Vinson & Elkins’ Louise Woods, Kimberly Tayeb and Elena Gillett examine the evolution of the critical minerals debate and its subsequent implications for mining investors, drawing lessons from the energy sector’s years of experience in managing sovereign and regulatory risk.
The global scramble for critical minerals has fundamentally reshaped the mining sector’s investment environment. Extraction of these resources is at the center of increasing geopolitical competition, as governments treat them as strategic assets essential to national security and the energy transition.
A new wave of resource nationalism
State intervention in mining has increased steadily in recent years, driven not by a traditional commodity boom but by geopolitical competition for critical energy transition minerals. As a result, some countries in Africa, Latin America, and Asia have taken steps to tighten government control over these resources, including full nationalization, banning the export of raw minerals, forced local beneficiation, and mandatory state funding. For example, Mexico amended its domestic law in April 2022, declaring lithium to be the exclusive property of the state and prohibiting the granting of concessions to private or foreign companies. Chile announced in April 2023 that the state must hold a majority stake in all projects deemed to be of “strategic value,” African countries such as Mali, Burkina Faso, Niger and Namibia introduced aggressive new mining laws, and the Democratic Republic of Congo imposed a cobalt export ban.
A new paradigm for strategic control
The treatment of critical minerals as national security issues (or “strategic assets”) has also steadily increased, with governments directly acquiring stakes in mining companies, positioning themselves as offtakers, creating strategic reserves, and forming trading mineral alliances on this basis. Recent examples include the US’s ‘Project Vault’ (US$12 billion for critical mineral stockpiles) and the acquisition of a direct stake in MP Materials, a domestic rare earths processor. Meanwhile, G7 members have proposed adjusted floor prices for rare earths, demonstrating a desire to control commodity markets that would have been unthinkable a decade ago.
The increasing link between critical minerals and national security is also reflected in stringent foreign direct investment (FDI) screening. Acquisitions or investments in significant mineral assets by foreign investors may be subject to regulatory review and approval. In parallel, tariffs on both raw minerals and processed products are receiving increasing attention as a policy tool to strengthen supply chains by encouraging domestic production and reducing dependence on foreign imports.
what it means
These developments are creating significant headwinds for both new and existing projects. These include narrowing the investor base, lengthening approval processes, increasing compliance costs, and introducing uncertainty around market access and funding. Therefore, the investment calculation for critical minerals has fundamentally changed. Decisions are no longer driven solely by geology, commodity prices and operating capacity, but must also consider sovereign risk, treaty risk, sanctions risk, social license to operate, and the possibility of regulatory or policy reversals.
To address this changing landscape, the mining industry can learn from the energy industry, which has long operated in an environment of geopolitical risk, regulatory instability, and strategic state involvement.
Investors need to incorporate strong contractual safeguards, such as stability clauses and law reform clauses, into mining contracts, concession agreements and joint venture agreements. These mechanisms ensure compensation and contract adjustments when changes in government policy, such as new tariffs, tax reforms, or export restrictions, significantly impact the economics of a project. Energy companies have long steered investment through a strong network of bilateral investment treaties and jurisdictions with multilateral protections, ensuring access to international arbitration in the case of expropriation or discriminatory regulations. Mining investors can similarly structure their investments to benefit from treaty protection and dispute resolution mechanisms such as the International Center for Settlement of Investment Disputes and arbitration before the Permanent Court of Arbitration, providing an important backstop should political or regulatory risks materialize. Mining companies can diversify their jurisdictional exposure. Large energy companies rarely concentrate their portfolios in one country. Spread your investments across multiple jurisdictions to reduce political and regulatory risk. Mining companies can apply the same portfolio approach to balance projects in riskier, resource-rich jurisdictions with those in more stable regulatory environments. Mining companies need to invest in systematic geopolitical risk monitoring and stakeholder engagement. Energy companies regularly maintain dedicated teams or external advisory networks to track geopolitical developments, sanctions regimes, and regulatory changes. For mining companies involved in critical minerals, incorporating real-time geopolitical monitoring and community engagement into commercial decision-making can help anticipate export controls, investment restrictions, and regulatory changes before they have a significant impact on operations. Additionally, taking advantage of available political risk insurance, such as the Multilateral Investment Guarantee Agency (MIGA), will be more appropriate than before.
As critical minerals become increasingly strategic assets in the global energy transition, the mining sector must adopt the risk management architecture that the energy industry has refined over the decades. Stronger contractual protections, treaty-based safeguards, portfolio diversification, geopolitical oversight, and multilateral risk mitigation tools will enable mining investors to navigate the growing intersection of resource development, geopolitics, and national security.
