The US Department of Agriculture is supporting the energy transition, backstopping a loan that would expand production at a small Utah copper producer.

President Joe Biden's all-government approach to climate change includes using USDA programs aimed at rural businesses to boost critical minerals production. Nevada-based Greater Commercial Lending is a credit organization that provides capital to underserved rural businesses, including through the USDA's Business and Industry Loan Program.

On Feb. 14, the lender announced the completion of $25 million in USDA-backed financing for Lisbon Valley Mining Co. LLC, a Utah-based copper miner seeking to grow operations at the Lisbon Valley mine.

Both the miner and the lender are looking at widely forecast future copper deficits and seeing an opportunity.

"There is additional demand that has been encountered already and potentially quite a bit more to come towards the back half of this decade and beyond," Lisbon Valley Mining CEO George Shaw told S&P Global Commodity Insights. "The industry is very mature, and there are not many new projects in the pipeline that can be readily brought into production. So, there's a real focus from the investment community on projects that are presently producing and have capacity to grow."

The copper market is estimated to have recorded a deficit of 24,000 metric tons in 2023, once all production data is reported, according to a Feb. 28 Commodity Briefing Service report from Commodity Insights. The report forecasts surpluses of copper through 2027, with a deficit of 404,000 metric tons estimated for 2028. Commodity Insights expects the annual average London Metal Exchange's three-month copper price to rise 17.1% to $9,970/metric ton by 2028, compared to 2023.

Lisbon Valley Mining caught the credit organization's eye over reports of the growing demand for copper and the US' current reliance on sources from overseas, said Jeremy Gilpin, president of Greater Commercial Lending. The organization is particularly interested in projects that promote energy independence or national security and create jobs in the US. A number of other mined materials, such as lithium, are also getting attention for the role they play in making the energy transition happen, Gilpin said.

"A lot of these minerals are going to be in very, very high demand. And you can only import so much of a product," Gilpin said in an interview.

The financing from Greater Commercial Lending will allow Lisbon Valley to grow its mining operations, Shaw said, noting the open pit copper mine has annual production capacity of about 50 million pounds. The operation has an estimated mine life of more than 20 years, the company said in a news release announcing the loan.

The US Department of Agriculture declined to comment. The agency backs the loan through its Business and Industry Loan Program. The initiative is broad — applying to "most any legal business purpose" that will save and create rural jobs in America. The USDA program generally provides a 60% to 80% federal guarantee, depending on the loan size. Loans over $10 million are 60% guaranteed.

In mining, upfront capital costs are often high, and the venture capital typically available to smaller companies in the space can come at a high price.

"We can bring conventional loan rates to these types of projects," Gilpin said, as the government's backing removes much of the lenders' risks. Gilpin said he hopes future policy initiatives aimed at increasing renewable energy will not only consider the entire supply chain but also focus on the energy transition work is happening in rural areas.

"It's not happening in downtown New York. You're not creating copper out of a copper mine in Manhattan," Gilpin said. "When allocating funds from a governmental perspective, we need to be very cognizant of the supply chain and where it's actually being utilized."