The contents of this essay are based on conversations during the 7th India-US Forum
Over the past few decades, there has been an uptake in the discourse on critical minerals. The issues that were the domain of a few investment bankers, chemists, and diggers are now at the heart of national and economic security. In the context of China’s decision to use these resources coercively, and its imposition, starting August 2023, of export controls on materials like gallium, germanium, and special graphite, there is a need to construct robust alternative structures and develop a proactive agenda. This report will discuss the risks and opportunities in this domain.
While global concentrations of supply are often discussed, what makes a mineral critical remains largely unexplored. Criticality can be evaluated through a mineral’s industrial value addition and its supply risk, both of which are in constant flux. This dynamism must be factored into assessments of criticality.
In addition to supply dynamics, assessments of criticality should track changes in demand. The surge in electric vehicle (EV) demand in India highlights this dynamism. EV sales rose from 2,399 units in 2014 to 14,442 units in 2020, then to 1.2 million units in 2022–23, and approximately 1.38 million units in 2023–24. When both supply and demand display dynamism, unique coordination mechanisms have to be devised to ensure energy security.
Criticality can also be defined through the risk of weaponization, the risk of market failure, their availability to meet the challenge of the climate crisis, and the urgency that governments have attached to the pace of their energy transition.
Exploration and Data: Advancing Discoveries and Collaborations
Critical mineral exploration is a key area for India. The Ministry of Mines and the Geological Survey of India have prepared more than 100 reports on critical mineral blocks that are ready for auction. More than 200 new projects have been identified for mineral exploration in 2024–25.
India has also made 170 years of critical mineral data publicly available through the National Geoscience Data Repository, information that data analytics and mining companies can analyse to make informed geological predictions regarding mineral locations. Subsequently, exploration projects can be funded by the government. This initiative presents an opportunity for US data companies to collaborate on the repository and support exploration efforts. India has also opened avenues of finance to R&D institutions, scientific and research labs, and start-ups.
In addition, India has recently introduced the auction of exploration rights. The earlier (2015) auction regime hindered junior miners and did not give direct extraction rights to those who discovered minerals. Instead, it mandated an auction process for mining rights. Along with exploration rights, a new exploration license has been established to facilitate this process.
If an area with potential for critical minerals is identified, an exploration proposal can be submitted to the ministry. The exploration rights for the area will then be auctioned. During the auction, junior mining companies can bid on the percentage of the eventual premium the mine would receive upon auctioning. This system provides a regular income to junior miners for their exploration efforts. India also hopes to attract junior mining companies from countries such as the US, Canada, and Australia to bid for these exploration blocks.
In the process of scaling up, the possibility of market failure becomes a central concern. While availability is often emphasized, the cost of delivery is equally vital. The proposed solutions tend to be more expensive than the existing carbon-intensive alternatives. This makes achieving the desired goals significantly more challenging. India and the US can work together to explore alternative solutions through new technology, for instance, by replacing a sodium battery with a lithium battery or the induction of synthetic graphite. The private and R&D sectors can play an important role in developing this technological capability.
The issues are compounded when neither the host country nor the interested country have processing capacities. Bilateral research and development projects for processing present another opportunity for collaboration. A research-based partnership can be based in areas such as critical minerals, energy-storage batteries, optimizing batteries for fast cycle times, longer energy retention, and easier recycling.
Indian ingenuity in getting cost structures right while adhering to the highest standards of sustainable processing is a significant advantage. At the same time, India can adopt operations and processing practices such as beneficiation and use of AI and video analytics from places such as Wyoming. This will support the integration of technology into the basic steps of mining and manufacturing. A three-way dialogue between manufacturers, consumers, and governments is critical to managing market fluctuations.
Recycling is another avenue for cooperation. However, import restrictions are a hindrance for India to become a recycling hub. The sheer scale of requirements for a world-class recycling facility will trigger restrictions that prevent the entry of harmful materials into India. The formulation of an adaptable legal framework with the right purpose can be helpful.
Multilateral engagement
Given these opportunities, multilateral forums can further facilitate accessibility. India’s entry into the Minerals Security Partnership (MSP) as the first non-G7, non-developed country has changed the profile of the organization and provided it greater credibility. India’s colonial past and current position as a focal point of the Global South will support engagement with resource-endowed countries and affirm the commitment to the delivery of benefits.
There is general acknowledgment that India’s involvement in this group has surpassed expectations. The priority is to translate discussions into action. This includes the identification of specific projects with global Indian companies such as Tata and Epsilon Carbon to address existing gaps efficiently. However, this endeavour may take years due to China’s first-mover advantage in this domain.
The signatories to the MSP are committed to identify gaps and mobilize diplomatic energy, trade, finance, and development resources. In addition, they are committed to making clear to producer countries the risks of Chinese offtake, and the importance of other players in the game. MSP signatories are less focused on specific projects in member countries, but hope to offer a viable and trustworthy alternative to producer countries. Given the dynamic nature of this sector, a monthly engagement among all partners and an annual engagement at the ministerial level is needed.
In line with this, the Minerals Investment Network for Vital Energy Security and Transition (MINVEST) is an important initiative under the MSP to build public-private partnerships. India has championed two projects—one in Argentina focused on lithium, the other in Africa centered on rare earths. One of them is close to bankability, and the goal of the MSP is also to mobilize resources from the private sector and development finance agencies to push these projects over the finish line.
The Quad has a unique opportunity to counter China’s overwhelming presence in lithium-producing countries in Africa, Australia, and South America. All four Quad Ambassadors can visit producer countries to promote an MSP project and enable access to critical minerals. The International Energy Agency (IEA) is developing a list of specific critical minerals that member states should stockpile to ensure security and stability in the market.
Private Sector Involvement: Investment Concerns and Risks
There is a general consensus that private sector involvement is crucial for security in this domain. A fundamental consideration for the private sector is the comfort that certain geographical regions and stable, established markets provide. Therefore, major investments are primarily in countries such as India, the US, and the UK. Private sector hesitancy stems from rapid changes in government, which is particularly evident in South America. Concerns about nationalism and possible nationalization of assets compound these challenges. While capital availability is not a problem, there is allegiance towards long-term adherence to commercial terms and assurance of protection from regulatory changes.
Joint policy development with industry stakeholders can address these concerns and ensure sustainable operations. G2G collaboration for investment protection is a step in this direction. The private sector in India can coordinate more with Indian Ambassadors in producer countries for complementary efforts to build trust. The private sector’s concerns about exit strategies have to be addressed as well. For instance, change of control clauses restrict the transfer of underlying rights or assets, which acts as an impediment to investment. Flexible clauses, infrastructural support, and access to green finance will reduce the risk and cost of capital for private projects.
A recognition of interdependence in resource extraction is also critical. For instance, key minerals like spodumene required for lithium extraction come from the US. It is necessary to develop detailed policy frameworks that recognise this interdependence.
A combination of ramped-up domestic manufacturing, increased bilateral asset acquisition, and engagement with multilateral forums is crucial to achieve sustainable economic growth and reduce the dependence on imports. This strategy will not only create jobs and boost the economy, but will also enhance national security and resilience in the face of global uncertainties.
