United States President Donald Trump plans to rapidly ramp up critical mineral production. The European Union is working on a list of projects covering the production of battery raw materials at all stages of the value chain. India has announced the National Critical Minerals Mission.
To scale up electric vehicle production and renewable electricity generation, access to a secure and flexible materials supply chain is imperative. While India has started taking steps to proactively pursue critical minerals, it is clear that both India and its Western counterparts are late to the critical minerals party.
India is, in fact, 25 years behind China in efforts to gain access to primary sources of critical minerals. China began extending easy credit to companies mining critical minerals in 2000 through state-sponsored entities, amounting to $56.9 billion, according to a 2025 AidData report.
Easy access to funds
China deployed a multi-pronged strategy of offering easy access to funds — first through an aggressive acquisition lending programme, followed by a series of recurring loans for mine development and expansion, ensuring working capital to maintain operations and secure long-term access to their outputs.Â
In a strategic move, when American mining company Freeport-McMoRan exited the Democratic Republic of the Congo (DRC) in 2016 due to financial strain, Chinese firms acquired its assets with the help of credit from state-sponsored loans.
Much of the acquisition of mines and the securing of extraction and processing operations leverage China’s Belt and Road Initiative, the country’s global infrastructure development project that connects Asia with Africa and Europe through land and maritime networks.
The AidData report revealed a key insight into the loan programme — that it comprised subsidised credit, or loans priced below market rates. In addition, it was all non-public debt. This was facilitated through Special Purpose Vehicle companies or joint ventures, in which Chinese government-owned firms held majority stakes. This structure enabled China to avoid host-country repayment guarantees.
Project funding typically involved Limited Recourse Project Finance (LRPF) transactions rather than sovereign debt transactions to bankroll operations. LRPF is a financing arrangement where lenders’ ability to recover their investment is restricted to the specific project and its generated cash flows. This contrasts with sovereign debt transactions, where lenders can pursue the borrower’s overall assets in case of default.
More importantly, this kind of project financing allows sponsors to fund major projects off-balance sheet. This means the debt used to fund the project does not appear on the company’s balance sheet and has no impact on its credit rating or borrowing capacity.
In comparison, a sovereign debt transaction involves a national government borrowing money — typically by issuing bonds or taking loans — to finance its activities, along with the associated obligations of repayment and interest payments.
Continuous funding for mine development
Mining activities are often capital-intensive, requiring up to a decade of development before operations begin. During this period, the project managing entity requires massive funds for development and expansion. China extended sustenance funds through consecutive loans from state-owned creditors, ensuring that raw materials moved directly to Chinese refineries — units that process 73 per cent of the world’s cobalt and 59 per cent of lithium.
China has provided 66 per cent of loans to 14 mining operations across eight countries: the Toromocho, Las Bambas, and Marcona mines in Peru; the Tenke Fungurume, Kamoa-Kakula, Sicomines, Kolwezi, and Kinsenda mines in the DRC; the Bor mine in Serbia; the Aktogay mine in Kazakhstan; the Phu Kham mine in Laos; the Mirador mine in Ecuador; the Bisha mine in Eritrea; and the Ramu mine in Papua New Guinea.
China’s long-term strategy of gaining access to the most productive mines and operating refinery ecosystems has given it a first-mover advantage that appears difficult to overcome.Â
With demand for critical minerals in key sectors such as electric vehicles expected to grow, India will need to develop strong strategies to build domestic processing capacity and reduce import dependence. The International Energy Agency expects demand for critical minerals to increase by at least 30 times by 2040.
India must combine strategies that ensure access to capital and leverage partnerships such as the US-led Mineral Security Partnership, which emphasises ESG-focused supply chains, and the Quad partnership (comprising the US, Japan, Australia, and India) to secure critical mineral resources.
India could, in fact, use ESG compliance as a unique selling point for building new relationships. Additionally, India could take advantage of infrastructure projects such as the Lobito Corridor rail link, supported by the US and the European Union, which connects ports in Angola to mines in the DRC and Zambia.
While India has started making moves to secure its position in the sector, much remains to be done. In 2023, India identified a list of 30 critical minerals essential for economic development and followed this with the Rs 34,300 crore ($3.9 billion) National Critical Minerals Mission in January 2025 to promote exploration within the country and at offshore locations.
The government has exempted import duty for 12 critical minerals, including cobalt powder and waste, lithium-ion battery scrap, and lead and zinc. Although import duty exemptions reduce the cost of acquisition, they do not address exposure to geopolitical uncertainty. Nor do they address the issue of unavailability of critical materials such as black mass, an intermediate product in EV battery recycling. Europe and China have banned the export of black mass and battery scrap, meaning India will have fewer sources to acquire black mass for critical mineral recovery.
India has about 44.9 million tonnes of cobalt ore resources and 163.9 million tonnes of copper reserves but lacks domestic processing capacity, according to an IEEFA report. In a bid to gain access to these reserves, India has auctioned 22 strategic mineral blocks, of which eight — containing deposits of minerals such as cobalt, phosphorite, graphite, and vanadium — were awarded in November 2024.Â
Exploration projects have also increased in the last five years. The Geological Survey of India had 59 exploration projects in 2020-21, increasing to 122 in 2023-24. Plans are underway to reform mining policy to enable the recovery of critical minerals from tailings or mining by-products, encourage best practices, and establish a state mining index.
However, mining is complex and time-consuming. Exploration and development activities depend on several factors, such as the viability of mining, the concentration of required minerals in the ore, and the timeframes for site development and financing. The June 2024 auction, for instance, did not generate much interest. The government had to annul 14 of 18 auctions due to a lack of technical bids, highlighting industry scepticism about the viability of the blocks being auctioned.
The government has proposed an allocation of Rs 1,500 crore for a production-linked incentive scheme to encourage e-waste recycling and recover EV battery minerals such as lithium, cobalt, copper, graphite, and silicon. The aim is to recycle at least 10 per cent of the nation’s annual consumption to reduce dependence on primary raw materials.
The government is also pursuing the acquisition of critical mineral assets in resource-rich countries. Discussions took place last year with African and Latin American nations to gain access to these resources.Â
The state-owned joint venture Khanij Bidesh India Ltd partnered with CAMYEN, an Argentine state-owned company, in 2024 for the exploration and mining of five lithium blocks in Argentina. Although the deal is relatively small compared to China’s $3.2 billion lithium investments in the country, it is a start.
Much of India’s dependence on imports will likely continue, as domestic mines will take nearly a decade to begin production. However, India’s efforts in critical mineral exploration, auctioning mineral blocks, and securing foreign reserves are moves in the right direction.
