PAYNE INSTITUTE COMMENTARY SERIES: COMMENTARY

By Kruthika A. Bala and Robert J. Johnston

November 12, 2025

Abstract

This paper introduces the Critical Metals, Minerals, and Materials (CM3) taxonomy, a structural–financial model for assessing mineral bankability. Unlike conventional criticality frameworks that focus on geological scarcity or import dependence, CM3 identifies the economic and institutional conditions that determine whether projects can attract private investment. It links observable market, technical, and commercial structures to distinct types of financial risk, explaining why some materials remain uninvestable despite strategic importance. By integrating resource security with industrial finance, the taxonomy complements existing USGS and DOE lists and provides policymakers with a framework for prioritising interventions where private capital fails to flow.

Introduction

Governments around the world, including the United States (US) and Canada, have created long lists of “critical minerals.” These lists have raised awareness, but they are growing unwieldy. The US has progressively expanded its definition of “critical minerals” rising from 35[1] in 2018 to 50 in 2022, and to 54[2] in the 2025 draft, with final 2025 list now comprising 60[3] materials deemed essential to the economy and national security.

Current approaches focus heavily on supply chain vulnerability –  measuring import dependence or concentration of production. These are important metrics, but they only describe where the risk lies, not why the risk exists or how to fix it. The result is that critical minerals lists often become long “to-do” rosters without clear hierarchy or actionable guidance.

Most lists still emphasise geology and reserves, but supply chain disruptions usually occur elsewhere, during refining, chemical conversion, or customer qualification. The best evidence comes from rare earths, which remain the most visible and extreme example. But this pattern is systemic. Across a wide range of materials including lithium, cobalt, graphite, manganese, gallium, and germanium, the real bottleneck lies in refining and chemical processing, not in ore extraction. Rare earths are not an outlier; they are an early warning of a broader structural challenge.

Earlier frameworks for assessing criticality, such as the European Commission’s Critical Raw Materials methodology (2010–2023), the Yale-Graedel material criticality matrix[4], and the US National Academies’ 2024 critical minerals framework[5] have primarily emphasized geological availability, supply concentration, and substitutability as key criteria. These models have been valuable for identifying which materials are vulnerable to supply disruption but have offered limited insight into the underlying economic, institutional, and market factors that explain why investment often fails to mobilize despite widespread recognition of strategic importance. The CM3 taxonomy extends this tradition by introducing bankability as a structural dimension of criticality, linking observable market, technical, and commercial characteristics to financing outcomes and thus bridging resource security with industrial finance.

Traditional lists tell us what is critical. The CM3 taxonomy explains why those materials remain uninvestable. It moves the analysis from geological scarcity to financial structure. Instead of asking which minerals are important, it asks why some can attract private investment while others cannot.

In this paper, bankability refers to the ability of a project to attract private capital under standard commercial terms, without reliance on extraordinary government guarantees or interventions. It represents the practical intersection of technical feasibility, market structure, and financial risk tolerance. Whereas criticality measures strategic importance, bankability measures investability.

Methodological Approach

The CM3 taxonomy was developed through comparative analysis of mineral market structures, investment data, and industrial financing conditions across more than a dozen metals and materials. Each category emerged inductively from observed variation in pricing mechanisms, processing pathways, and offtake structures, rather than from theoretical classification. This typological approach allows the framework to be descriptive enough for empirical application and diagnostic enough for policy design. 

From Criticality to Bankability

The Critical Metals, Minerals, and Materials (CM3) Taxonomy introduces a new lens for assessing vulnerability. It focuses on bankability – the ability of projects to attract private financing without extraordinary government intervention. The question it answers is simple: under what conditions will capital actually flow?

The framework is descriptive in structure but diagnostic in purpose. It defines the physical, market, and commercial realities that shape financing conditions, and then shows how these translate into three types of risk:

1. Financial risk, driven by market size and pricing structure.
2. Technical risk, shaped by production pathways such as refining and conversion.
3. Commercial risk, determined by the quality and concentration of offtake.

Together, these three dimensions explain why some materials attract stable investment while others remain dependent on subsidies or state guarantees.

Table 1 summarises the causal logic linking structural features, risk types, and bankability outcomes in the CM3 framework.

Why It Matters for Policy

The CM3 framework does not replace the USGS or DOE lists. It complements them. While the existing lists diagnose where vulnerability exists, CM3 explains why markets fail to correct it. This allows policymakers to match the right tool to the right barrier, whether that means improving price transparency, de-risking midstream investment, or underwriting offtake.

In short, CM3 bridges resource security and industrial finance. It helps governments prioritise not just which minerals are critical, but which markets are structurally unbankable through traditional capital markets without targeted support.

I. Market Size and Pricing Structure

Market structure determines whether a project can generate predictable cash flow, and therefore whether it can attract private finance. Predictable does not mean free from volatility, but rather the presence of deep and liquid markets that are generally well functioning.

Metals markets fall into three broad categories: exchange-based, index-based, and specification markets, listed from most to least bankable.

Exchange-based markets

Metals such as copper, aluminum, and zinc are traded on large public exchanges like the London Metals Exchange (LME). These markets have transparent pricing, deep liquidity, and futures contracts that allow producers and buyers to hedge their exposure. Because price discovery is open and continuous, investors view revenue from these projects as relatively more predictable and therefore more bankable.

Even these markets are not risk-free. The 2022 LME nickel crisis showed that liquidity shocks and speculative positions can disrupt trading. In that case, a large short position, a mismatch between low- and high-purity nickel, and low physical stocks triggered a short squeeze that briefly froze the market. Yet the event was a financial failure of risk management, not a structural weakness in the market itself. Projects producing exchange-traded metals remain largely self-financing, with government support needed only during extreme market stress.

Index-based markets

For materials such as lithium, manganese, and vanadium, pricing is determined not by a public exchange but by private industry indices, published by agencies such as Fastmarkets or Argus. These prices are based on surveys of actual transactions, bids, and offers, but are not transparent to the wider public to the same extent as exchange-traded markets .

In these index-based systems, a processor’s profitability depends on the volatile “spread” between the cost of its raw feedstock (for example, spodumene concentrate) and the selling price of the refined product (for example, lithium hydroxide). The two prices are set in distinct, thinly traded markets with different dynamics, making the spread unpredictable. When feedstock prices rise faster than refined product prices, processor margins can collapse or even turn negative.

Unlike exchange-traded metals such as copper cathodes or aluminum ingots, where both input and output prices can be hedged, index-priced markets offer few reliable tools for managing price risk. As a result, standalone processing facilities face major financing challenges. For instance, lithium converters in Argentina or Australia often face margin compression when spodumene prices rise faster than hydroxide or carbonate prices, a volatility that has led governments and buyers to explore contracts-for-difference and revenue-stabilization mechanisms.

Specification markets

At the most complex end are materials such as graphite anode, niobium, and scandium. These rely on private or bilateral pricing and, crucially, cannot be sold until they pass stringent qualification tests with end users. For investors, this means long periods of pre-revenue exposure and a real possibility of commercial failure even after capital is sunk. For example, several early scandium ventures such as Clean TeQ’s Syerston (now Sunrise Energy Metals) and certain junior graphite anode developments in Canada and Australia such as Evolution Energy Minerals (Chilalo project) have faced multi-year qualification delays that exhausted capital before achieving offtake approval.

Projects in specification markets are therefore the least likely to secure private finance without government intervention. Public support often takes the form of early-stage qualification funding, pilot plant construction, or ramp-up guarantees. Government support can take many forms, from pilot and qualification grants to strategic co-investment motivated by both financing and geopolitical considerations. For example, Canada’s recent investments in Rio Tinto’s scandium project[6] and Nouveau Monde Graphite[7] were as much about reducing Chinese processing dominance as overcoming qualification barriers, reflecting how strategic and financial rationales often converge in critical minerals policy. 

Policy takeaway

Differences in transparency and liquidity translate directly into differences in bankability. Exchange-traded metals have relatively stable, predictable revenue streams. Index-based markets suffer from volatile processing spreads and opaque pricing, both of which reduce transparency and increase financial risk. Specification markets face both volatility and qualification risk. The policy response should therefore be targeted: strengthen market transparency and hedging tools for index-based materials and use direct public support to unlock early-stage qualification for specification-based ones.  For example, Arcadium Lithium’s[8] (formerly Livent) integrated lithium operations in Argentina illustrate how vertical integration can partly offset spread volatility in index-priced materials like lithium. Yet this strategy requires balance-sheet scale and is rarely feasible for junior developers, highlighting why most standalone projects still depend on public or OEM-backed financing.

II. Production Pathway: Refining, Conversion, and Secondary Production

For many critical minerals, mining is only the first step. The real value,  and most of the risk lies in what happens next: refining, conversion, and qualification. These midstream processes determine whether a mineral can become an industrial input. Without them, even abundant resources remain economically stranded.

Refining and Conversion Complexity

Minerals such as lithium, rare earths, and graphite require multiple technical steps before reaching end-use industries. Lithium mines cannot supply batteries without chemical converters; rare earth mines cannot serve magnet producers without separation plants; graphite cannot enter electric vehicle supply chains until it is purified and coated into anode material.

Each additional processing stage increases technical risk, capital intensity, and project duration. For investors, these features translate into longer payback periods and higher uncertainty, a combination that lowers bankability.

By-Product Dependence

Some strategically important materials, including cobalt, rhenium, tellurium, gallium, indium, and bismuth, are not mined directly. They are recovered as by-products from host metals such as copper, nickel, zinc, or aluminum. This creates a structural paradox: supply of these critical materials depends entirely on the economics of unrelated commodities.

When demand or prices for the host metal fall, by-product recovery declines even if the by-product itself is in short supply. The result is a fragile and unpredictable supply chain that discourages investment in dedicated recovery or refining facilities.

Traditional critical mineral lists have tended to overlook this dependency. However, newer assessments, including the 2025 draft USGS Critical Minerals List and the 2023 DOE Critical Materials List now incorporate this interdependence explicitly. The US Geological Survey, for example, uses advanced input–output modeling to capture how a disruption in one host-metal supply chain affects availability of its by-products. This represents a major step forward in analytical sophistication but remains primarily diagnostic; it identifies where vulnerabilities exist, not how to make projects financeable.

Policy Tools for Midstream and By-Product Risk

Governments can address these structural risks through targeted measures:

• Premiums for by-product recovery: Paying smelters and refineries incremental incentives to maintain recovery circuits through commodity cycles.
• Recycling and circular supply incentives: Supporting recovery from tailings, slag, or scrap to reduce dependence on primary host-metal production.
• Strategic inventories: Maintaining small, refined stockpiles of by-products to stabilize recovery economics during downturns.
• Processing backstops: Co-investing in refining or separation capacity and maintaining strategic stockpiles or price-floor mechanisms, as recently endorsed by the G7 and Canada, to stabilize recovery economics where private financing remains insufficient. 

Base metals like copper, nickel, and aluminum illustrate the opposite case. Their refining steps are standardized and globally distributed, producing consistent, high-purity products. However, current tightness in copper concentrates and pressure on smelter TC/RC margins highlight that even mature systems face cyclical stress despite structural stability.

In contrast, for materials dependent on complex midstream processing or by-product recovery, private investment remains limited. Here, government intervention plays a critical role in maintaining continuous processing capacity and de-risking early-stage projects.

Policy takeaway

Greater production complexity increases capital intensity and lengthens project timelines, which lowers investor appetite for standalone midstream projects. For policymakers, the focus should be on de-risking processing, not just promoting new mining. Financial incentives for refining, separation, and by-product recovery are often more effective in securing supply resilience than expanding upstream extraction. The recovery of gallium from alumina refineries and germanium from zinc smelters illustrates how by-product dependence ties critical mineral supply to unrelated host-metal cycles, reinforcing why midstream co-investment is essential to maintain continuous recovery capacity[9].

III. Quality of Offtake: Market Access and Buyer Concentration

A mineral can be mined and refined, but it is not bankable unless it can be sold. The ability to secure predictable, long-term sales depends on how many buyers exist and how difficult it is to qualify with them. In many critical mineral markets, the problem is not supply but market access.

Market accessibility in CM3 has two dimensions: buyer concentration and qualification burden. Buyer concentration limits who producers can sell to, while qualification burden determines how hard it is to sell at all. Together they explain why engineered or speciality materials, facing both narrow buyer bases and long certification cycles, sit lower on the bankability ladder than exchange-traded or by-product materials.

Concentrated Demand: Monopsony and Oligopsony Risk

A small number of dominant buyers, often in aerospace, defense, or advanced manufacturing control demand for certain high-specification materials. These buyers set technical standards, negotiate contract terms, and can delay or refuse purchases. This concentration of demand creates monopsony or oligopsony conditions, where producers have little pricing power and limited ability to secure financing.

Markets for scandium, beryllium, and hafnium illustrate this challenge.

• Scandium is used in aerospace alloys, solid oxide fuel cells, and additive manufacturing. Only a handful of global buyers, such as aerospace primes or specialized fuel cell manufacturers, dominate demand. Producers face long qualification cycles and high purity requirements. Because scandium is usually a by-product, supply cannot adjust flexibly, giving buyers leverage over contract terms and pricing.
• Beryllium is used mainly in defense, telecommunications, and medical devices. Supply is controlled by a few refiners and fabricators (for example, Materion in the United States). Extreme purity standards and mandatory government or industry qualification make entry difficult, leaving new producers dependent on a narrow set of government or defense-related buyers.
• Hafnium is a by-product of zirconium refining, with a 1:50 production ratio. Its uses in nuclear control rods, turbine superalloys, and semiconductor manufacturing are specialized, and its buyers few. Each requires ultra-pure, long-term qualified supply, creating a structurally inelastic market controlled by refiners and large end-users.
• Across all three, demand concentration and lengthy qualification requirements limit producers’ bargaining power and delay cash flow, making these projects difficult to finance without guaranteed offtakes or government backing.

Qualification Barriers: Technical Market-Entry Risk

Some materials face a second constraint: products must pass strict performance and safety tests before any commercial sale. Graphite anode material, niobium alloys, and scandium-based products are examples where qualification cycles can take years and success rates are low. Qualification cycles for graphite anode material and scandium-aluminum alloys can exceed three years, according to data from Benchmark Mineral Intelligence[10] and industry disclosures, with many junior developers failing to advance beyond pilot stage. For investors, this creates extended pre-revenue exposure and uncertainty even after major capital expenditure.

Policy Tools for Market Accessibility

Governments can help expand market access by:

• Supporting multi-buyer qualification: Funding shared testing and certification facilities to speed up market entry.
• Anchoring offtake demand: Using public procurement or offtake pools to provide predictable initial sales volumes.
• Encouraging buyer diversification: Coordinating allied-market access through initiatives such as the G7 Critical Minerals Partnership and emerging NATO supply-chain frameworks to reduce monopsony risk and enhance competition among end-users.

Policy takeaway

Buyer concentration defines how many doors a producer can knock on. Qualification risk determines whether those doors open. Both constrain revenue certainty and therefore bankability. Addressing these barriers requires a dual strategy: broaden the buyer base and shorten the qualification timeline. Markets with few buyers and high qualification hurdles will not self-correct, they require deliberate policy intervention to create competitive and transparent offtake opportunities. Recent attempts to commercialize scandium – aluminum alloys highlight how lengthy qualification timelines and concentrated buyer power delay cash flow, even when the underlying product meets or exceeds performance standards[11].

Table 2 The CM3 Bankability Ladder: Linking Structure, Risk, and Policy Levers

Materials move down the ladder as market transparency, processing simplicity, and buyer diversity decline. Policy interventions should correspond to the structural bottleneck rather than the mineral’s strategic importance alone.

IV. Conclusion: From Lists to Leverage

Traditional critical mineral lists identify which materials matter. The CM3 taxonomy explains why some are investable while others are not, and what governments can do about it. Bankability is not a single attribute but the outcome of three structural realities:

• Market Size and Pricing Structure determines how predictable revenues are. Exchange-traded materials (like copper and aluminum) have transparent benchmarks and deep liquidity, making them naturally bankable.
• Index-traded materials (like lithium or manganese) suffer from volatile margins and opaque pricing, requiring spread insurance or contracts-for-difference.
• Specification-based materials (like graphite or niobium) face both price opacity and qualification risk, making them dependent on public support.

Production Pathway determines how complex and capital-intensive the route from ore to product is.

• Standardized refining steps, as in copper or aluminum, attract private capital easily.
• Multi-stage processing and by-product recovery, as in cobalt or gallium, introduce technical and timing risk that reduce bankability.
• The policy lever here is targeted midstream investment – refining, conversion, and by-product recovery, rather than only more mining.

Quality of Offtake determines whether the product can find a market.

• Concentrated or monopsonistic demand (as in scandium, beryllium, or hafnium) constrains revenue certainty.
• Long, uncertain qualification cycles delay cash flow.
• Public procurement, shared qualification facilities, and allied-market coordination can expand buyer diversity and improve market access.

Taken together, these three dimensions form the Bankability Ladder, a framework that reveals where private markets can operate unaided and where policy intervention is essential.

Policy takeaway

Rather than expanding lists, governments can use the CM3 taxonomy to prioritize intervention where it yields the greatest leverage:

• Financial interventions (e.g., price floors, spread insurance) for index-traded markets.
• Technical interventions (e.g., midstream co-investment) for complex production pathways.
• Commercial interventions (e.g., guaranteed offtakes, qualification facilities) for markets with limited buyers.

This approach moves critical mineral policy from identification to implementation – from lists to leverage.

Scope and Limitations.

The CM3 taxonomy is intentionally structural and diagnostic rather than predictive. It maps where private capital faces structural barriers but does not quantify probability of project success or return. Its strength lies in revealing causal patterns that can guide targeted policy interventions. Future empirical work could translate these qualitative dimensions into measurable indicators of financial risk.

References

[1] https://www.usgs.gov/news/national-news-release/interior-releases-2018s-final-list-35-minerals-deemed-critical-us#:~:text=List%20Includes%2035%20Minerals%20Deemed%20Critical%20to,35%20critical%20minerals%20under%20Executive%20Order%2013817.

[2] https://www.usgs.gov/news/science-snippet/department-interior-releases-draft-2025-list-critical-minerals

[3] https://www.federalregister.gov/documents/2025/11/07/2025-19813/final-2025-list-of-critical-minerals

[4] https://www.mmta.co.uk/wp-content/uploads/2017/02/Environmental-Science-and-Technology-Methodology-of-Metal-Criticality-Determination-Graedel-et-al-Yale-2011.pdf

[5] https://me.smenet.org/wp-content/uploads/sites/3/2025/04/Feature_USGS-Critical-Minerals-Review_May-2025_Proofs-for-Checking.pdf

[6] https://www.riotinto.com/en/news/releases/2025/rio-tinto-and-canada-growth-fund-announce-transaction-to-advance-canadian-production-of-scandium

[7] https://www.canada.ca/en/natural-resources-canada/news/2025/10/backgrounder-canada-unlocks-25-new-investments-and-partnerships-with-9-allied-countries-to-secure-critical-minerals-supply-chains.html

[8] https://s203.q4cdn.com/709125885/files/doc_presentations/2024/August/Arcadium-Lithium_Corporate-Presentation-IR-August-2024.pdf

[9] https://www.csis.org/analysis/beyond-rare-earths-chinas-growing-threat-gallium-supply-chains

[10] https://www.datocms-assets.com/65260/1669096065-syr_benchmark_anode_and_graphite_conference_presentation.pdf

[11] https://scandium-canada.com/scandium-canada-updates-on-its-proprietary-aluminum-scandium-alloys/

ABOUT THE AUTHORS

Kruthika A. Bala
Managing Director, Resources Now
Kruthika brings over two decades of experience in driving growth, innovation, and impact at the intersection of global energy, industrial development, climate solutions, and natural resource management. Based in London, she is the Managing Director of Resources Now, where she leads advisory and consulting work across energy markets, critical mineral supply chains, and geopolitics, advancing strategies that underpin industrial development, economic resilience, and energy security. With previous leadership roles at J.S. Held, Eurasia Group and Frost & Sullivan, Kruthika has led strategic engagements with executive teams in navigating multifaceted geopolitical, market, and decarbonisation challenges. She advises organisations through complex challenges across energy, technology, policy, and sustainability, bringing together technical insight with extensive strategic consulting and project leadership experience.

Robert J. Johnston
Senior Research Fellow, Payne Institute for Public Policy
Robert “RJ” Johnston is the Director of Energy and Natural Resources Policy at the University of Calgary School of Public Policy and Senior Research Associate at the Colorado School of Mines Payne Institute of Public Policy.

Previously, RJ was Senior Director of Research at the Center on Global Energy Policy at Columbia University. RJ also served as the founder of the Eurasia Group’s Energy, Climate, and Resources practice and was the firm’s CEO from 2013 to 2018.

RJ is an independent advisor to the First Nations Climate Initiative and serves as an advisor on North American energy policy to a New York-based diversified investment management firm. He serves as a counselor for the Canada-US Trade Council. He also served as Project Director for the Aspen Institute Task Force on US Critical Minerals Policy.

RJ is a member of the Trilateral Commission and co-chairs the Open Minds Next Generation initiative on the dual energy/climate policy challenge. He was a Senior Fellow at the Atlantic Council Global Energy Center from 2017 to 2021.

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