With more than 300 new mines needed over the next decade to satisfy the growing critical minerals demand, faster approvals are just one of the catalysts required to ramp up production. Capital can be hard to source, with critical minerals projects often seen as risky by investors and developers due to a lack of understanding of customers and price.
State of Play’s Critical Minerals: Developing Price Transparency report surveyed and interviewed key players in industry, with the aim of understanding how we can bridge the knowledge gap between industry and the broader market, to encourage greater flows of financing into the sector. The key mechanism the research focused on was through transparency of price.
The report found that 55% of respondents believe there is currently very low to low levels of price transparency in critical minerals markets and 84% of industry report transparency of price and supply as an issue in developing critical mineral markets.
Highlights uncovered in the report include:
- The market mechanisms used to deliver critical minerals are immature, opaque, and poorly understood. As it stands there are no central spot prices, no derivative markets, and an overall lack of liquidity.
- The current approach to financing new projects is typically through offtake agreements, with as little as 10-20% remaining outside of these agreements to trade by other means.
- Marketplaces have proven a viable vehicle to enhance price transparency and market maturity in other commodities and are suggested as a vehicle for critical minerals industry players to consider.
State of Play chair, Graeme Stanway says:
“With such a small volume of critical minerals traded outside of offtake agreements, achieving price transparency and a central spot market is incredibly difficult. Greater collaboration from all stakeholders across the value chain is required, particularly with the sharing of information, and banks need to become more comfortable in financing projects that don’t have multiple agreements already lined up.”
“If a critical mass of participants and a global reach is achieved, a successful marketplace could be the key that accelerates price transparency in critical minerals markets, enabling the publishing of trusted benchmark pricing information and spurring the investment required to finance the next wave of critical mineral projects.”