What is the UK’s Critical Minerals Strategy, and how does it compare to the EU’s and Australia’s strategies?

The UK Critical Minerals Strategy (“UK CMS”), first published in July 2022 and refreshed in March 2023, aims to “help deliver the secure, stable supplies of critical minerals needed by the UK industry now and in future”.

The strategy seeks to achieve this by:

1. Accelerating the UK’s domestic capability – this involves the government supporting the development of critical mineral projects, including mining and refinery, in the UK;
2. Collaborating internationally – developing trading and diplomatic relations with other priority countries to ensure the security of supply of critical minerals to the UK; and
3. Enhancing international markets – leveraging London’s role as the centre of mining finance and metals trading to make international markets more responsive, transparent, and responsible.

What are Critical Raw Materials?

Critical Raw Materials (“CRMs”) are mineral commodities that are economically important, and at risk of supply disruption by a number of factors, including rapid demand growth, high concentration of supply chains in particular countries, and/or high levels of price volatility. They are essential for technologies which will “enable decarbonisation of the global economy, such as electric vehicles and renewable energy infrastructure”. Presently, the UK is producing none of the 18 CRMs - including Cobalt, Lithium, Tungsten and Tin - it has deemed to be highly critical, although a report from the British Geological Survey (“BSG”) alludes to the extraction potential across many areas of the UK. Meanwhile, China is the largest producer globally of 12 of those minerals. However, there are various domestic projects, at different stages of development, and in particular a number of these are in Cornwall and Devon. The UK is also seeing an increase in the number of planned downstream and recycling facilities, including Pensana’s proposed rare earth processing hub in Saltend and Ionic’s proposed magnet recycling plant in Belfast.

As part of the UK CMS, the BEIS Critical Minerals Expert Committee has been asked to advise on a ‘watchlist’ of minerals which are increasingly becoming critical in the event of unexpected market or supply shock. The first watchlist list includes Iridium, Manganese, Nickel, Phosphates and Ruthenium.

What funding is or will become available?

To support the acceleration of the UK’s domestic capabilities, the government is required to maximise what the UK can produce domestically; rebuild the UK’s skills in mining and minerals; support research and development to aid critical minerals supply chains; and maximise a circular economy of critical minerals in the UK. These all require imminent funding.

The UK CMS cites various funds already established, such as the BEIS Automotive Transformation Fund (ATF), which has up to £850 million of funding for late-stage R&D and industrialisation projects. A recent recipient of such funding (and associated UK Planning Permission granted in July 2023) is Green Lithium, the first large-scale lithium refinery in the UK, which is based in Teeside, and which has been granted over £600,000. Other recipients include Cornish Lithium, Weardale Lithium Limited, Pensana and the ill-fated Britishvolt.

Other funds/initiatives include:

• Industrial Energy Transformation Fund (IETF) – this £350 million fund can assist critical mineral companies to invest in energy efficiency and deep decarbonisation technologies;
• National Security Strategic Investment Fund (NSSIF) – this fund is a joint venture between the government and the British Business Bank for dual-use advanced technologies;
• The UK Infrastructure Bank (UKIB) – this is a new government-owned policy bank, which has £22 billion of financing capacity to invest in capital structures, including senior debt, mezzanine, guarantees and equity. Projects must meet the bank’s investment principles including supporting regional and local economic growth or helping to tackle climate change;
• Driving the Electric Revolution (DER) – this is a UK Research and Innovation (UKRI) Industrial Strategy Challenge Fund providing £80 million of investment to grow the UK’s electric vehicle supply chain and support its industrialisation; and
• UK Research and Innovation (UKRI) National Interdisciplinary Circular Economy Research (NICER) Programme – this is a £30 million programme supporting the circular economy.

A wider perspective – the EU and Australia

Unsurprisingly, the UK is not alone in its development of a Critical Minerals Strategy. The EU and Australia have recently announced their respective strategies, which provide a helpful insight into the funding and policy direction that the UK could follow.

EU

In March 2023, the European Commission unveiled its Critical Raw Materials Act, which, if ratified into law, will commit the EU to developing a clean energy economy which will enhance security and diversification across critical materials supply chains, addressing reliance on non-EU supplier’s (specifically China and DRC). The Act will seek to onshore the production of at least 10% of the EU’s annual consumption of strategic raw materials and 40% of processed minerals demand, by 2030. Further, the Act would require EU nations to achieve at least 15% of material supply from European recycling plants.

Australia

In June 2023, the Federal Government of Australia also published its long-awaited Critical Minerals Strategy for 2023-2030 (the “Australian Strategy”). Australia is already a key player in the mining industry, with major mining companies already extracting critical minerals such as lithium, rare earth elements, and tungsten.

The Australian Strategy lists 26 critical minerals and provides for a A$500 million Northern Australia Infrastructure Facility (NAIF) fund to be dedicated to supporting critical minerals projects (for context, the 2023-24 Commonwealth defence budget is approx. A$52 billion); however tax-incentives (such as those provided in the US Inflation Reduction Act), fast-tracked approvals and adjustments to the Foreign Investment Review Board's (FIRB) regulation of foreign investment in critical minerals, were not included, which many in the industry had hoped to see.

The Federal Government has also already pledged a $1 billion National Reconstruction Fund for value-add resource projects, and $3 billion for renewables and low-emissions technologies. The Australian Strategy also, in similar fashion to the UK CMS, outlined the following actions: attracting investment and building international partnerships; First Nations engagement and benefit sharing; Promoting Australia as a world leader in ESG performance; Unlocking investment in enabling infrastructure and services; and growing a skilled workforce. Given Australia’s advanced economy and vast mineral wealth, it would be surprising if significant efforts were not made to capture as much of the downstream supply chain as possible.

Summary

For countries to meet the demand for critical minerals in their own jurisdictions, we expect the mining industry to call for more concrete policies, such as fast-tracked approvals and planning permission, and financial support, by way of funding and tax incentives, to capitalise on the supply of critical minerals at home and globally; and also to make it financially attractive to develop downstream processing and manufacturing facilities rather than simply shipping less refined products abroad. Whilst the UK CMS is a good start and comparable to the strategies published by the EU and Australia, our experience, talking to companies here in the UK, is that little practical support has been given by the government to date and they are being left at the mercy of local planners. The funds being made available seem small, and the much quoted post-Brexit “freedoms” to intervene to protect and promote the mining sector in the UK do not appear to be utilised in practice. In common with other “Western” governments the UK has left it late to join the race to secure CRMs and in recent years, several large corporates have been making their own arrangements to secure scarce resources.