Australia’s Critical Minerals Strategy
In March 2022, the Commonwealth Government, then under the leadership of Prime Minister Hon. Scott Morrison, released its Critical Minerals Strategy, confirming the Government’s ongoing commitment to the development of the critical minerals sector in Australia.
Over the 12 months since the publication of this strategy, the opportunities for growth in the critical minerals sector have continued to increase, notwithstanding a significant correction in the market prices of a number of minor metals such as lithium and cobalt.
While some of the ‘hype’ may have come out of the sector, support has continued to grow across all levels of government, with the Western Australian State Government the latest to announce a raft of new spending.
The WA Government gets behind the mining sector
This week, the Western Australian Government announced proposals that will see an additional $40 million in investment aiming to accelerate resource discoveries in WA.
The initiates include:
a $16.1 million boost to the Exploration Incentive Scheme to increase greenfield exploration and create a new Geophysical Co-funding Program (GCP ), designed to support better decision-making around land use by excluding ground that shows little or no prospectivity;
$6.7 million for an Industry Ready Program (IRP ) to create data analytics packages for key regions and commodities and provide opportunities for graduates to work at the Geological Survey of WA;
$6.2 million for magnetotelluric data acquisition to enable more targeted exploration in combination with passive seismic data being collected through the ongoing WA Array project;
a $4 million boost to the Minerals Research Institute of Western Australia to expand research and innovation in net zero and waste reduction projects;
$3.3 million to update and optimise core libraries in Carlisle and Kalgoorlie, including new bionic lifting equipment; and
$3.7 million to redevelop and improve many of the Department of Mines, Industry Regulation and Safety's (DMIRS ) online data services.
The latest round of support complements other WA Government policy designed to provide a fillip to companies seeking out opportunities to profit from the green energy transition. These include the Green Energy Assessment Unit, Future Battery Industry Strategy, Diversification Leases for large scale renewable energy projects, and direct investment in the development of the State’s nascent hydrogen industry.
In February this year, the Western Australian Government announced $96.5 million in funding for port upgrades at Lumsden Point in the Pilbara to which the Commonwealth Government will contribute $565 million. This funding will be used to establish common user facilities and new berths at the port, for increasing lithium and copper concentrates export capacity and upgrades to allow for the importation of wind turbines and blades to build the Pilbara’s renewable energy infrastructure.
The increasing importance of the critical minerals sector
The WA Government announcements come hot on the heels of the most recent Resources and Energy Quarterly publication by the Department of Industry, Science and Resources’ Office of the Chief Economist , which makes clear the increasing importance of the critical minerals sector to Australia’s future security and prosperity.
The report notes that Australian resource and energy exports are forecast to set a record of $464 billion in the 2022-23 fiscal year. While this is primarily the result of a new wave of surging bulk commodity revenues (due in part to historically high levels of brownfield expansion expenditure in the last five to seven years, and the unexpected surge in commodity prices resulting from the Russia / Ukraine conflict), what is notable is the increasing contribution of critical minerals to Australia’s export earnings over the outlook period to 2027 - 2028.
Notably, the report suggests that lithium and base metals (and their raw material inputs) are likely to account for almost as much export revenue as all coal types by the 2027-28 fiscal year. So, while the global trend towards decarbonisation poses a threat to some exports - particularly thermal coal but also, over the longer term, metallurgical coal and LNG- it also represents a massive opportunity for all the metals complex which is critical to electrification.
This includes not only battery metals such as lithium, cobalt, manganese, graphite and nickel, but also base metals such as copper and even iron ore, given the magnitude of the infrastructure spend required to support, in particular, the electrification of transport.
Towards a new Critical Minerals Strategy
Despite the change in government following the May 2022 federal election, many of the initiatives provided for in Commonwealth’s 2022 Critical Minerals Strategy remained in place, including programmes for the provision of direct financial support for critical minerals projects (see our note Government Support for the Critical Minerals Sector).
Under the leadership of new Resources Minister, Hon. Madeleine King, the Commonwealth Government recently released a Critical Minerals Strategy 2023: Discussions Paper with a view to seeking submissions from the public on a proposed revision to the 2022 Critical Minerals Strategy. The revised strategy is expected to focus on creating economic opportunities (including for regional Australia), developing new sovereign capabilities and industries and building reliable, competitive and diverse supply chains.
The Discussion Paper has a strong environmental, social and governance (ESG) overlay. This includes alignment with the Commonwealth Government’s commitments to tackle climate change, seek out opportunities for economic empowerment of First Nations peoples, boosting women's economic equality, and strengthening international trade partnerships. Australia is also a signatory, alongside Canada, the United Kingdom, France, Germany and the United States, to the Sustainable Critical Minerals Alliance, with the objective of advancing sustainability and ESG standards for the mining and processing of critical minerals. The Alliance was launched on the sidelines of the UN Biodiversity Conference (COP15) in Montral on 12 December 2022.
While on the one hand, ESG considerations may be seen as adding risk to critical mineral projects, on the other, they represent an area of competitive advantage for Australia and Australian mining companies, in a world where such considerations are increasingly influential in determining the flow of global capital.
Metals lie at the heart of decarbonisation
In releasing the Discussion Paper, Minister King noted that:
Without mining, the world cannot reach net zero by 2050. In fact, the minerals required to achieve our decarbonisation goals are of such magnitude that to reach net zero, we will need more mining, not less.
In short, decarbonisation is a metal-intensive process. This augurs well for a jurisdiction, like Australia, which possesses both a substantial mineral endowment, and a stable fiscal and regulatory regime to enable its responsible and sustainable exploitation. Sensible, targeted government support provides the potential to further catalyse the development of critical minerals projects with the associated benefits for stakeholders both domestically and abroad.