On the 23rd May the EU Critical Raw Materials Act (CRMA) entered into force. The main objective of the CRMA is to establish and maintain a secure and sustainable supply of Critical Raw Materials to the EU.
The CRMA lists 34 materials which are considered strategic. Of these 17 are considered critical such as copper, cobalt and battery grade graphite.

The CRMA calls for specific goals in relation to mining, recycling and processing of critical raw materials.

• 10% of all critical raw materials consumed in the EU to be mined and produced in the EU by 2030. Therefore, new exploration projects in the EU, will receive increased attention and potentially more accessible and favourable extraction conditions. 
• A significant increase in recycling efforts, totalling up to 25 % of annual consumption in the EU by 2030. Waste landfills in Europe are expected to comprise large quantities of critical raw materials that could turn into lucrative mines. EU Member States are encouraged to devise measures to increase the circularity of their economies.
• 40% of all critical raw materials consumed in the EU are to be processed in the EU by 2030.

 
The CRMA is designed to strengthen all stages of the European critical raw materials value chain, diversify the EU’s imports to reduce strategic dependencies, improve the EU’s capacity to monitor and mitigate risks of disruptions to the supply of critical raw materials, and improve circularity and sustainability.

The first call for projects to be deemed “strategic projects” opened on 23 May and will close on 23 August 2024.

Those projects that receive 'Strategic Project' designation will benefit from more streamlined and efficient permitting procedures, as well as facilitated access to finance avenues.

Projects from third party countries such as Australia may qualify if they meet the objectives of the CRMA and the wider EU Green Deal.

Strategic Projects should be flagship projects with respect to technological innovation and sustainability. Applications to be lodged on the EU portal must include supporting documentation including detailed technical studies, timetable for development, permitting information, and sustainability practices. Also, a business plan should be attached for assessment of the viability of the project.

For projects in “third countries” such as Australia and Canada (outside the EU but considered strategic partners) the EU has pledged to work with those partner countries to assist with permitting and sustainability practices where possible.

In this respect, the signing of the MOU on a CRM partnership between Australia and the EU which was signed on 28 May 2024 was an important and integral step in the EU CRM Act for Australia.

The partnership seeks to enable the EU to diversify its supplies of materials necessary for the green and digital transitions, whilst contributing to the development of Australia's domestic critical minerals sector.
The partnership covers the entire critical and strategic minerals value chain: exploration, extraction, processing, refining, recycling, and processing of extractive waste.

 In addition to jointly developing projects along the entire value chain in the EU and in Australia, the partnership will also explore cooperation in countries where the EU and Australia have mutual interests, focusing on reducing environmental impacts and benefiting local communities. Additionally, it promotes innovative and digital technologies and services for mining, and other projects along the critical minerals value chain.

The agreement seeks to enhance cooperation between Australia and the EU in 3 main areas:
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• Integration of sustainable raw materials value chains, including networking, joint facilitation of projects (e.g., via joint ventures), creation of new business models and promotion and facilitation of trade and investment linkages, ensuring the well-functioning, sustainability, and resilience of these critical supply chains.
• Cooperation on research and innovation along the raw materials value chains, including on minerals knowledge and the minimisation of environmental and climate footprint.
• Cooperation to promote high environmental, social, and governance standards and practices, as well as improved policy alignment, driven by full respect of worker's conditions and safety, and by the need of a sustainable and secure production of critical minerals.

Following the signature of the MoU, a roadmap with concrete actions will be jointly developed to put the Strategic Partnership into practice, over the next six months.

Equity markets in Europe have picked up from a very dismal 2023.

There is always robust interest in quality ASX /TSX /CSE listed companies with a dual-listing in Frankfurt. Especially where those companies have a sustainable purpose and vision, clear strategic direction with strong competitive advantage, capable board and management and unique value proposition.

Stocks that see the greatest level of support are in the areas of critical raw materials, uranium, green metals and minerals, biotech and medtech, gold, clean energy and technology.

ASX listed companies such as Droneshield (ASX: DRO) and Brainchip (ASX: BRN) see very solid support om German exchanges. We also see Australian companies with quality global projects in the areas of critical raw materials engage very strongly such as Winsome Resources (ASX: WIN) with a very strong lithium project in Canada.

Uranium stocks in particular are trading very well this year in Germany such as Deep Yellow (ASX: DYL).

2024 has seen Novo Nordisk become the largest European company by market capitalisation and this has reignited interest in quality biotech and medtech stocks.

The outlook continues to be bright for quality ASX / global companies to increase EU investor interest and engagement.​

DroneShield (ASX: DRO) is a worldwide leader in counter-UAS security and technology.

DroneShield develops pre-eminent UAS security solutions that protect people, organisations, and critical infrastructure from intrusion from UAS threats. Its leadership brings world-class expertise in engineering and physics, combined with deep experience in defence, intelligence, and aerospace.

DoneShield is very well supported by German and European investors with its dual-listed shares often seeing volume of over 8 million shares a month on German trading exchanges such as Frankfurt, Tradegate, and Hamburg.

We expect interest to continue to increase for ASX listed companies with a German dual-listing that have significant or interesting European operations or contracts.

In October 2023, it was announced that DroneShield had been awarded AU$10 million from the Australian government to supply C-UAS equipment to Ukraine as part of an effort combat Russian attacks.
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Earlier this week the Company announced announce it has received a repeat order of A$5.7 million from a US Government customer for a number of its C-UxS (Counter-UxS) systems. C-UxS refers to counter-drone systems targeting multi-domain aerial, ground and maritime surface drones. 

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Europe works very differently to Australia in many respects. 
Relationships and business etiquette are vital when building relationships, networks and collaboration opportunities in Europe.
This sometimes takes time and patience which can be difficult to understand for executives used to a faster pace from Australia and North America.
It is worth engaging with Europe - European GDP is around $26 billion and represents about one sixth of the global economy.
The lesson for Australian companies wanting to engage in Europe is take time, discuss opportunities, create networks and relationships, explore working with an EU partner, understand the cultures and way of doing business and respect the EU way of doing things.
It is a shame more Australian companies are not active in Europe - we hope this will change and we are here to help.

A call for applications on strategic projects under the Critical Raw Materials Act is open as of 23 May 2024.
The first cut off date is 22 August 2024, 12:00 CEST.

Strategic projects make a meaningful contribution to the security of the Union’s supply of strategic raw materials. They are or will become technically feasible within a reasonable timeframe, showing expected production volumes, and implemented sustainably with a sufficient estimated confidence level. 
The Commission considers strategic projects of public interest due to their importance in ensuring the security of the supply of strategic raw materials and safeguarding the functioning of the internal market.
A list of 34 CRMs, including 17 strategic raw materials (SRMs) has been created and all are materials expected to grow exponentially in terms of demand.
The final list of CRMs (with SRMs* highlighted in bold) presented below will be reviewed regularly.
1. Aluminum/Bauxite/alumina
2. Coking Coal
3. Lithium
4. Phosphorus
5. Antimony
6. Feldspar
7. Light rare earth elements*
8. Scandium
9. Arsenic 1
10. Fluorspar
11. Magnesium
12. Silicon metal
13. Baryte
14. Gallium
15. Manganese
16. Strontium
17. Beryllium
18. Germanium
19. Natural Graphite
20. Tantalum
21. Bismuth
22. Hafnium
23. Niobium
24. Titanium metal
25. Boron
26. Helium
27. Platinum group metals
28. Tungsten
29. Cobalt
30. Heavy rare earth elements*
31. Phosphate Rock
32. Vanadium
33. Copper
34. Nickel 


The Criticial Raw Materials Act an important step forward by the European Union to address the challenges of secure and sustainable access to critical raw materials.

The CRMA’s provisions are significant as a mix of industrial policy instruments together with financial and economic assessment will create a pool of projects able to sustain European requirements for CRM's for energy, decarbonisation and electrification for years to come.

A webinar our director, Matthew Reynolds, participated in. The webinar discusses the dual-listing process for the Frankfurt Stock Exchange and why there is a substantial benefit for Australian and Canadian companies to dual-list in Frankfurt and engage with European retail and strategic investors.

The success of German Mittelstand companies
Much like a sturdy oak tree with deep roots in fertile soil, German Mittelstand firms are anchored in robust principles that nurture enduring success.

These companies navigate the complexities of global markets with remarkable agility, exemplifying an ethos of innovation melded with time-honoured traditions - the bedrock of their worldwide acclaim.

Essence of the Mittelstand Model
At the heart of the German Mittelstand philosophy lies a quintessentially German blueprint for business - a compound of deeply ingrained pragmatism, stewardship, and long-term thinking. These firms, often family-owned and with a strong regional footprint, are renowned for coupling nimble management with formidable technical expertise, yielding a niche-market domination that defies their often-modest size.
Commitment to workforce skilling and community integration stands as a testament to a sustainable growth ethos, which has perennially fostered resilience and competitiveness on the world stage.

Defining Mittelstand Characteristics
Mittelstand companies epitomise strategic focus, operational flexibility, and a profound commitment to quality over volume.
These enterprises are characterised by strong family ownership, a steadfast loyalty to local regions, and a propensity for sustained, independent growth.
Rooted in prudent financial management and a deep-seated culture of innovation, Mittelstand firms skilfully navigate market fluctuations, ensuring long-term viability.

Adaptability and Innovation
Inherent agility catalyses Mittelstand resilience.
The Mittelstand model epitomises adaptability and innovative prowess. Central to this ethos is an ability to respond swiftly to market fluctuations and technological shifts. German Mittelstand companies consistently invest in research and development, leading to revolutionary product offerings that secure competitive advantage. Importantly, this mindset of innovation is not an occasional endeavour, but a continuous commitment incorporated into the corporate ethos.

Change is embraced as a perpetual innovation catalyst.

German Mittelstand firms exhibit remarkable foresight in - and preparedness for - future market shifts. By prioritising long-term strategic planning over short-term gains, and harnessing a culture of continuous improvement, these entities maintain their edge. In doing so, they demonstrate a proactive rather than reactive approach to market dynamics.

Strategic agility underpins sustainable competitive success.

With a history of pivoting effectively to meet emergent commercial challenges while upholding exceptional standards of product quality, the German Mittelstand remains a paradigm of evolutionary excellence far into the 21st century. This adaptability has underpinned their enduring success and the indelible mark they continue to imprint upon the global business landscape.

Long-term Strategic Focus
The German Mittelstand epitomises the principle of a long-range strategic outlook in their business operations.

Intergenerational ownership structures frequently buttress a commitment to sustained growth, rather than maximising short-term shareholder returns.

Moreover, their strategic horizons often extend well beyond the next financial quarter or fiscal year, embedding resilience and adaptability into their corporate DNA.

Forethought and careful planning allow these enterprises to invest significantly in research and development, reinforcing their technologically advanced position within niche markets globally.
Such foresight ensures that the Mittelstand continues to thrive, even in fluctuating economic climates.

Cultivating a Skilled Workforce
The profound prowess of German Mittelstand companies in cultivating a skilled workforce is pivotal to their success. They harness the strength of a well-informed, supremely trained employee base which solidifies their competitive edge.

Crucially, the dual education system, integrating vocational training and academic learning, underpins this skilled labour force. As a lynchpin of the German educational fabric, it marries theoretical knowledge with practical expertise, producing workers of unparalleled proficiency within their respective fields.

This emphasis on continuous training ensures a perennial inflow of adept professionals, ready to excel in the Mittelstand's innovation-driven environment.

Employee Retention Strategies
Employee retention is pivotal in maintaining the competitive edge of Mittelstand companies.

• Competitive Compensation: Offering attractive salary packages aligned with industry standards.
• Work-Life Balance: Encouraging flexible working hours and remote work opportunities.
• Employee Recognition Programs: Acknowledging and rewarding outstanding performance and dedication.
• Professional Development: Investing in employees' growth through continuous learning and career advancement opportunities.
• Corporate Culture and Values: Fostering a positive work environment that reflects the company's ethos.
• Health and Wellness Initiatives: Providing resources and support for employees' physical and mental well-being.

Effective retention strategies lead to reduced turnover and a committed workforce.
Sustaining a corporate culture that values each team member is key to retaining top talent.

Niche Market Leadership
The Mittelstand model's hallmark is its unwavering commitment to niche market leadership, which translates into a formidable competitive advantage. These companies identify and dominate specialist segments of markets, largely due to their acute focus on product quality and customer satisfaction.

heir strategy centres around deep specialisation in particular fields, allowing them to innovate and adapt with agility. As these companies grow organically within their niches, they not only set the standards but often become synonymous with the sectors they lead. This leverages their reputation, ensuring long-term stability and sustained profitability in a globalised economy where differentiation is key to success.

Specialisation and Expertise
Mittelstand companies are distinguished by their profound industry specialisation and domain expertise.

• Narrow focus: Concentrating on specific niche markets.
• Deep domain expertise: Intensive knowledge and skills within their field.
• Continuous innovation: Persistent drive for developing and improving products/services.
• Quality over quantity: Prioritising high-quality outputs rather than mass production.
• Customer-centric approach: Tailoring solutions to meet specific customer needs.

Their specialised knowledge allows for unparalleled expertise in their respective niches.
By maintaining a strong emphasis on specialisation, these entities uphold a competitive edge that is difficult to replicate.

Family-Owned Dynamics
A quintessential element of the Mittelstand ethos is the pervasive influence of family ownership. These entities often thrive under a continuity of leadership that spans generations, infusing the enterprise with a profound sense of stewardship and long-term vision. Such a framework promotes a deep-rooted, intrinsic understanding of the business fabric and its core values.

It also fosters a unique organisational culture, where employees are seen not merely as cogs in a wheel but as part of an extended corporate family. This relational capital, when harnessed effectively, contributes significantly to the robust resilience and agility that characterises these companies, thereby enabling them to meticulously navigate and flourish in the fluctuating tapestry of global markets.

Governance and Succession Planning
Efficient governance structures are the bedrock upon which Mittelstand companies construct their enduring success. Board compositions often weave intricate threads of family involvement with external expertise, assuring a balance of legacy knowledge and innovative perspectives.

These firms tend to adopt a meticulous, strategic approach when addressing succession. Embracing both nepotism and meritocracy, they seek heirs within the family who portray exceptional aptitude and are deeply ingrained with the company's ethos. This ensures leadership continuity that respects the founding principles while identifying opportunities for progressive evolution.

In instances where family successors are not viable or optimal, Mittelstand businesses are pragmatic in their approach. They may appoint seasoned professionals from within or outside the firm who are capable of upholding foundational values and driving future growth, thus circumventing potential disruptions.

To secure their future, Mittelstand firms often engage in proactive succession planning, sometimes decades in advance. Such foresight allows the smooth transition of power and maintains operational stability, reflecting their dedication to sustainable progress. Advanced planning mitigates the risks associated with abrupt leadership changes, establishing robust frameworks that nurture long-term prosperity.

Balanced Growth and Risk
German Mittelstand companies exhibit a formidable balance, mitigating risk while pursuing consistent, sustainable growth across many decades. Their strategies embody a cautious expansion, committing to incremental improvements and prudent investments that protect their core markets and competencies. This blend of conservative financial management and measured development underpins their resilience in volatile markets.

Such an approach often eschews rapid scaling in favour of stability. It ensures that expansions are thoroughly planned, meticulously executed, and aligned with the Mittelstand ethos of long-term sustainability and steadiness. Consequently, these entities do not over-leverage, thereby avoiding the pitfalls of aggressive growth strategies.

However, their aversion to risk is not synonymous with stagnation. Reliably, Mittelstand firms invest in innovation and technology, albeit in a controlled manner (typically reinvesting profits instead of seeking external capital) to retain their competitive edge. It's a harmonised approach balancing the new with the tried-and-tested.

Their growth trajectory is frequently anchored to vertical integration or diversification within related sectors, allowing them to reinforce authority within their niche, increase efficiencies, and reduce dependency on external suppliers. This self-reliance mitigates external risk factors and empowers operational fluidity.

Ultimately, the Mittelstand philosophy embodies a measured approach to business. Rather than chasing short-term gains, these firms concentrate on steady growth that safeguards their legacy and secures their future impact in the global economy. This prudent approach positions them well to cope with economic uncertainties and market fluctuations.

Global success
When Mittelstand companies compete globally, they prefer for full control over foreign operations.
This is due to fact they view the relationship with the customer as something too important to delegate.

Some 97% of these companies have their own presence in the U.S. market. And more than half of them have successfully entered the Japanese market and established countrywide service networks there. According to Harvard Business Review “Nowhere else in the world do companies with revenues in the range of $50 million to $2 billion have such strong international networks under their own control”.
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Examples
Examples of German Mittelstand companies are:
Rimowa, Jungbunzlauer, Strama-MPS, Sartorius, SMS Group and Heidelberger Druckmaschinen