Each year the Annual Survey of Mining Companies (conducted by the Canadian based Fraser Institute) identifies the top ranked jurisdictions in the world for mining investment based on factors such as the relevant Government policies ability to provide a stable regulatory environment and geological attractiveness for minerals and metals. In the latest results from the Annual Survey of Mining Companies (2020), Australia continued its history of strong performance with Western Australia being ranked 4th in the world while South Australia was 7th, Queensland 16th, the Northern Territory 19th, New South Wales 27th, Victoria 56th and Tasmania 63rd.
‘Critical minerals’ are described differently across jurisdictions, but are generally understood to refer to mineral and metal elements which are critical to the development of future technologies. Examples of these technologies include batteries for energy storage, renewable energy equipment, low-emission power sources, defence equipment and weapons, electric vehicles, consumer devices, products for the medical sector and for scientific research.
As Federal and State Governments, private companies and international economies move toward reducing carbon emissions and investing in new energy generation and storage technologies, it is expected that demand for critical minerals will increase to exceed existing global production, resulting in supply shortages. Consequently, Governments and industries across the world are seeking to drive investment in critical minerals exploration and secure predictable alternate supply chains in safe and stable jurisdictions like Australia.
A national approach
The following is a snapshot of some of the industry initiatives undertaken in Australia in 2020.
- In January 2020, Australia launched its centralised Critical Minerals Facilitation Office (CMFO) with ambition to drive a whole-of-sector and national approach to unlock Australia’s critical minerals potential. The CMFO is a step towards implementing the Australian Critical Minerals Strategy, which aims to promote investment in Australia’s critical minerals sector by providing incentives for innovation to lower costs, increase competitiveness, develop Australia’s downstream processing capabilities and to connect critical minerals projects with key infrastructure development, all in an effort to make Australia a world leader in the exploration, extraction, production and processing of critical minerals.
- Also in 2020 Australia became a founding partner of the international Energy Resource Governance Initiative (ERGI) along with Botswana, Canada, Peru and the United States. The ERGI seeks to promote and share diversified, sustainable and ethical resource supply chains to meet growing global demand for energy resources and, in particular, critical minerals. As a practical means of disseminating best practices, ERGI developed a toolkit which provides practical guidance on resource management, project development, production and stewardship. Cooperation between the United States and Australian
Governments over the past 18 months has fostered ideal conditions to position Australian minerals as part of the solution to the world’s
supply chain needs, including by fostering investment in new projects to meet the world’s processing requirements.
- In October 2020, a prospectus of critical mineral projects in Australia was distributed by the Federal Government as a strategy to attract investment in the sector by showcasing over 200 investment projects nationwide. The investment projects identified in that prospectus included processing plants for the development of critical minerals including rare earths.
- In addition to these Federal initiatives, there has been ongoing development of initiatives in Queensland, such as the junior exploration scheme; the Strategic Blueprint for Queensland’s North West Minerals Province, which accounts for 75% of Queensland’s base metal and minerals; and Queensland’s Unite and Recover Economic Recovery Plan (Recovery Plan), which has continued to headline development initiatives and investment in the past year.
- The Queensland minerals sector was bolstered with investment and new initiatives announced in 2020, including:
– approximately $500 million over five years to boost mineral freight exports on the Mount Isa Line through ongoing maintenance and track improvements, discounted freight charges and support for a new container terminal at the port of Townsville;
– finalising arrangements with industry for creation of a $100 million Resources Community Infrastructure Fund (RCIF), delivered over three years towards projects to improve economic and social infrastructure across Queensland’s resources communities including the North West Minerals Province. The RCIF will supplement existing planned State community infrastructure, in addition to the investment by resource companies and is aimed at supporting resource communities to assist their recovery from the COVID-19 pandemic;
– as part of Queensland’s Recovery Plan:
– an additional $10 million funding to upscale the Collaborative Exploration Initiative and support exploration activity for new economy minerals for emerging technologies and products;
– a commitment to deliver Queensland’s Resources Industry Development Plan which will focus on setting targets for industry growth, encouraging exploration through future rounds of the existing Collaborative Exploration Initiative, and exploring opportunities to continue advanced processing of resources in Queensland; and
– $14.8 million to continue investigating the feasibility of the CopperString 2.0 project, a 1,100 kilometre high-voltage transmission line to connect the North West Minerals Province with the national energy market which will deliver lower energy costs for the industry.
Key takeaways
We anticipate that the industry initiatives and funding announced by the Federal and State Governments in 2020 will have a positive impact on the Fraser Institute international rankings for investment attractiveness in survey results for the coming years. Critical minerals are an essential ‘enabler’ for the transition to a clean energy future and Australia is well positioned to benefit from the increase in demand that this transfer is expected to generate.
However, the sector does face some challenges. Like most of the resource sector in Australia, the critical minerals industry needs access to capital, and historically that capital has been secured from foreign investment. Recent decisions by FIRB makes it clear that foreign investment in critical minerals is a sensitive issue. In 2020, two proposed investments by Chinese companies in Australia’s critical minerals sector were unofficially blocked, causing the applicants to withdraw their FIRB applications. Extensive FIRB reforms introduced earlier this year have also identified critical minerals as a national security issue, ensuring stricter oversight of foreign investment going forward. The concern for industry is that the imposition of tougher restrictions on foreign investment into critical minerals will reduce access to capital even to the point that the stated objectives of the Government of driving investment in critical minerals will be adversely affected in a material way.