Global private equity and venture capital investments in the EU's metals and mining industry are rising as the member states aim to bolster their independence from raw material imports.

From Jan. 1 to Oct. 30, private equity deal value in metals and mining companies amounted to $4.19 billion, nearly double the $2.23 billion amassed in 2023 and more than seven times the $580 million reached in 2022, according to S&P Global Market Intelligence data. The rising deal value in the EU's mining sector bucks the sharp drop in global metals and mining private equity investments in 2024.

Private capital deployment into the sector increased rapidly after the EU unveiled its Critical Raw Materials Act in 2023 and adopted it earlier this year.

The act — which identifies 51 materials as strategic or critical for the EU's 27 member countries — provides incentives and mechanisms to mining companies and private investors to boost sector growth and reduce dependence on material imports from China, which holds some of the largest reserves of energy transition materials such as lithium, graphite and cobalt.

The regulation enables private investors to receive public financing for projects the EU considers strategic, according to a Baker McKenzie report.

Megadeal in EU steel

The largest private equity transactions in the EU mining sector are funding rounds for steel, diversified mining and aluminum companies.

One outsized deal — a $4.1 billion investment in Swedish steelmaker H2GS AB by an investor group including Microsoft Corp.'s M12 and Just Climate LLP — accounted for most of the deal value so far in 2024. The steelmaker, doing business as Stegra, said it will use the funds for its steel plant in northern Sweden. Sweden is working to use green hydrogen — a low-carbon alternative to natural gas and coal — as fuel to manufacture steel.

The second-largest deal is a Bpifrance Investissement SAS-led $37.2 million investment in French diversified mining company Vulkam SAS, which specializes in critical and strategic materials such as nickel, copper and hafnium, among other metals. Vulkam will use the funds to launch its plant in Isère, France.

Otium Capital's $8.6 million investment in France-headquartered alumina refining company IB2 SAS ranks third. Alumina is used to produce aluminum, a strategic material under the Critical Raw Materials Act.

EU mining funds to spur growth in efficiency, nuclear energy

Investments in the EU's mining sector will spur rapid growth in operational efficiencies and performance levels since technology providers and mining companies closely collaborate on projects, according to Euromines Director of Energy and Climate Florian Anderhuber.

"A lot of equipment can be tested in a real-life environment early on, which leads to a lot of innovation and breakthroughs," Anderhuber said. "We're now looking into the first fully electrified underground mines."

The EU's nuclear energy companies will also benefit from more investments in the bloc's mining sector, especially capital going to miners of rare earth metals, which often contain significant amounts of uranium, according to James Walker, CEO of NANO Nuclear Energy Inc.

Walker named beryllium, boron and hafnium as supporting materials for the nuclear industry.

– Download a spreadsheet with data featured in this story. – Catch up on global private equity investment activity in October. – Check out the world's top pension funds by private equity allocation.

China's metals and mining private capital declines

In contrast to the EU, private equity-backed investments in China's metals and mining sector have plunged to less than $100 million. The $50 million invested in China's mining industry from Jan. 1 to Oct. 30 was about 7.7% of the $650 million the sector received in 2023 and only 4.5% of the $1.10 billion amassed in 2022.

The fall in metals and mining investment follows the trend for overall US private capital deployment into China, which is pacing for a three-year decline.

Funding rounds by local investor groups made up the largest private equity-backed deals in China's materials sector.

The largest deal in China's mining sector so far is a $20.7 million investment in titanium alloy company Chongqing Lianghang Metal Materials Co. Ltd. by an investor group including Shenzhen Capital Group Co. Ltd. The company said it will use the funds for research and development in the titanium alloy field.

The second-largest deal is a $13.9 million series A round for alloy research company Jiangsu Zhiren Jingxing New Materials Research Institute Co. Ltd. by an investor group including Huatai Zijin Investment Co. Ltd. The company will use the funds to build factory production lines.