In brief

On 22 July 2022, the UK government published a policy paper entitled “Resilience for the future: The UK’s critical minerals strategy” (UKCMS). The UKCMS outlines how the UK will secure critical mineral supply chains to ensure the energy transition. It also sets out the UK state support for domestic production of critical minerals as well as enabling the supply from third-party nations. This alert highlights the key points addressed in the UKCMS.

Background

Global transition to energy systems powered by clean energy technologies is one of the biggest transformational changes that the world is undergoing right now. The deployment of clean energy technologies such as solar photovoltaic plants, wind farms and electric vehicles is driving demand for minerals that are vital in the manufacturing of such technologies. Many countries (particularly in Europe) are accelerating their energy transition plans in light of the recent geo-political developments and looking to ensure energy independence through increased investment into clean technologies. Therefore, many governments around the globe are currently working to secure the supply of critical minerals for their countries. Some of them (for example, the USA, the EU, Germany, Australia, Canada and Japan) already have well-developed strategies focusing on securing critical minerals. Now, the UK has officially joined the race.

Key goals of the UKCMS

The UKCMS has three key goals, which are as follows:

  • To accelerate the growth of the UK’s domestic capabilities (including maximising domestic production and increasing recovery, reuse and recycling rates of critical minerals)
  • To collaborate with international partners (including diversifying supply, supporting UK companies to participate overseas in “diversified responsible and transparent supply chains”, and developing diplomatic, trading and development relationships around the world to improve the resilience of supply to the UK)
  • To enhance international markets to make them more responsive, transparent and responsible (including boosting global environmental, social and governance performance (ESG), reducing vulnerability to disruption and levelling the playing field for responsible businesses, developing well-functioning and transparent markets, and championing London as the world’s capital of responsible finance for critical minerals).

List of minerals critical for the UK

Similar to a number of strategies from other countries that have defined lists of critical minerals, the UKCMS provides the initial list of minerals with “high criticality for the UK”. The UKCMS is progressive as it recognises the dynamic nature of “criticality” in the world of fast-developing technology. The list of critical minerals will be reviewed annually by the new Critical Minerals Intelligence Centre, led by the British Geological Survey. In addition, a “watch list” of minerals that are deemed to be increasing in criticality will be published by the Critical Minerals Expert Committee from time to time.

UK state support for critical minerals

A significant amount of state support and private investment into the critical minerals sector is required to match the demand with the supply. In many cases, the recent critical minerals strategies that we see emerging around the globe mean not only substantial policy and state support for domestic production of critical minerals, but also state support focused on enabling the supply from third-party nations by making funding or other types of support available, with export credit agencies playing a key role.

The UKCMS is not an exception. It lists a number of existing financial support opportunities for UK businesses within the critical minerals supply chain, including the Automotive Transformation Fund, the Industrial Energy Transformation Fund, the National Security Strategic Investment Fund and the role played by the UK Infrastructure Bank (a new, government-owned policy bank, focused on increasing infrastructure investment across the UK) in potentially funding critical minerals supply chains.

It also highlights the importance of the UK Export Finance (UKEF) for funding critical minerals and expressly states that UKEF products can support eligible critical mineral projects, including UK-based projects with potential to export or overseas projects that present opportunities for export of UK goods and services.

Finally, the UKCMS pledges to work with development banks “to direct Overseas Development Assistance (ODA) towards helping like-minded, resource-rich countries develop critical mineral resources in a market-led way that aligns with sustainability, transparency, human rights and environmental goals, and supports our development priorities”.

Deep-sea mining

Deep-sea mining has been gaining momentum due to the rising demand for critical minerals. The UK government made its position clear on deep-sea mining as things currently stand: “The UK has agreed not to support the issuing of any exploitation licenses for deep-sea mining projects unless or until there is sufficient evidence about the potential impact on deep-sea ecosystems”. That said, the door is not closed — the government acknowledged that the UK sponsors two deep-sea mining exploration licenses for UK Seabed Resources to explore a total of 133,000 square kilometres of the Pacific seabed. This project is expected to explore the environmental, regulatory and industrial considerations of deep-sea mining.

International partnerships

The UKCMS highlights the UK’s active participation in a number of relevant international partnerships, including the Minerals Security Partnership, the International Energy Agency, the International Renewable Energy Agency, G7 and a number of bilateral initiatives between the UK and certain countries. There is a particular spotlight on the Minerals Security Partnership, which was entered into in June 2022 at the Prospectors and Developers Association of Canada (PDAC) conference in Toronto by the UK and Australia, Canada, the European Commission, Finland, France, Germany, Japan, South Korea, Sweden and the US. The partnership aims to promote investment into critical mineral supply chains to incentivise diversification in the market.

Conclusion

The UKCMS is an important policy development that will no doubt shape not only the UK critical minerals sector but also the critical minerals supply chains around the world. It acknowledges and reflects the dynamic nature of the industry and is progressive in nature. It also has teeth — the policy statement comes with significant funding opportunities both for the mining industry in the UK and in support of the critical minerals supply chains globally.