germany’s push too secure vital resources for its industrial base has taken its first concrete step with a lithium project investment funded by the newly established Raw Materials Fund. But the pace of deployment has drawn criticism as bureaucratic hurdles and funding disagreements slow progress, notably when compared to more aggressive moves by the United States and other European nations [[1]]. This report examines the challenges facing Germany’s efforts to build a resilient supply chain for critical minerals, and the potential impact on its economic future.
Germany’s efforts to secure critical raw materials took a first step forward with the financing of a lithium project in the Rhine Graben by the country’s newly established Raw Materials Fund, though the pace of investment is raising concerns. The move underscores Germany’s reliance on a stable supply of resources to maintain its position as a leading industrial power.
The fund’s initial investment comes after a delay following its announcement in 2024, a contrast to the more direct approach taken by the United States. In recent months, the U.S. has been actively acquiring stakes in companies and plans to invest $5 billion alongside a private equity firm. Private investors, including banks, are also demonstrating significant interest in projects focused on critical metals.
Bureaucracy Slows German Investment
Germany’s Raw Materials Fund, with an investment volume of $1 billion, appears hesitant compared to other nations. France and Italy, for example, are each investing roughly twice as much through joint ventures with private partners. The Institute of German Economy (IW) has criticized the fund’s limited capital, highlighting a broader issue within Germany’s raw materials policy: conflicting priorities and bureaucratic delays hindering swift action.
Disagreements between the Federal Ministry for Economic Affairs and the Federal Ministry of Finance over funding details resulted in no projects being approved in the first year after the fund’s launch. This slow pace not only delays the production of critical materials but also discourages promising companies from seeking German funding.
“Mining doesn’t wait for German decision-making processes,” according to industry observers. Almonty Industries, one of the few remaining Western producers of tungsten, is set to open the largest Western tungsten mine since the 1970s in South Korea in the coming weeks. With capital readily available for exceptional raw material projects, companies are questioning why they should navigate the lengthy European funding process when faster options exist in the U.S.
Guarantees and Risk Mitigation are Key
Insufficient funding and lengthy procedures aren’t the only obstacles. The current draft of the federal budget allocates only €116.3 million for risk mitigation, significantly less than the originally planned €272.9 million. These guarantees and collateral are crucial for transforming potential raw material projects into operating mines, as state backing unlocks further private sector investment.
Encouraging private investment through guarantees is a more effective approach than direct state ownership of mining companies. Raw material producers should focus solely on the efficient extraction of resources while adhering to legal and regulatory requirements, a goal best achieved when governments provide support through guarantees rather than participating in shareholder meetings.
A significant weakness of the German Raw Materials Fund is its exclusion of early-stage projects – land holdings in promising regions where initial exploration suggests viable deposits. Developing a mine from an early-stage project typically takes at least ten years. These early phases are integral to the process, with each exploration drill or resource estimate contributing to a comprehensive understanding of the potential.
An ambitious raw materials fund should aim to identify promising projects early on to gain a competitive edge in the global race for resources.
KfW Expertise and Clear Priorities are Crucial
The German Raw Materials Fund is leveraging the expertise of Kreditanstalt für Wiederaufbau (KfW), which previously financed Almonty’s Sangdong tungsten mine in South Korea. KfW is capable of investing in early-stage projects and is a thorough and highly competent financing partner. Its mining expertise is critical to the success of the German Raw Materials Fund.
All involved government entities must prioritize securing raw materials. Faster decision-making, coupled with expertise and boldness, will be the most important factor in the global competition for resources.
Lewis Black is CEO of American mining company and tungsten producer Almonty Industries.
