Currently a mere sub-set of “Advanced Materials”, Critical Minerals should soon constitute a separate “sensitive area” for the purposes of the UK NSIA if (as expected) the industry welcomes the Government's proposal in last week's Call for Evidence (CfE) to regulate the sector on a stand-alone basis under the NSIA.
The proposed change underlines the growing importance of the Critical Minerals sector to UK industry and energy transition and a welcome rise in its profile in Government thinking, but the CfE also offers the potential to define the precise circumstances in which corporate transactions in the Critical Minerals sector would trigger a mandatory notification under the NSIA, in a way that takes due account of evolving UK Critical Minerals policy and practice.
Creating and updating a Critical Minerals area
The CfE raises the following questions in relation to Critical Minerals transactions:
#35. Do you understand what activities might bring an entity into scope of mandatory notification requirements, as set out in the Notifiable Acquisition Regulations?
#36. Are there activities specified in the Notifiable Acquisition Regulations that you do not think should be included? If so, what activities?
#37. Are there activities not included in the Notifiable Acquisition Regulations that you think should be included? If so, what activities?
#38. Are there areas of the Notifiable Acquisition Regulations that would benefit from additional guidance? If so, what areas and what guidance?
#39. Are there areas of the Notifiable Acquisition Regulations that would benefit from drafting changes to improve clarity on the activities covered, either by changing drafting within areas of the Regulations or by carving out new areas? If so, what areas?
As a recap (see The New UK National Security and Investment Act: Impact on Mining & Minerals Deals, Guy Winter (fasken.com) ), Schedule 1 of The National Security and Investment Act 2021 (Notifiable Acquisition) (Specification of Qualifying Entities) Regulations 2021) extends the mandatory notification to:
'the "extraction, refinement, processing, production and end of life recovery (in single element, compound or product form)" of any of the following materials:
(i) activated carbon; (ii) antimony; (iii) arsenic; (iv) beryllium; (v) bismuth; (vi) boron; (vii) cadmium; (viii) cerium; (ix) chromium; (x) cobalt; (xi) dysprosium; (xii) erbium; (xiii) europium; (xiv) fluorspar; (xv) gadolinium; (xvi) gallium; (xvii) germanium; (xviii) graphite; (xix) holmium; (xx) indium; (xxi) iridium; (xxii) lead; (xxiii) lithium; (xxiv) lutetium; (xxv) mercury; (xxvi) molybdenum; (xxvii) neodymium; (xxviii) niobium; (xxix) osmium; (xxx) palladium; (xxxi) platinum; (xxxii) praseodymium; (xxxiii) rhenium; (xxxiv) ruthenium; (xxxv) samarium; (xxxvi) scandium; (xxxvii) selenium; (xxxviii) tantalum; (xxxix) tellurium; (xl) terbium; (xli) thulium; (xlii) tungsten; (xliii) vanadium; (xliv) ytterbium; and (xlv) yttrium.'
I would agree that, as proposed in the CfE, the materials themselves should be updated in line with the British Geological Survey’s latest assessment of critical minerals (due for publication early next year). The current description of the relevant activities does, however, give rise to some questions that will hopefully be addressed following the consultation exercise, including:
(1) does “extraction” include test drilling and core sampling during the exploration or development phases of a project, as well as commercial exploitation of a mine during the operation phase?
(2) how is the NSIA intended to apply (if at all) to mining royalties and streaming companies, which may hold an entitlement to a fixed percentage of the net smelter revenue generated by a mine (in the case of royalties) or physical metals (in the case of streams)?
(3) does mere separation of waste streams constitute “end of life recovery” or is some form of hydro, pyro or electro-chemical processing of waste feedstock required?
Splitting Critical Minerals out from the wider world of Advanced Materials which (as the Government notes) “ranges from metals and alloys to semiconductors to nanotechnology” will clearly help focus attention on the activities which could materially impact on the UK's national interests in this vital sector, and we look forward to the outcome of the CfE in due course.