BlackRock has launched two new global equity ETFs in the US providing exposure to mining companies specializing in the extraction of copper or lithium.
Demand for both copper and lithium is being driven by the climate transition.
The iShares Copper and Metals Mining ETF (ICOP US) and iShares Lithium Miners and Producers ETF (ILIT US) have been listed on Nasdaq with expense ratios of 0.47% each.
Copper is seen as a leading barometer of the health of the world’s economy, while demand for both copper and lithium is being driven by the climate transition.
Copper is an essential component of low-carbon technologies – renewable energy systems, including wind, solar, and hydropower, require copper to generate, transmit, and store electricity, while electric vehicles can use more than double the copper of an internal combustion engine vehicle.
Lithium, meanwhile, is the key component in lithium-ion batteries which play an increasingly important role in electric vehicles and renewable energy storage.
Methodologies
ICOP tracks the STOXX Global Copper and Metals Mining Index which selects its constituents from a universe of developed and emerging market stocks with market capitalizations greater than $100 million and average daily trading volumes above $1m.
The methodology targets ‘pure-play’ copper miners by selecting all companies categorized within ‘Copper Ore Mining’ according to the Revere Business Industry Classification System (RBICS). If fewer than 50 stocks have been chosen, the methodology also selects firms deriving between 25% and 50% of their revenue from copper mining (prioritizing those with higher revenue exposure) until the target constituent count is met.
Any firm that has not already been selected but falls within the top 50% of the copper mining industry in terms of market share will also be included.
Constituents are weighted by float-adjusted market capitalization while capping the weight of any single stock at 8% and the cumulative weight of stocks with weights above 4.5% at 45%. Notably, the index also caps the aggregate weight of all companies that fall within the top 50% in terms of market share at 50%, an approach that will relatively increase exposure to smaller-cap miners.
ILIT, meanwhile, is linked to the STOXX Global Lithium Miners and Producers Index which utilizes a similar methodology to screen for lithium miners and manufacturers of lithium compounds.
Constituents are also weighted by float-adjusted market capitalization while capping the weight of any single stock at 8%. Notably, however, the index sets a minimum allocation of 90% for ‘High Exposure’ companies which are defined as firms with at least 50% revenue exposure to lithium mining and compound manufacturing.