those securities. References in this document to investment funds that have not been registered with the FINMA cannot be distributed in or from Switzerland except to certain categories of eligible investors. Some of the entities of the NS Partners Group or its clients may hold a position in the financial instruments of any issuer discussed herein, or act as advisor to any such issuer. Additional information is available on request.
© NS Partners Group

Investing in picks and shovels

The 1848-1855 California Gold Rush attracted thousands of fortune seekers. While some found a few nuggets, many went away empty-handed, having lost a lot of money. However, pickaxe and shovel sellers did pretty well out of those caught up in the gold fever. Although this was a less enticing prospect than discovering a vein of gold, these traders made big profits.

Merchants do better than prospectors

Today we are in the midst of a 30-year transition towards decarbonising our economy, which makes “transition metals” look like a particularly attractive investment opportunity – as the sellers of picks and shovels of yesteryear did. Indeed, current investors are on the hunt for gold. i.e. the future market leaders in electric vehicles, battery manufacturing, wind energy, public electricity utilities or solar panels. But what all these sectors have in common is a huge need for transition metals, which could provide the real big wins of the move to decarbonisation.

Metals vital to the transition

One such essential metal is lithium, which is used in laptop batteries, smartphones and electric vehicles, as well as energy storage. Lithium is found in mines and in brine deposits and lithium-rich salts. Rare earth elements, such as neodymium, dysprosium and praseodymium, are used to make the permanent magnets needed for EVs and wind turbines. They can be found in small amounts all over the world, but China is the country that is most active in mining and refining them. Several companies based in North America and Australia are also major suppliers. Uranium, meanwhile, is increasingly being used as a replacement fuel for coal, fuel oil and natural gas in nuclear power plants. A number of the biggest uranium suppliers are in Canada. Copper will directly benefit from the increasing electrification, as it is needed for enhancing the electricity grid, wiring EVs and connecting wind turbines to the grid.

China plays an important role in refining and supplying these transition metals, but bedfore rushing in, investors must take into account the risks attached to investing in a country without fully reliable legal and economic structures. Countries with less government intervention and a more stable legal system are likely to be a better bet.

The recently passed US Inflation Reduction Act, which supports clean energy financing, as well as forthcoming EU regulations promoting the adoption of cleaner energy technologies, will increase demand for transition metals. As a result, investing in the ‘picks and shovels’ of the energy transition – which should continue over the next 30 years – may be the way to go.

Article published in Le Temps, 6 February, 2023

Investir dans les pelles et le pioches

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Protected: NS Investment Conference, 28 June 2022