Emerging markets have the minerals. Capital has to catch up.

<div class="grid grid--33-66-col"><div class="col"><img loading="lazy" src="/getContentAsset/0e071e21-fc03-4f6a-9fda-865ee6f81ad5/cb87803a-320c-480f-ab75-7b9029eaaf79/Viloshan-Govender-article.jpg?language=en" alt="Viloshan Govender-article" title="Viloshan Govender-article" style="width: 180px" class="fr-fic fr-dii"></div><span style="font-size: 12px"><div class="col"><strong>VILOSHAN GOVENDER<br></strong>PORTFOLIO MANAGER<br><br><p>Viloshan Govender is a Portfolio Manager in the Investments and Structuring team at Gemcorp Capital, where he focuses on the execution and management of private credit investments across emerging markets.</p></div></span></div><hr><p><em>Emerging markets dominate the world's critical mineral reserves. Developing these resources requires capital, and private credit has a big part to play.&nbsp;</em></p><p><br></p><p data-pasted="true"><strong>Key takeaways</strong></p><ul><li><strong>Demand for critical minerals is accelerating rapidly:&nbsp;</strong>The materials underpinning electric vehicles, renewable energy systems and defence technologies are expected to see sharp increases in demand, with projections suggesting the market could quadruple by 2040.</li><li><strong>Supply chains remain highly concentrated:</strong> China dominates processing and refining for several critical minerals, highlighting the strategic importance of diversifying global supply.</li><li><strong>Emerging markets hold the resources:</strong> Africa, Latin America, Central and Southeast Asia account for a large share of global mineral reserves yet currently attract a disproportionately small share of exploration and development capital.</li><li><strong>A structural investment gap is emerging:</strong> The scale of capital required to develop new mines, processing facilities and logistics networks is significant, while investment growth has slowed.</li><li><strong>Private credit can help bridge the gap:</strong> Structured lending, blended finance and commodity-backed financing can mobilise private capital into critical mineral supply chains.</li></ul><p>The global economy relies on critical minerals. According to the International Energy Agency (IEA), demand for critical minerals used in energy technologies has more than doubled over the past decade and could quadruple by 2040 as electrification accelerates across transport, power and industrial systems.¹</p><p>From electric vehicles and renewable energy infrastructure to advanced electronics and defence systems, the materials that underpin modern economies have become increasingly strategic. Governments across the United States, Europe and Asia are racing to secure reliable access, an issue that has only intensified in the past year.</p><p>In April 2025, China issued Announcement 18, a raft of export controls on medium and heavy rare earths as well as related oxides, alloys and permanent magnet technologies.² Framed as a national security imperative, the restrictions reverberated through supply chains underpinning electric vehicles, defence systems and clean energy manufacturing. Within days, the US announced bilateral critical minerals framework agreements with Australia and Japan, and in February 2026 convened 54 countries at a critical minerals summit, pledging to “reshape the global market for critical minerals and rare earths”.³</p><p>The implications for capital allocation and emerging markets will be significant.</p><p><br></p><h2>The scale of demand&nbsp;</h2><p data-pasted="true">The global energy transition is mineral intensive. Electric vehicles require substantially larger volumes of lithium, nickel, cobalt and rare earth elements than conventional internal combustion engine vehicles. Renewable energy technologies are similarly resource intensive: wind turbines depend on rare earth magnets, while expanding electricity grids require substantial volumes of copper and other industrial metals. Guided weapons systems, meanwhile, use 18 different critical minerals; combat aircraft 15 and naval warships 14.⁴</p><p>Demand has already grown sharply. Lithium demand rose by almost 30% in 2024 as electric vehicle production expanded globally.¹ Demand for nickel, cobalt, graphite and rare earths increased by between 6% and 8% over the same period.⁵</p><p>Looking ahead, the trajectory is expected to remain steep. The IEA estimates that demand for several critical minerals could increase by between 50% and 60% by 2040 under current policy scenarios.¹ McKinsey projects that developing new copper and nickel projects alone will require $250-350 billion of investment by 2030. By 2050, the broader critical minerals sector could grow into a trillion-dollar market.⁶</p><p>For investors and policymakers, the implication is clear: securing reliable supply chains for these materials will be essential for the energy transition and national security.</p><p><strong data-pasted="true">Figure 1: Minerals used for electric vs conventional cars (kg/vehicle)</strong></p><p><strong data-pasted="true"><img loading="lazy" src="/getContentAsset/c6242cf7-45af-46f3-a579-48bf44b4c963/cb87803a-320c-480f-ab75-7b9029eaaf79/Minerals-used-for-electric-vs-conventional-cars.png?language=en" alt="Minerals used for electric vs conventional cars " title="Minerals used for electric vs conventional cars " style="width: 100%" class="fr-fic fr-dib"></strong><span style="font-size: 12px">Source: International Energy Association, The Role of Critical Minerals in Clean Energy Transitions, 2021.&nbsp;</span></p><p><br></p><h2 style="margin-left: 0" data-pasted="true">Supply chains remain dangerously concentrated</h2><p data-pasted="true">Despite the strategic importance of these materials, supply chains for many critical minerals remain highly concentrated.</p><p>China is particularly dominant in refining and processing, responsible for nearly 60% of global rare earth mining and more than 90% of magnet manufacturing.⁷ It also controls around 75% of global purified phosphoric acid production, essential for lithium iron phosphate batteries, and 95% of high-purity manganese sulphate, a key input for emerging battery technologies.¹ For cobalt, graphite and rare earths, approximately 90% of supply growth in refining between 2020 and 2024 came from China.¹</p><p>China’s Announcement 18 demonstrated that rare earths are not merely an economic resource but a tool of geopolitical leverage. As S&amp;P Global noted, China has shown a “greater willingness to use its dominance in critical minerals to advance its trade and geopolitical influence, potentially causing significant disruptions to global supply chains”.</p><p><strong data-pasted="true">Figure 2: Regional share of rare earths and magnet production (per cent)</strong></p><p><strong data-pasted="true"><img loading="lazy" data-fr-image-pasted="true" src="/getContentAsset/d8c9c016-3e98-4909-b062-6fb4dfe00457/cb87803a-320c-480f-ab75-7b9029eaaf79/Regional-share-of-rare-earths-and-magnet-producti.png?language=en" alt="Regional share of rare earths and magnet production" title="Regional share of rare earths and magnet production" class="fr-fic fr-dib" data-pasted="true"></strong><span style="font-size: 12px">Source: International Energy Agency, With new export controls on critical minerals, supply concentration risks become reality, October 2025.</span><strong data-pasted="true"><br class="Apple-interchange-newline"></strong></p><p><br></p><h2>Emerging markets hold the resource key</h2><p data-pasted="true">While the diversification debate often focuses on developed economies building domestic supply chains, geology tells a different story. Much of the mineral resource base required for the energy transition is located in emerging markets, and no credible diversification strategy can ignore them.</p><p>Africa is particularly critical in this context. The continent holds roughly 30% of the world’s known mineral reserves, including large shares of cobalt, manganese, platinum group metals and rare earth elements.⁸ Sub-Saharan Africa alone holds around a quarter of global graphite resources.¹&nbsp;</p><p>Several African countries are also important producers. Beyond cobalt in the Democratic Republic of the Congo (which accounts for 70% of global supply), Mozambique and Madagascar are expanding graphite production. Angola, Botswana, Namibia and Zambia are increasingly central to Western diversification strategies. In May 2025, Namibia launched Africa’s first industrial-scale green iron facility, powered entirely by renewables, signalling the continent’s ambition to move beyond raw materials extraction.⁹</p><p>Despite this, Africa currently attracts less than 10% of global exploration spending – a stark gap between geological potential and capital flows.¹⁰</p><p>Latin America has emerged as another major frontier. Brazil holds the second-largest rare earth reserves globally, and in late 2024 Serra Verde became the first operation outside Asia to commercially produce heavy rare earths used in EV motors and wind turbines.¹¹ Chile and Peru dominate global copper production, while Chile and Argentina combined account for 97% of US lithium imports, and Bolivia contains some of the world’s largest lithium deposits.¹²</p><p>In Southeast Asia, Vietnam, the Philippines and other countries in the region hold significant mineral endowments and are increasingly courted by both Western and Chinese capital in what analysts have described as an example of strategic competition reminiscent of the Cold War-era.¹³</p><p><strong data-pasted="true">Figure 3: Critical mineral reserves by country (per cent)</strong><strong data-pasted="true"><img loading="lazy" src="/getContentAsset/a9f0ac51-adcd-4e51-9360-5ee3d5f7b207/cb87803a-320c-480f-ab75-7b9029eaaf79/Critical-mineral-reserves-by-country.png?language=en" alt="Critical mineral reserves by country " title="Critical mineral reserves by country " style="width: 100%" class="fr-fic fr-dib"></strong><span style="font-size: 12px">Source: US Geological Survey, Mineral Commodity Summaries, January 2025.</span></p><p><br></p><h2>The investment gap is large and structural</h2><p data-pasted="true">Importantly, access to resources is only the first step. Converting those resources into reliable supply requires massive investment in mining operations, processing facilities, infrastructure and logistics networks.</p><p>Mining projects are capital intensive and typically involve long development timelines: new mines can take a decade or more to move from exploration to commercial production. Processing facilities are equally complex and expensive. The IEA estimates that capital expenditures for mining and refining in regions outside the dominant producer are typically 50% higher, and that these producers also face higher ongoing operating costs. This makes it difficult to remain competitive during commodity downturns.¹</p><p>Meanwhile, investment momentum has weakened. Global spending on critical mineral development rose by just 5% in 2024, down from 14% in 2023; adjusted for cost inflation, real investment growth was just 2%.¹&nbsp;</p><p>The result is a structural mismatch: the world needs more critical minerals, particularly from outside China, but the investment required to access them is not materialising at the necessary pace. The Peterson Institute for International Economics has framed this as a ‘bankability gap’: the challenge of triangulating between the demands of private capital markets (high returns), downstream users (low prices) and national security imperatives (low risk and continuity of supply).¹⁴</p><p>China has solved this problem for its own ends through state subsidies. Critical mineral processors are treated like core infrastructure, with risk spread via policy banks, credit subsidies and price controls. Western governments are attempting to replicate elements of this model, but private capital is also needed.</p><p><br></p><h2 data-pasted="true">Crowding in private capital</h2><p data-pasted="true">The scale of government commitments to critical mineral financing has expanded rapidly, with the structures being deployed explicitly designed to de-risk the layer where private capital typically sits.</p><p>In the US, the financing toolkit encompasses long-term loans from the Department of Energy (DOE), Export-Import Bank export credit, Development Finance Corporation international financing, and Department of Defense equity stakes. The US government became the largest shareholder in MP Materials – the only fully integrated rare earth producer in the US – in a $1 billion transaction,⁵ while the DOE Loan Programs Office has committed billions of dollars to finance lithium exploration and battery recycling projects.⁴</p><p>While governments can provide first-loss capital, private equity and private credit are expected to fill the layers above. The US State Department’s February 2026 Critical Minerals Ministerial made this explicit, noting that “governments alone cannot solve this problem” and committing to “close partnership with the private sector”.⁴</p><p>Elsewhere, the European Union has announced 60 strategic projects targeting lithium, graphite, cobalt, nickel and rare earths, of which 13 are in partner countries including Canada, Kazakhstan, Ukraine and Zambia.¹⁵&nbsp;</p><p>The question for private credit is not whether the opportunity exists, but whether the right structures and expertise are in place to access it.</p><p><strong data-pasted="true">Figure 4: Participants across the capital structure for critical mineral projects&nbsp;</strong></p><table style="width: 100%; margin: auto; height: 238px" class="fr-not-dropzone"><colgroup><col style="width: 50%"><col style="width: 50%"></colgroup><tbody><tr style="height: 30.4286px"><td class="fr-cell-fixed "><div style="text-align: center"><strong>Providers of capital</strong></div></td><td style="text-align: center" class="fr-cell-handler "><strong>Where capital is applied<br></strong></td></tr><tr style="height: 30px"><td><strong>Sponsor equity<br></strong></td><td>Project developer/mining company; highest risk, highest return<br></td></tr><tr style="height: 50.4286px"><td><strong>Strategic investors/offtake partners<br></strong></td><td>Downstream manufacturers, automakers or tech companies securing supply; may take equity or prepayment positions<br></td></tr><tr style="height: 30px"><td><strong>Sovereign/quasi sovereign equity<br></strong></td><td>Direct stakes: signals strategic commitment and reduces political risk<br></td></tr><tr style="height: 30px"><td><strong>Development finance institution subordinated debt<br></strong></td><td>Absorbs first losses, enabling commercial lenders to participate<br></td></tr><tr style="height: 50.4286px"><td><strong>Private credit/structured lending<br></strong></td><td>Mezzanine/senior secured debt linked to production, export flows or offtake contracts; flexible structures tailored to cash flows<br></td></tr><tr style="height: 30px"><td><strong>Project finance/ commercial bank senior debt<br></strong></td><td>Traditional lenders, often requiring DFI presence to participate<br></td></tr></tbody></table><p><span style="font-size: 12px">Sources: Gemcorp analysis, FTI Consulting, The New US Government Critical Minerals Playbook, February 2026; IFC, The Role of Blended Finance in an Evolving Global Context, September 2025.</span></p><h2><br></h2><h2 data-pasted="true">The role of private credit</h2><p data-pasted="true">Private credit has long played an important role in the financing of natural resource projects.</p><p>Unlike traditional bank lending, private credit can offer flexible financing structures tailored to the needs of resource development – including structured loans linked to commodity production, asset-backed arrangements or lending tied to export flows and offtake agreements. These structures are particularly relevant in emerging markets, where access to conventional bank financing may be limited and where the ability to underwrite complex risk is a differentiator.</p><p>Blended finance – where concessional capital from governments or development finance institutions is combined with commercial funding to de-risk projects – creates a natural opportunity for private credit lenders. Development finance institutions may deploy first-loss guarantees, subordinated loans or junior equity to strengthen the credit profile of projects; private credit can then provide senior or mezzanine debt above that layer, achieving returns that reflect residual rather than full project or development risk.¹⁶</p><p>The trade and commodity finance dimension is equally important. As supply chains are reconfigured away from Chinese-dominated routes, new trade flows are emerging and the working capital infrastructure needed to support them must be built – precisely the kind of structured, asset-backed lending that private credit firms with commodity expertise can provide.</p><p>The opportunity for managers with genuine emerging market experience is both specific and structural: comfort with frontier jurisdiction risk, the ability to structure financing across the capital structure and the networks required to originate transactions before they become broadly syndicated.</p><p>As demand for critical minerals continues to grow, the countries that hold these resources will become increasingly central to the global economy. For investors with the experience and structuring capability to operate in these markets, financing the development of critical mineral supply chains represents a substantial, yet largely untapped, opportunity.</p><p><br></p><p data-pasted="true"><strong>Endnotes</strong></p><ol><li>International Energy Agency, Global Critical Minerals Outlook 2025, May 2025.</li><li>PRC Ministry of Commerce, Announcement No.18 of 2025, April 2025.&nbsp;</li><li>United States Department of State, 2026 Critical Minerals Ministerial, February 2026.</li><li>J.P. Morgan, Critical Minerals Outlook, February 2026.</li><li>CaixaBank Research, China’s Alchemy: How It Transforms Critical Minerals into Global Power, January 2026.</li><li>McKinsey &amp; Company, cited in US Department of Energy critical minerals funding documentation, August 2025.</li><li>CNBC, Critical Minerals: Rare Earth Magnet Makers Relish a Moment in the Sun, December 2025.</li><li>African Development Bank, Natural Resources Action Plan, February 2025.</li><li>Namibia Green Hydrogen Programme, Namibia Inaugurates World’s First Green Iron Plant, August 2025.</li><li>BDO, Annual Mining Report 2026, February 2026.</li><li>Dialogue Earth, Latin America is entering the rush for rare earths, March 2026; US International Development Finance Corporation, Serra Verde loan announcement, November 2025.</li><li>The National Interest, Latin America’s Growing Role in Critical Minerals, October 2025.</li><li>Atlas Institute for International Affairs, Rare Earth Rivalries: The Geopolitical Rise of Critical Minerals, April 2025.</li><li>Peterson Institute for International Economics, ‘Bankability’ of Critical Minerals is in the Eye of Three Beholders, February 2026.</li><li>European Commission, Selected strategic projects, March 2025.</li><li>IFC, The Role of Blended Finance in an Evolving Global Context, September 2025.</li></ol><p><br></p><p style="font-size: 12px"><strong>Important Information:</strong></p><p style="font-size: 12px">This content has been prepared solely for informational purposes by Gemcorp (as defined below), is confidential and may not be reproduced.</p><p style="font-size: 12px">This content does not constitute an offer or solicitation of an offer with respect to the purchase or sale of any security and should not be relied upon when evaluating the merits of investing in any securities or form the basis of an investment decision. 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