Good news for Australia’s critical minerals industry as Australia partners with other nations to establish Minerals Security Partnership Finance Network
This week, Australia, the United States, Japan, Canada and 11 other nations announced the establishment of the Minerals Security Partnership Finance Network (Network),a joint financing body designed to fund critical minerals projects across the globe. The Network aims to strengthen cooperation and promote information exchange and cofinancing amongst its participants to secure sustainable supply chains for critical minerals.
It is no secret that investment is required from a combination of sources and both debt and equity structures to deliver the capital required to support development of infrastructure needed to meet the world’s energy transition targets. The partnership between these participating nations is yet another reminder that the energy transition requires action in concert and cannot be achieved alone. The announcement is a welcome addition to the raft of other funding commitments by Australian and overseas governments to support development of the Australian critical minerals industry.
In addition to providing valuable diversity and security in the global supply chain, the Network aims to advance previously negotiated project funding within Australia. In March 2024, the Export-Import Bank of the United States issued a letter of interest to listed Australian company, Australian Strategic Materials, for the potential financing of up to US$600 million for the construction of a rare earth and critical minerals project.
While foreign investment into Australian critical minerals projects will continue, what remains to be overcome is ensuring that Australia has appropriate regulatory and policy regimes in place to attract ongoing investment. Until then, we are seeing more clients progress critical minerals projects through arrangements outside of more traditional debt and equity structures, including by way of strategic partnerships, including farm-ins, offtake prepayment arrangements and royalty streaming. Offtake security is a common feature of these bespoke arrangements as investors in early-stage projects are looking for offtake security to both secure their own supply chain and underwrite operating expenses.
This joint approach reflected by the composition of the Network demonstrates global efforts to diversify the critical mineral supply chain, which has traditionally relied on China’s dominance in the downstream processing and manufacturing of critical minerals. Overseas, for example, the United States is taking more direct initiatives to diversify reliance on China, including by increased tariffs on Chinese made electric vehicles and vehicle parts. Similarly, the Australian Government’s action via the Foreign Investment Review Board to more stringently regulate inbound Chinese investment into the critical minerals sector mirrors these efforts to ensure a more diverse supply chain, while providing opportunities for others.
This global policy shift, as well as Australia’s involvement in the Network, is good news for critical minerals projects in Australia. For more information about the opportunities in Australia’s critical minerals sector or the various investment structures available, please do not hesitate to contact a member of our Resources and Renewables team.
To read more about the emerging issues and opportunities in Australia’s Energy and Resources Industry, including within the critical minerals sector, please click here.