The removal gap: financing critical minerals superpower status

What country wouldn't want to be a critical minerals superpower? How will the work that's needed to become a critical minerals superpower be paid for?

Mining and critical minerals as levers toward development and prosperity mean somewhat different things for developing and for developed countries. In the developing country context, conversations centre around how mining can catalyse sustainable development as local beneficiation and capacity building take hold. For downstream developed countries, conversations focus on minerals security, how to ensure that the right minerals that are needed are available at the right place at the right time. In both cases, leverage, the ability to extract value through controlling flows, is core to the thinking.

Where are critical minerals found?

• Africa: the DRC holds 50-75% of global cobalt reserves; the continent also has significant copper in several countries, including the DRC and Zambia, world leading manganese and platinum reserves in South Africa and Gabon, huge graphite reserves in Mozambique along with lithium in Zimbabwe.
• Latin America: the lithium triangle, Argentina, Bolivia and Chile, has world leading lithium reserves, and Chile and Peru have over a third of the world's copper between them.
• Indonesia, and to a lesser degree the Philippines, have dominant nickel reserves.
• Of course there are many other minerals found in many other parts of the world.

At the same time:

• Canada, and to a somewhat lesser degree, Australia, have huge world-spanning mining industries that operate projects on a global scale.
• Switzerland is a powerhouse in mining finance.
• Saudi Arabia is an emerging mining superpower, leveraging in-country reserves with extractives expertise and vast quantities of cash in hand.

Geopolitics and integration

In terms of downstream developed economies, geopolitical rivalries to secure stable supply access are intense between China, the US, EU/UK and to a degree with Saudi Arabia.

China is likely the only country that can legitimately be described as a critical mineral superpower today. The country controls dominant mining and refining positions across most critical minerals. What China understands is that minerals security is not simply about mining, integration is essential, with seamless approaches to mining, refining, and logistics that connect with industrial strategies all mattering when it comes to critical minerals capability. In some cases, rare earth minerals in particular, China has dominant refining positions even as rare earths are broadly available for mining in different parts of the world, giving China effective control. The country has earned dominance over 25 years, methodically driving strategies that gradually increased their integrated control of minerals value chain systems.

Saudi Arabia, leveraging extractives expertise, in-country minerals, geographic position that puts them between China and the west, and cash on hand, is growing its mining footprint rapidly. The country appears to be following a similar integrated playbook to what made China successful, and is making meaningful progress in developing its capacity.

The EU/UK, US, Canada and Australia all have potential strengths when it comes to critical minerals, whether Canada's world-leading mining industry or capital in the US, but all of these players are clearly behind China when it comes to critical minerals. As they consider critical minerals strategies that make sense for their contexts, a basic question is how they will differentiate themselves from China, given that cloning China's strategy may not lead to success given China's 25-year head start. Responsible mining practices are a potential differentiator that makes sense as some of these players challenge Chinese dominance.

Mining and economic development

Developing economies have different dynamics. From the DRC to Indonesia to Peru, developing countries see minerals as a way of delivering economic development. Put simply, leveraging mining toward local refining and broader industrialisation is seen as a way of driving growth. Success also requires integrated approaches, but integrated in the context of producing countries means going up development ladders, mining, infrastructure and capacity building all being necessary for ultimate local beneficiation and improved economies. Even as there may be a desire in some cases to look for developmental short-cuts, there are no short-cuts when it comes to the interplay of infrastructure and capacity toward beneficiation. Indonesia, with world-leading nickel reserves, is a good example of what success looks like, the country leveraged export controls to focus development on infrastructure and industrial parks, transitioning mining toward being a lever for broader economic growth.

Capital is king

As developed countries compete for minerals security and supremacy, and as less developed producing countries focus on economic development from mining, one certainty is that a lot of investment is required. Wood Mackenzie has estimated that $2.3 trillion of net new investment is needed to deliver the mining and refining capacity that the world requires in the next 25 years. Recognising that this estimate does not include supporting infrastructure, required totals are even higher.

Required investment needs to include costs for:

1. Exploration and development of mining projects.
2. Infrastructure development (power, water, road systems).
3. Processing facility development.
4. Stakeholder solutions, importantly including artisanal mining professionalisation that de-risks mining regions while increasing productivity.
5. Capacity building in the mining industry itself and in less developed economies where resources are found.

From a developing economy perspective, these investments equate to growth opportunities, especially if refining is positioned in-country; from a downstream economy perspective, these investments equate to control, the ability to enable stable secure supply over the course of time. The bottom line is that the same investment areas are needed from both perspectives.

The problem: capital is not stepping up to the table to fund the growth that mining requires, with lack of transparency and perceptions of risk impeding engagement.

In summary

Everyone wants to be a critical minerals superpower, a concept that means different things for upstream producing countries and for downstream consuming countries. In both cases, investment is required on the ground in order to develop and deliver the integrated capacity that growing demand requires. Catalysing significant investment is critical and is challenging given perceived risks and lack of transparency. As developed and developing countries look at their mining and critical minerals strategies, it is essential to integrate approaches for capitalising the necessary work, which will require financial instruments capable of directly addressing the risk and transparency issues that have kept capital on the sidelines.

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