Many will be aware that the European Union has critical minerals legislation, but few understand what it means for their project, or if it even applies to them. What is a critical mineral, and what does it mean for your project? This insight provides a snapshot of the EU’s Critical Raw Materials (CRM) regulations, including the new CRM Regulation that is in the final stages of approval.
Framework – The CRM regulations in Europe were introduced in 2008 as part of the Raw Materials Initiative. These aim to ensure the secure and sustainable supply of raw materials essential to the EU’s economy. As we summarize below, while the CRM regulations have provided support to critical mineral projects since their inception, the new CRM Regulation is set to provide ground-breaking support.
What is a critical mineral? The EU has identified a list of critical raw materials that are essential for the EU’s strategic interests and have a high risk of supply shortage. The list is based on certain criteria, including the economic importance of the materials, their supply risk, and the difficulty in finding substitutes. The updated list, published in 2023, includes 34 critical minerals which include lithium, bauxite, copper, manganese, nickel and helium.
Other legislation – The EU also has legislation in place to regulate the use of certain CRM, such as the (i) REACH regulation, regulating the use of chemicals in the EU, including critical raw materials; (ii) Conflict Minerals Regulation which requires due diligence on tin, tungsten, tantalum, and gold to ensure they are responsibly sourced; and (iii) Circular Economy Action Plan, promoting a more sustainable use of resources in the EU, which can help to reduce the demand for CRM.
A new CRM law for the EU? The draft ‘Regulation of the European Parliament and of the Council (EU 2019/2020) (“Regulation”) has been released which proposes broad support for critical mineral projects, including funding, expedited permitting and a system for offtakes.
What is a Strategic Project? To obtain the support offered by the Regulation, a project will first have to be classified as a ‘Strategic Project’. To qualify for this status, the project must among other things be a raw materials project that (i) makes a “meaningful contribution to the EU’s supply of strategic raw materials”; (ii) has an expected production volume that can be estimated with confidence; (iii) will be implemented sustainably; and (iv) has obtained a classification according to the ‘UN Framework Classification for Resources’ (UNFC), being a global classification scheme. Upon recommendation of the European Critical Raw Materials Board, the EU Commission may approve the project for strategic status.
What support is provided? Under the Regulation, if a mining project is classified as a Strategic Project: it will be considered to “be in the public interest” and as “having an overriding public interest” with regard to environmental impacts. Strategic Projects will have an expedited permitting process which shall not exceed: (i) 24 months when it involves extraction, and (ii) 12 months when processing or recycling is involved. They will receive financial support from EU Member States, through financing sources which include (i) national promotional banks and institutions, (ii) EU development financial institutions including the European Investment Bank group, and (iii) other financial institutions including the European Bank for Reconstruction and Development. The Commission will also set up a system to facilitate the conclusion of offtake agreements for Strategic Projects which include bid processes for the sale of critical raw materials.
Is the Regulation law? It must still be agreed by the European Council before it enters into force. Once adopted, and as an EU regulation, it will be binding and have direct effect in all EU countries immediately.
At Serus, we have extensive experience in the critical minerals sector. We provide legal services to companies with structuring, project acquisition, and due diligence, and we prepare mining agreements including royalty, JV, construction, and earn-in agreements.
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The contents of this insight do not constitute legal advice and are subject to input from a lawyer.