AMEC’s Lucy McClean provided a helpful overview of Critical Minerals, explained why these are important, and the role AMEC plays in supporting the sector. McClean outlined what AMEC and its members hope to see come of the Federal Government’s new Critical Minerals Strategy and the requirement for a more streamlined process for regulatory approvals. At a time when there is a need to accelerate exploration and development, the approval process has never taken longer and been more difficult. McClean stressed the importance of companies and investors grasping the opportunities arising from the current focus on Critical Minerals.

EFA’s Amanda Copping spoke of the role of government in Australia’s burgeoning Critical Minerals sector and the important work EFA does in supporting Australia’s exports and industry supply chains, providing funding for new mining projects and ‘crowding in’ additional private sector financing.  EFA is seeing a high level of inquiry for funding for Critical Minerals projects and coordinates closely with other international export credit agencies and multi-lateral financing bodies on various opportunities.  Copping also spoke about the Critical Minerals Office and the $2 billion Critical Minerals Facility administered by EFA.

Appian is the investment advisor to its two significant global natural resources private equity funds.  Peter Nicholson provided a timely reminder of the importance of project fundamentals in attracting private capital.  Inclusion on the list of Critical Minerals is less important to Appian than a project with credible management, well understood technical risks, and competitive cost and market position.  Nicholson spoke of the collaborative hands-on role that private capital typically takes through the investment period, and also addressed the current trend of declining support for the mining sector from the commercial bank market, the likely reasons for this decline, and what this means for the increasing role of private capital.

Michael Sheridan of VHM brought the unique perspective of a company developing critical minerals projects.  Sheridan shared VHM’s story, current focus on its flagship Goschen rare earth and mineral sands project in Victoria, and spoke of the critical success factors needed in pursuing critical minerals projects.  VHM is currently assessing a range of financing options and strategic partnerships approaching the Final Investment Decision for Goschen.

Frank van Rooyen from NAIF explained key challenges financing Critical Minerals projects including market risk, technical risk and current cost inflation.  For many Critical Minerals, it can be difficult to justify new investment based on historical pricing so both lenders and equity investors must take a view on price outlook for these commodities.  Many Critical Minerals involve technically complex processing which van Rooyen noted increases technical risk for lenders and means pilot plant or demonstration plant testing is often needed. The current high inflationary environment places cost pressure on many new capital projects and van Rooyen noted this is typically addressed through additional equity contribution given debt capacity is constrained by forecast project cashflows.

It was clear from the panel discussion that private capital – be it from private equity funds, private debt funds, commodity traders or end users such as car manufacturers – and government lenders such as EFA and NAIF, are likely to play pivotal roles in financing Australia’s Critical Minerals sector, an evolution in project financing amplified by the contraction of commercial bank specialist mining project teams and related credit risk appetite for the sector.  For private capital this will likely mean a more hands-on approach and higher return expectations than traditional bank financing.  For government lenders, a broader risk-return measure is used that values public benefit from new projects such as job creation and supply chain security.  However, government lenders are not ‘lenders of last resort’ and prefer to play a cornerstone role that facilitates the addition of other commercial lenders.