Coming Investment Market Boom Revolves Around Critical Minerals

Critical minerals essential for defense, digital, and clean energy technologies are in high demand, and the Trump administration is opening the door for a surge in partnerships to increase domestic production.

These minerals, such as lithium, cobalt, and copper are among the fastest growing commodities globally and represent a significant opportunity for investors and developers of projects and related infrastructure. McKinsey estimates that $250 billion-$350 billion will be needed for new copper and nickel critical minerals projects by 2030. This growth could create a trillion-dollar market in the wider critical minerals industry by 2050.

However, they are also subject to supply chain risks. Lithium, a vital component for advanced battery chemistry, has its production heavily concentrated in Australia, Chile, China, and Argentina. After extraction, lithium must then be refined to meet specifications for commercial use, adding another tenuous link to the supply chain.

Companies such as Tesla have made large investments to increase domestic processing facilities for lithium. However, foreign dominance in processing means that even with increased domestic production, many raw materials are shipped to China ahead of being used in electric vehicle batteries and other end products.

This reliance on non-US supplies and processing has led the US Department of Defense to invest in lithium as a critical mineral for national security and economic stability. With demand for lithium expected to outpace supply by 2030, increases to domestic capabilities will be needed to match.

US Production Directives

President Donald Trump has issued several executive orders to support the increase of US production of minerals intended to address national and economic security risks posed by foreign mineral production and further narrow the gap between increasing demand and the capital required.

Starting his first day back in office, Trump started rolling out an energy agenda that centered on the importance of domestic production and refining of critical minerals.

Unleashing American Energy. One of Trump’s Day One executive orders aimed to establish the US as the leading producer and processor of rare earth minerals by removing regulatory barriers and opening more public lands for mining. Market actors are monitoring the pause of disbursements of funds under the Inflation Reduction Act until a review ensures alignment with the policies of the Trump administration, which include increasing the production and processing of critical minerals in the US.

Declaring a National Energy Emergency. Another Day One order identified critical minerals as a top priority and the lack of resource development as an “extraordinary threat” to the US economy and national security and directed agencies to expedite the completion of all authorized projects.

Establishing the National Energy Dominance Council. On Feb. 14, Trump issued an order establishing a council to advise him on how best to make America energy dominant on the world stage, including improving processes for permitting, production, and export of critical minerals.

Immediate Measures to Increase American Mineral Production. On March 23, Trump issued an order to boost US minerals security by expediting permitting for “priority” mining projects on federal lands through the Defense Production Act and using financing programs such as the US International Development Finance Corporation to fund domestic mining projects.

Private Sector Partnerships

To meet rising demand and to address supply chain issues, sponsors are exploring new sources of capital and financing structures for projects along the entire supply chain, from extraction to processing and refining, which are typically capital intensive and require long lead times.

The market is seeing more strategic mergers and acquisition, including between industry participants. There has also been a growing trend of major oil and gas companies and oilfield services companies investing in direct lithium extraction—an efficient alternative means for sourcing the key critical mineral.

Joint ventures are also on the rise, with partnerships forming between large mining majors and smaller mining companies, and inter-industry collaborations. For example, General Motors and Lithium Americas formed a joint venture for the Thacker Pass project, with General Motors investing $625 million in direct equity. The anticipated production is expected to support up to 800,000 EVs and reduce reliance on non-US suppliers.

On April 1, Lithium Americas and General Motors announced they took a final investment decision for the development and construction of Phase 1 of the Thacker Pass project and had satisfied all remaining equity capital financing requirements under the previously announced $2.26 billion loan from the Department of Energy.

Grants, loans, and tax credits established under the Biden administration have been crucial for supporting the development of large-scale critical minerals projects and related infrastructure that can underpin a domestic circular economy for critical minerals, spanning the value chain from mining, processing, and refining of raw materials, to the recycling of end products.

The Department of Energy Loan Programs Office, through programs such as the Advanced Technology Vehicles Manufacturing initiative, opened new avenues for sponsors seeking project debt financing to construct these projects that would otherwise face challenges in obtaining debt from private sector financing sources.

We expect that recent executive measures intended to increase US mineral production through unlocking “regulatory bottlenecks” and establishing recommended strategies for expediting domestic mineral production will result in a significant increase in public and private partnerships, additional sources of capital, and new financing structures to meet the significant demand from industries that rely on critical minerals to remain competitive.

This article does not necessarily reflect the opinion of Bloomberg Industry Group, Inc., the publisher of Bloomberg Law and Bloomberg Tax, or its owners.

Author Information

Rebecca Seidl is partner in the global projects department of Baker Botts’ Houston office and leads the firm’s critical minerals and metals subsector.

John Papaspanos is partner at Baker Botts, focused on debt and equity financing transactions involving energy and infrastructure projects and companies.

Tyler Kendler is an associate at Baker Botts.

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