Last week, the Albanese government announced it will invest a further $2 billion into Australia’s critical minerals industry, with a focus on bolstering the nation’s downstream processing and manufacturing capabilities.

The commitment will double the capacity of the Critical Minerals Facility (CMF) to fund and develop Australian projects from $2 billion to $4 billion. The injection aims to reduce reliance on China for downstream processing and manufacturing of critical minerals and, instead, to transform Australia into a competitive value adding participant in the critical minerals supply chain.

China’s well entrenched refining and processing capabilities make it the dominant player in the critical mineral supply chain, including the production of cathode and anode active materials and battery cells required to manufacture batteries essential to the energy transition.  

In response, many countries are now looking to diversify their supply chains, by looking for safer and more reliable alternatives, to meet their emissions reduction targets and deploy clean energy technologies. The International Energy Agency has recently reported that while global supply might be catching up to clean energy ambitions globally, there are three key challenges which must be overcome to secure effective energy transition, namely:

  • the supply of critical minerals to meet rapidly growing demand;
  • ensuring supplies come from safe and diversified sources; and
  • securing the supply of volumes from clean and responsible sources.

Earlier this year, Australia and the United States announced their shared commitment to enhance bilateral cooperation on climate and clean energy matters under a Climate, Critical Minerals and Clean Energy Transformation Compact (Compact). The Compact aims to establish strategic partnerships, integrate supply chains and accelerate climate action. In a statement released by the Minister for Resources, the expansion of the CMF will help to build supply chains with the United States under the Compact to support our shared clean energy, manufacturing and defence ambitions.

The bilateral relationship with the US is an example of the Federal Government’s plan to attract foreign investment and build strategic partnerships within the critical minerals sector. On a larger scale, the announcement is reflective of the increasing global recognition that the road to net zero cannot be travelled alone, and that a diversified and sustainable supply chain is critical to ensuring that clean energy technologies are adopted as soon and as safely as possible.

Although further significant equity investment is still needed to support industry, this recently announced injection is expected to result in greater access to debt financing and falls in step with other recent policy announcements to attract foreign investment in Australia’s critical minerals industry. Together with the $57.1 million Critical Minerals International Partnerships Program, a target investment level of up to $1 billion from the National Reconstruction Fund, and a $500 million pledge from the Northern Australia Infrastructure Fund, we anticipate that more foreign investors will be enticed to explore opportunities in Australia’s growing market, creating opportunities domestically and globally to ensure an adequate and sustainable supply of critical minerals.

For more information about the announcement or Australia’s role in the critical minerals industry, please do not hesitate to contact a member of our Resources and Renewables team.  

To read more about the emerging issues and opportunities in Australia’s Energy and Resources Industry, including within the critical minerals sector, please click here: Emerging Issues for the Australian Energy and Resources Industry 2023 (mccullough.com.au).

Thank you to Adam Kearney, Senior Associate, and Laura Sclavos, Lawyer, for their contribution to this article.