Government cash reshaping mining finance: report

As the United States announces more investments in mining and processing, mining companies and the general public need to be more aware of how the trend is changing the government’s role in the sector, its economy and control, a new study argues. 

Governments are moving beyond regulating critical-mineral projects to become lenders, investors and customers, reshaping how mining companies finance projects and who ultimately holds influence over their output, GEM Mining Consulting says in the report. 

The shift means that companies seeking public funding must compete on more than geology, costs and conventional bankability. They increasingly need to meet government requirements covering product origin and qualification, domestic or allied content, workforce, reporting and security of supply. 

Washington’s recent backing of critical-minerals projects illustrates the scale and variety of that involvement. It included a conditional loan of about $1.4 billion for Sila Nanotechnologies, which will build a lithium-ion battery cell manufacturing plant, and $400 million for Australia’s Sunrise Energy Metals (ASX: SRL), which will build the world’s first primary scandium mine. President Donald Trump also announced more than $180 million for mining education and workforce development.

The estimated $2 billion commitment shows how federal support can’t be considered the same thing for all beneficiaries, as all of them will have different goals, purposes and rights.  

All these different types and quantities of government funds will have different results in the long term, GEM’s study argues. A large loan, for example, can lower the cost of capital for a project moving toward commercial scale, while a much smaller grant could prove more consequential if pilot testing or customer qualification unlocks substantially more private financing. Education funding doesn’t directly increase mine production but could ease workforce shortages affecting multiple projects. 

Global models 

The U.S. isn’t alone: Canada, Australia, the European Union (EU) and Japan have developed their own approaches to financing mining and critical-mineral supply chains. GEM’s analysis shows that no major system relies on a single funding tool. 

The U.S. uses the broadest mix of loans, equity, grants, purchase rights and stockpiles, while Canada puts greater emphasis on infrastructure and equity participation. Australia combines financing with output rights and strategic inventories, the EU emphasizes public credit, grants and permitting coordination, and Japan focuses on financing, offtake and deployable stockpiles. 

All this information should be made readily available to the public through a credible public database, GEM says.

Guarantees and insurance should be reported as contingent exposure rather than money already spent, while repayments, fees, equity value and recovered rights should also be disclosed.  

Matching funds 

Mining projects should choose a jurisdiction not by how much capital they offer, but which one can help them solve their issues and what comes with it, GEM says.  

Canada, for instance, may be particularly suited to remote projects requiring corridors and shared infrastructure, while EU programs may better fit integrated mining and processing projects supplying European customers. Japan’s system is geared toward overseas supply linked to Japanese users, while Australia’s approach suits projects that can provide allied supply and strategic reserve services. 

Governments should try to manage the capital they are planning to invest in the sector as a portfolio and make support staged and conditional, GEM says.  

These models can be replicated in other countries, as long as a similar framework is used, aiming to convert a credible project into qualified and reliable supply.  

The study’s final test is whether government involvement produces development that wouldn’t otherwise occur. Without that added value, public financing risks merely replacing private capital or granting governments strategic rights over projects that would have proceeded anyway.