Australia’s new Critical Minerals Strategy is finally here – so how does it stack up against expectations, and what will it mean for our resources sector? In this article, we break down the key components of the strategy, who stands to benefit, and what we think is next on the cards.
On 20 June 2023, the Department of Industry, Science and Resources (DISR) released its highly anticipated Critical Minerals Strategy for 2023-2030 (the Strategy), which can be found in full here.
In our recent 2023-24 Federal Budget and beyond breakdown, we were looking out for simplified approvals processes (more transparent, predictable and defined) for critical minerals projects, and incentives akin to those in the US Inflation Reduction Act.
What the Strategy has delivered is a step in the right direction for the critical minerals industry, but is far from revolutionary. Notably, it identifies streamlined approvals and the need to foster a flexible approach for critical minerals projects. The Strategy also identifies the significant opportunities for producers with positive environmental, social and governance credentials in a market where integrity of supply chains is increasingly important.
But does it go far enough in realising Australia’s enormous critical minerals potential?
The case for downstream processing in Australia
Australia is the world’s largest producer of lithium, the third largest producer of cobalt and fourth largest producer of rare earths. Australia also produces significant amounts of metals such as aluminium, nickel and copper, which are also crucial for low emission technologies such as electric vehicles, batteries, solar panels, and wind turbines. Australia will continue to play a key role in the global critical minerals industry, given its resource profile and geopolitical position.
Despite Australia’s credentials, the country has only two operating downstream lithium processing plants:
Tianqi and IGO’s Kwinana plant in Western Australia, which produced Australia’s first lithium hydroxide in May 2022 with a current production capacity of 24,000 tonnes per annum (tpa); and
Albemarle and Mineral Resources’ Kemerton plant, which achieved first production in mid-2022 and which has a current production capacity of 50,000 tpa of lithium hydroxide.
Comparatively, based on data from Benchmark Mineral Intelligence, China controls around 60% of the world’s lithium processing capacity, and up to 80% of global production of battery grade raw materials – despite hosting only 23% of all battery raw materials.
Government support remains the key to industry’s success
Historically, Government support of the Australian resources industry has taken the form of in-kind support and collaboration through government financing, tax concessions, Commonwealth grants, protections such as tariffs and targeted foreign investment restrictions and debt or equity funding through Commonwealth entities such as the Clean Energy Finance Corporation, Export Finance Australia or the Northern Australia Infrastructure Facility.
The Strategy highlights that despite the high level of expertise and funding in the mining sector, there are still aspects of critical minerals exploration, development and processing that require Government intervention. Given the need to greatly accelerate critical mineral development, the more complex nature of critical mineral processing, the impact of geopolitics and the fact that many projects are held by junior mining companies with limited financial capacity, the need for more Government support is obvious. Both the Strategy and other national imperatives, like the ‘Australian Made Battery Plan’ (see the National Battery Strategy issues paper), go so far as acknowledging this and earmarking funding, but fall short of delivering a clear pathway to meaningfully incentivise investment or bring critical mineral processing onshore.
How will the critical minerals industry benefit from the Strategy?
The Strategy is based on stakeholder consultation and will be delivered by the Critical Minerals Office (CMO), Austrade and the Department of Foreign Affairs and Trade. The 2023-24 Budget has committed $21.3 million for the CMO to develop critical mineral downstream opportunities. Whilst industry is likely to be disappointed with the lack of significant new funding (aside from the earmarked $500 million of funding for the Northern Australia Infrastructure Facility, potential access to $1 billion in the National Reconstruction Fund and $500 million for the Critical Minerals Fund), the Commonwealth Government has demonstrated its intent to develop Australia’s critical minerals sector through the Strategy.
The Strategy has identified significant barriers to critical mineral project development, such as technical and market risks, and has sought to address these through funding and other initiatives. In announcing the Strategy, the Minister for Resources, the Hon Madeleine King MP, said the Strategy makes it clear that Australia can play a crucial role in delivering the processed minerals the world needs for a clean energy future, building on a rich geological endowment and record as a reliable exporter of energy and resources. Minister King stated that:
“The new Critical Minerals Strategy outlines the enormous opportunity to develop the sector and new downstream industries which will support Australia’s economy and global efforts to lower emissions for decades to come. While the potential is great, so too are the challenges. The Strategy makes it clear our natural minerals endowment provides a foot in the door, but we must do more to create Australian jobs and capitalise on this unique opportunity.”
The Strategy notes that independent modelling has found increasing exports of critical minerals and energy transition minerals could create more than 115,000 new jobs and add $71.2 billion to GDP by 2040. However, the number of jobs could increase by 262,600, and the increase in GDP strengthen to $133.5 billion by 2040 if Australia builds downstream refining and processing capability and secures a greater share of trade and investment.
Breakdown of the Critical Minerals Strategy
Key overarching objectives of the Strategy include using the Federal Government to provide technical support to de-risk projects and attract investment to commercialise the Australian critical minerals industry. This will include investing in research to create new clean energy technologies and strategic frameworks to support supply chains and maintain a competitive advantage. Notably, the Strategy seeks to bolster international partnerships, particularly with countries also actively developing their critical minerals sectors, such as the United States and Japan.
The Strategy defines ‘critical minerals’ as materials that are essential to modern technologies, economies and national security, and whose supply chains are vulnerable to disruption. There are currently 26 minerals on Australia’s Critical Minerals List, which includes lithium, cobalt and rare earth elements. The Strategy aims to prioritise economic opportunities for these minerals by focusing on six key areas, which are described below.
Developing strategically important projects
$225 million Exploring for the Future program to continue providing geoscience data and encouraging investment through Geoscience Australia.
$100 million Critical Minerals Development Program to continue providing grants to early and mid-stage projects.
The Northern Australia Infrastructure Facility (NAIF) will earmark $500 million to support projects (particularly downstream processing) that align with the Strategy.
Establish the National Reconstruction Fund, which includes $1 billion for value-add in resources and $3 billion for renewables and low emissions technologies.
Supporting critical mineral discoveries and projects and reviewing policies in place to achieve this.
Attracting investment and building international partnerships
$40 million Critical Minerals International Partnerships program to support (1) co-investment between Australia and international partners and (2) joint projects that will develop international end-to-end supply chains.
$6.65 million to increase global critical minerals engagement.
$6.7 million to help Austrade boost international engagement.
$2.2 million over four years to track foreign investment patterns (in the 2023-24 Budget).
First Nations engagement and benefit sharing
Reform to the Environmental Protection and Biodiversity Conservation Act 1999 (Cth) and federal First Nations heritage protection legislation.
$5.5 million towards the First Nations Clean Energy Strategy.
The Government will work with First Nations communities to develop best practice engagement in the resources sector, including under existing regulatory frameworks e.g., the Native Title Act 1993 (Cth).
Promoting Australia as a world leader in ESG performance
Promoting works underway on a Certification and Life Cycle Analysis for Australian Battery Minerals and a Battery Material Provenance Authentication pilot to improve product marketability.
Working with international standards organisations, India, Japan and the US to establish principles for clean energy supply chains.
A national Circular Economy Advisory Group has been established to guide Australia’s circular economy transition and assess the impact of international policies on critical mineral demand.
$600 million Safeguard Transformation Stream under the new Safeguard Mechanism to reduce emissions.
Other net zero measures including the Powering Australia Plan and utilising national science agencies.
Unlocking investment in enabling infrastructure and services
10-year $120 billion Infrastructure Investment Program in tandem with the NAIF to develop priority infrastructure.
Net Zero Authority to promote orderly and positive economic transformation through stakeholder engagement.
Regional Investment Framework to ensure investment is targeted towards local priorities.
Growing a skilled workforce
$3.1 billion Australian Apprenticeships Incentive System.
$504 million for Jobs and Skills Councils.
$105.1 million New Energy Apprenticeship and New Energy Skills Programs.
480,000 Fee-Free TAFE places to be delivered through the National Skills Agreement
National Strategy to Achieve Gender Equality to inform assessment for grants under the Critical Minerals Development Program.
Jobs and Skills Australia to identify skills shortages and reduce these through policy, program and funding decisions, particularly by targeting First Nations and other culturally diverse people and encouraging skilled migration.
The Strategy also seeks to establish a process to update Australia’s Critical Minerals List and analyse the value chain for priority technologies.
Industry players should consider whether their proposed projects are in line with Strategy objectives. Both international mining companies and junior explorers can seek grants under the Critical Minerals Development Program. However, it is yet to be seen whether indirect measures, including those targeted towards employment and improving Australia’s international reputation, will assist development of the critical minerals sector in the long-term.
Where the Strategy falls short
As we’ve flagged already, while the Strategy has clear objectives for industry growth, it remains to be seen whether the investment under the Strategy will be enough to have a meaningful impact on the critical minerals sector. The Strategy heavily relies on existing initiatives, and aside from the $500 million earmarked by the NAIF and access to the National Reconstruction Fund, there is a lack of significant new funding for the sector.
As noted above, the Strategy identifies a need to streamline approval processes and incentivise supply chains, but it does not explicitly discuss measures akin to the US Inflation Reduction Act or EU Critical Raw Materials Act. Although very welcome, the investments under the Strategy do not match the funding being thrown at the industry by the US and EU, nor does Australia have the massive installed industrial base of those jurisdictions to support the kind of “demand pull” strategies which underpin the Inflation Reduction Act.
Further, Australia’s Critical Minerals List has been criticised for excluding metals central to the energy transition, namely nickel, copper and aluminium, and failing to maximise economic returns as a result. However, new minerals may later be added to the list given indications in the Strategy to update the list in line with clean energy objectives.
What happens now?
Industry has indicated that it will push the Government to designate more minerals as ‘critical’, particularly bauxite, nickel, copper, zinc and tin. It is likely that industry will also lobby for a practical approval streamlining processes, particularly for environmental approvals.
Both federal and state Governments have proposed legislative and policy changes including:
Reform of the Environmental Protection and Biodiversity Conservation Act 1999 (Cth) in light of the Samuel Review, including the development of National Environmental Standards.
Potential reform of the Aboriginal and Torres Strait Islander Heritage Protection Act 1984 (Cth), which is currently undergoing consultation.
Reform of Western Australian Aboriginal cultural heritage legislation, which establishes a comprehensive due diligence process to prevent harms to heritage sites and objects.
Various consultations and new policy guidelines from the Western Australian Department of Mines, Industry Regulation and Safety and Department of Water and Environmental Regulation on mining approval streamlining and environmental compliance.
Proposed Queensland Government legislation to increase the generation of renewable energy and maintain employment in the sector.
The DISR will comprehensively review the Strategy in 2026. In the meantime, the critical minerals industry should seek to maximise benefits under the Strategy, but also be aware that funding measures may be insufficient to support substantial project development or foreign investment.
Like this piece? You might also be interested in Queensland packs policy punch in its own Critical Minerals Strategy.
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