Common use infrastructure, tax credits and streamlined approvals processes are at the top of the critical minerals sector’s wish list for next week’s federal budget.
“We have large reserves in critical minerals and we want to exploit those reserves, so a critical minerals strategy to support that is important,” Tania Constable, chief executive of the main mining lobby group, Minerals Council of Australia (MCA), told The Business.
In Perth this week, Prime Minister Anthony Albanese acknowledged the importance of getting the most out of Australia’s world-leading critical minerals deposits that, for the most part, still remain embedded under the earth.
“If we don’t move now, this world of opportunity will go right past us,” he told a gathering of about 1,000 of Perth’s business leaders on Wednesday.
He announced a $566 million investment over 10 years into Geoscience Australia to fund the creation of maps detailing what lies under Australia’s soil and seabed.
“So much of our future prosperity depends on finding more critical minerals, extracting more critical minerals and doing more with critical minerals before we export them,” he said.
Other pre-budget announcements have been made with the critical minerals sector in mind.
Last week, Treasurer Jim Chalmers announced an overhaul of foreign investment laws, including “dedicating more resources to screening foreign investment in critical infrastructure, critical minerals and critical technology”.
While, in April, the prime minister allocated $585 million to two alumina and graphite projects as part of the recently announced Future Made in Australia Act.
World-leading minerals waiting to be mined
Australia has some of the largest known critical minerals deposits in the world.
There are 31 elements on the nation’s critical minerals list that are in line for fast-tracked government processing and funds.
The sector wants more support in Tuesday’s budget to get those minerals, which are essential for decarbonisation and defence capabilities, to the surface.
“It is absolutely important to incentivise activity in our industry, in our nation,” the head of the Chamber of Minerals and Energy in WA (CME) Rebecca Tomkinson told The Business.
“The processing of rare and critical minerals, rare earths, is highly intensive; it’s very important that we’re able to ensure we’ve got the right policy settings from government.
“It is essential to decarbonisation across the globe that we are able to develop the mineral deposits in our nation — there is no net zero without Australia.”
Ms Tomkinson has a long list of requests for the federal government.
“We’re asking for government to make investments in common use infrastructure in strategic industrial lands, and looking at the fiscal settings that can apply, undertaking the potential of a production tax credit, looking at debt financing opportunities, also working with our foreign investment policies to see how we can attract and retain further investment in our country,” she added.
Those calls are echoed by the Minerals Council of Australia.
Ms Constable added they want changes to industrial relations laws.
“We want to see the removal of these poor industrial relations changes to ensure that we’ve got flexibility occurring, that we’re not seeing high prices occurring across labour in business and making sure that we have the right people attached to the right jobs across Australia.”
She’s also calling for a stay on existing taxes.
“We need to see no changes occurring within the minerals industry, no changes to the fuel tax credits system that is supporting regional Australia.”
Balancing government support
A significant portion of the money Mr Chalmers has to allocate in his budget comes from taxes and royalties paid by the mining sector.
The MCA reports Australian minerals contributed an estimated $64 billion in company taxes and royalties in 2022.
But economists like The Australia Institute’s Richard Denniss believe the government could be getting more.
“While most fossil fuel exporters make a lot of money out of it, the Australian government fails to make much money from things like the Petroleum Resource Rent Tax,” he told The Business.
Dr Denniss warned the government needs to strike a balance in supporting the emerging critical minerals sector, while ensuring all Australians benefit from global demand for our resources.
“If we’re going to go forward with supporting the export of these minerals, if we’re going to try and add value to these minerals, we need some really clear principles about identifying what is the comparative advantage, what is the competitive advantage that we in Australia have, and how can the Australian government use regulation and funding to capture that value.”
Nickel on a knife’s edge
In January this year, Resources Minister Madeleine King added nickel to the government’s critical minerals list, as an influx of cheaply produced nickel from Indonesia saw global prices for the battery metal collapse.
Much of the sector here remains on its knees, with the biggest player, BHP, still weighing up if it’ll call time on its Nickel West business.
But explorer Ardea Resources is confident it’s timing its development right on the money, with plans to be in production by the end of this decade.
“We believe the earliest we can get into production will be 2029/2030. When we look at a lot of independent research houses, they expect the current nickel surplus to move back into deficit in 2028 and continue to grow, so we see our timing to come online as ideal,” Ardea chief executive Andrew Penkethman told The Business.
Ardea Resources has just signed a 50:50 joint venture with a Japanese consortium made up of Sumitomo Metal Mining and Mitsubishi Corporation, to shore up reserves on their site in the middle of Western Australia.
Mr Penkethman said government support that helps streamline approvals processes will help get the project off the ground.
“Every project you want to be able to stand on its own feet and be able to contribute economically,” he said.
“But there are some levers that the government can pull to assist projects to get there in the first place and then once they’re there, they’ll be creating opportunities that may not otherwise have been realised.
“So even though there may be some assistance provided to industry, the contributions to the economy, and the communities far outweigh any assistance that would have been provided.”
Competing with global partners
Government investment in critical minerals is also about securing our defence capabilities, because so many of the minerals are needed to create military machinery.
It was a point made clear by the US Ambassador to Australia, Caroline Kennedy, in a recent speech to a battery minerals conference.
“It’s a national security and economic issue for our countries,” she said.
“It’s also a massive business opportunity, and no two countries are better positioned to benefit than the United States and Australia.”
The Biden administration is injecting hundreds of billions of dollars through its inflation reduction act to develop its critical minerals sector, some of which is expected to find its way to Australia as a favoured partner.
Mr Chalmers doesn’t have access to those kinds of funds, but how he hands out the money he does have, will be closely scrutinised next week.
Including by Dr Denniss.
“Exactly how the Australian government plans to capture benefits for Australia, rather than subsidise exports by foreign mining companies, well, that’s the test that we’re yet to see.”