Beneath the Surface – Unlocking development and funding for midstream projects in the UK and Europe

As global demand for critical minerals accelerates, the midstream – the processing and refining of raw materials into usable industrial inputs – is increasingly viewed as a strategically important section of the metals value chain and key to industrial sovereignty. However, despite the strong demand narrative, midstream projects in the UK and Europe face significant challenges.

In this briefing, we identify some of these challenges and explore ways to unlock development and funding for processing and refining projects in the UK and Europe.

Geopolitical and regulatory context

Global processing and refining supply chains are highly concentrated. Through forward-looking industrial policies over several decades and policy-driven vertical integration of supply chains, China has established a significant presence in the global midstream processing and refining market. This has coincided with a wider structural decline in the European industrial and manufacturing sectors. 

From a European perspective, this increases the likelihood of potential supply chain disruptions during periods of international conflict and disruption, trade disputes and market volatility, as highlighted by the COVID-19 pandemic, conflicts in Ukraine and the Middle East, US trade tariffs and China’s tightening export restrictions. This has prompted policy shifts in Brussels and London in recent years towards increased strategic autonomy, supply-chain resilience and industrial competitiveness.  

Recent EU policy measures include: 

• Critical Raw Materials Act (CRMA): legislation (which came into force in May 2024) which aims to strengthen European critical minerals supply chains, including setting targets for local capacity (e.g. by 2030 at least 40% of the EU’s annual strategic raw material consumption should be processed in the EU), identification of strategic projects, acceleration of permitting processes and partnerships with third countries; 
• RESourceEU Action Plan: a €3 billion investment plan to facilitate achieving the CRMA’s objectives through (among other things) coordinated EU financial instruments such as the InvestEU programme and the EU Innovation Fund; and 
• Industrial Accelerator Act (IAA): proposed legislation (published in March 2026 but not yet in force) which aims to strengthen the EU’s industrial base, whilst also supporting the energy transition. Among other things, the IAA will establish additional conditions for foreign direct investments in certain strategic sectors in Europe (namely battery technologies, electric vehicles, solar photovoltaic technologies and the extraction, processing and recycling of critical raw materials) – these conditions include investment through a joint venture with an EU entity, a foreign ownership cap of 49% and technology sharing requirements. 

At a national level, a number of EU member states and the UK have published strategies and enacted legislation aimed at strengthening domestic critical minerals supply chains. For example, in October 2023 the French government published its national critical minerals strategy (Stratégie nationale pour les métaux critiques) and enacted the Green Industry Law (Loi Industrie Verte), which aims to accelerate the reindustrialisation of France and streamline permitting for industrial projects (including mining and processing facilities), and in November 2025 the UK government published its national critical minerals strategy: “Vision 2035: Critical Minerals Strategy” (updated in January 2026).

By contrast, the US government is providing more substantial and targeted financial support for critical minerals projects based in the US through the use of (among other things) direct equity investments, loans and loan guarantees, grant funding, tax credits, public-private partnerships, long-term offtake arrangements and pricing support.

Recent US policy measures include: 

• Project Vault: a proposed strategic minerals stockpiling and offtake programme supported by US$10 billion financing from Export-Import Bank of the United States (US EXIM) and US$2 billion of private-sector investment (discussed further below); 
• Forum on Resource Geostrategic Engagement (FORGE): a proposed international forum of over 50 of the US’s allies whose aim is to strengthen global supply chains through the creation of a preferential trade-and-investment zone for critical minerals with coordinated price floors; and
• Developing Overseas Mineral Investments and New Allied Networks for Critical Energies Act (DOMINANCE Act): a proposed act (passed by the US House of Representatives on 8 June 2026 and currently before the Senate Committee on Foreign Relations) designed to reduce US dependence on China across the critical minerals supply chain by focusing on three key pillars – strengthening US energy diplomacy and allied supply chains, using structured finance to support strategic mineral investments and building long-term domestic capability by investing in workforce expertise. 

In June 2026 the Chinese government announced a new regulation on outbound direct investment (the PRC ODI Regulation), which (among other things) introduces a new outbound investment security review regime (with broad powers to review new transactions and unwind existing transactions), expands existing ODI and export control regulations to cover indirect transfers (including technical services, training and employee secondment arrangements) and PRC citizens, grants powers to take action against organisations engaging in practices deemed discriminatory to Chinese investment and includes penalties for non-compliance (including potential personal and criminal liability). The PRC ODI Regulation took effect on 1 July 2026 and is regarded by many commentators as a response to the EU and others countries’ perceived anti-China industrial policies, notably the EU’s IAA. It follows a series of battery value chain-related technology export restrictions announced by the Chinese government in 2025.

Challenges

There is no shortage of planned processing and refining projects in the UK and Europe – there are currently over 50 proposed critical minerals projects in the UK alone, most of which are midstream or recycling projects. However, inherent challenges have stymied the build out of UK and European midstream capacity. 

Processing and refining critical minerals are technologically complex and capital-intensive. Processing technologies need to be proven at scale before downstream purchasers commit to pay for the product. Without vertical integration, midstream projects are reliant on feedstock supply in a market where supply chains are fragmented and long-term supply contracts are difficult to secure with appropriate mitigants to pricing volatility. On top of all this, European projects face the additional challenges of high energy and labour costs, lengthy permitting processes, onerous regulatory and ESG requirements and fierce competition from other countries (notably China and the US). 

In the remainder of this briefing, we explore a number of financial instruments and structures which can be used to overcome some of these challenges and unlock development and financing for midstream projects.  

Government support

Grant funding

Government grants can be used to fund pilot plants and other early works before the project financing package has been put in place and also provide additional liquidity for construction and commissioning costs post-financial close.

Recent examples of European projects benefiting from government grant funding include:

• Rock Tech’s lithium refinery in Germany, which is receiving up to €100 million in grant funding from the State of Brandenburg and the German Railway Authority; and 
• Easpring Finland’s cathode active materials (CAM) plant in Finland, which is receiving up to €115 million in grant funding from Business Finland.

Direct equity investments

Equity investments by governments (whether directly through government departments or indirectly via government-owned banks/funds such as the UK’s National Wealth Fund (NWF) and Germany’s Kreditanstalt für Wiederaufbau (KfW) in European midstream projects have to date been limited. But there is precedent for this in the European oil and gas and mining industries and in the US, where the federal government has taken equity stakes in a number of US processing projects.

For early development-stage projects, equity investments may be better aligned with the projects’ risk profiles than project finance solutions. Equity investment also ensures alignment of incentives and signals government’s medium/long-term support for projects, reducing perceived change of law/policy risk.

ECA/policy bank support

Multilateral/policy banks (such as the European Investment Bank (EIB)) are able to provide loans, guarantees, direct equity investments and other financial support to projects that meet their investment criteria. Export credit agencies (ECAs) for their part can provide guarantees, insurance, direct loans and other financial products to support projects that meet their eligibility criteria – targeted ECA products include Bpifrance’s Garantie des Projets Stratégiques (GPS) and UK Export Finance’s Critical Goods Export Development Guarantee. ECA support can be tied to the export of goods or services from the ECA’s host country or be “untied”. The participation of Multilateral/policy banks and ECAs can be vital in crowding in other investment and provide assurances that projects align with long-term public interest. 

Recent examples of multi-source project financing packages for European projects include: 

• Keliber's lithium hydroxide refinery project in Finland, which includes a €150 million loan from EIB, a €250 Finnvera covered facility and a €100 million uncovered commercial bank facility; and 
• Vulcan Energy’s lithium extraction and processing project in Germany, which includes a €250 million loan from EIB, a US$235 million loan from Export Development Canada, a €120 million loan from Export Finance Australia, a €100 million loan from Export and Investment Fund of Denmark (EIFO), €373 million Bpifrance and SACE covered facilities, c. €300 million uncovered commercial bank facilities, a €150 million equity investment from KfW and c. €200 million of German government grant funding. 

Other government support

Whilst helpful in providing much-needed funding for projects, the above government support mechanisms do not solve the some of the fundamental structural challenges which midstream projects face, notably uncertainty of supply and pricing volatility. Government support which is specifically designed to address these challenges, such as long-term government offtake/stockpiling arrangements and government price support/flooring mechanisms, can be much more effective in improving projects’ overall bankability. These types of targeted government support mechanisms have not yet been used in the European market, but are increasingly being deployed in the US and elsewhere (e.g. Japan and South Korea). 

For example, the US’s Project Vault (mentioned above) is intended to address (among other things) issues of supply, offtake and pricing uncertainty through a guaranteed offtake mechanism facilitated by the US government. Although full details are yet to be released, it has been announced that the programme will involve the stockpiling of 60 critical minerals (in both raw and processed form) as a strategic reserve. The programme will be demand-led: in return for payment of certain fees and storage costs, participants in the programme will identify the materials they require (including grade and volumes) and make long-term financial commitments to fund the purchase of those materials at a fixed price. Commodity trading firms will then be engaged to source the materials. Participants can withdraw materials from the reserve subject to an obligation to replenish it up to their agreed commitment. 

European/Sino joint ventures 

An emerging trend in European midstream project development is the use of joint ventures between European and Chinese firms. Such partnerships give Chinese sponsors (faced with increasingly saturated domestic markets) a localised footprint in the European market and, of particular significance from a project bankability perspective, European sponsors / joint venture companies access to world-leading Chinese processing technology and operational expertise. European/Sino joint ventures can be structured in a number of ways, but contribution-in-kind type structures (whereby the Chinese sponsor’s JV capex contributions are made in the form equipment or technology rather than cash) may in some cases be well-suited to midstream projects.

Examples of European/Sino joint ventures include: 

• Easpring Finland, a joint venture between Finnish Minerals Group and Beijing Easpring developing a CAM plant in Kotka, Finland;
• Neomat, a joint venture between Orano and XTC developing a CAM plant in Dunkirk, France; and
• LICAMAX, a joint venture between Axens and China Minmetals developing a CAM plant in Saint-Saulve, France.

With European/Sino joint ventures, sponsors and lenders need to factor in a number of requirements, including the outbound and inbound direct investment regimes applicable in both China and Europe, various Chinese export control regimes (including technology and equipment) and, if sponsor support is being provided, the Chinese cross-border security regime (notably State Administration of Foreign Exchange (SAFE) registration). Chinese sponsors and other stakeholders should engage with the relevant Chinese and European regulators at each stage of the project to ensure the joint venture structure complies with all applicable laws and public policy requirements.  

It remains to be seen what impact the IAA and increasingly tougher FDI rules in Europe, on the one hand, and the PRC ODI Regulation and general tightening of Chinese ODI rules, on the other hand, will have on Chinese investment in European midstream projects moving forward.

Other financing structures

In addition to traditional project finance and multi-source finance structures, there are a number of other potential financing structures available to midstream projects. 

Alternative financing structures may include:

• Hybrid PF / corporate finance: Financings supported by creditworthy sponsor guarantees / other sponsor support, with project finance features such as funding shortfall tests during construction and ongoing financial modelling and project monitoring reporting, but lighter corporate-style covenant and security packages.
• Offtake-linked finance: Prepayment and similar offtake-linked finance arrangements (which are frequently used to finance mining projects) can in theory be used to finance midstream projects, although their application in practice has been limited as such arrangements are generally better suited to operating phase projects seeking working capital expansion than greenfield projects. 
• High-yield bonds: A recent trend emerging in European mining finance is for junior miners to raise debt on the high yield bond markets, e.g. Nordic bonds. These transactions tend to have shorter deal timelines, simpler documentation and lighter covenant packages than project finance transactions, which may equally appeal to midstream project developers.