Securing long-term buyers for critical minerals will be crucial to unlocking investment in new mining projects, according to senior financiers from Australia, the United States and Germany.

Speaking at the International Mining and Resources Conference (IMARC) in Sydney today, representatives of Export Finance Australia, US EXIM and Germany’s KfW IPEX-Bank said governments were developing new financing mechanisms to help critical minerals projects get off the ground, but securing commitments from downstream customers remained a key challenge.

KfW IPEX-Bank Chief Executive Officer Belgin Rudack said offtake agreements were important to give financiers confidence in the future cash flows of new projects.

“Offtake plays a very, very important role in the financial structuring,” Ms Rudack said.

She said manufacturers and other industrial customers needed to play a greater role in supporting new supply chains, pointing to Australian rare earths developer Arafura as an example of cooperation between financiers and prospective customers.

Arafura’s Nolans project in the Northern Territory has attracted significant German support, including a €50 million equity commitment from Germany’s Raw Materials Fund, project financing support and a binding offtake agreement with wind turbine manufacturer Siemens Gamesa.

Export Finance Australia Chief Executive Officer John Hopkins said offtake agreements were an important factor in assessing projects, although financiers were increasingly considering potential future demand when supporting early-stage developments.

He said that international agreements, including the Australia-US critical minerals framework and cooperation with Germany, also played a role in signalling demand and encouraging investment.

“Offtake, yes, clearly as a financier I want to see it and make sure it’s an obligation in the agreements we put in place, but surrounding that you do want to see political motivation and impetus, and you want to see that very clearly at the highest level,” he said.

Noting the significant delegation from Germany, including financiers and government representatives, Mr Hopkins added: “The fact that [people] are willing to send out senior delegations [to IMARC] gives us the incentive to be more creative with our financing for those particular countries and entities.”

“Success for all the ECAs is about transacting. It is not about talking. How can we get these deals to the bankability stage, and how can we get these deals across the line?”

 

New financing tools to support supply chains

US Export-Import Bank Senior Vice President and Chief of Staff Alyssa Pettus said international cooperation had accelerated from identifying problems to developing solutions and progressing specific projects, highlighting Project Vault as an example.

Backed by up to US$10 billion in EXIM financing and nearly US$2 billion in private-sector investment, Project Vault is establishing a strategic critical minerals reserve designed around the needs of US manufacturers.

Ms Pettus stressed that the initiative should not be viewed as a conventional government stockpile, but as a market-driven mechanism.

“It’s a first of its kind resiliency tool. It’s not a traditional stockpile,” Ms Pettus said.

Under the initiative, manufacturers identify the minerals and quantities they need, helping to align procurement with demand and support the development of domestic and allied supply chains.

Australia is also developing a Critical Minerals Strategic Reserve and expanding its equity investment capabilities, which Mr Hopkins said would provide further mechanisms to make projects commercially viable.

The discussion, How Global Export Credit Agencies Are Financing the Next Generation of Critical Mineral Projects, was moderated by Abigail Hunter, Executive Director of the Center for Critical Minerals Strategy at Securing America’s Future Energy.

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