14 Apr 2022

Recent updates to the critical minerals industry: what you need to know

By Brett Cohen, Armin Fazely and Luke Crofts

The key vision behind the 2022 Critical Minerals Strategy is for Australia to be a global critical minerals powerhouse by 2030, delivering stable supply, sovereign capability and regional jobs and growth.

Increased global demand, along with supply chain disruptions caused by various factors including the COVID-19 pandemic, has highlighted the need for access to reliable, secure and resilient supplies of critical minerals. The Australian Federal Government has recognised and responded to this, with a number of recent initiatives to capitalise on the country's large reserves of critical minerals and status as a reliable minerals primary producer.

Critical minerals: an opportunity for Australia

Critical minerals are metals and non-metals that are essential for the economic well-being of the world's major and emerging economies. Their supply may be threatened by geopolitics, geological accessibility, legislation, trade policies, economic rules or other factors.

Sectors which rely heavily on critical minerals include the energy, transport, aerospace, defence, medical, automotive and telecommunications sectors. In light of both the increasing global demand of critical minerals and disrupted supply chains caused by the COVID-19 pandemic, governments across the world are increasingly seeking to ensure their countries have access to reliable, secure and resilient supplies of the critical minerals they need.

The growing global demand for critical minerals presents a substantial opportunity for Australia, due to Australia’s large critical minerals reserves, technical expertise and track record as a reliable and responsible supplier of minerals. Australia already produces half of the world's lithium, and is the second-largest producer of cobalt and fourth-largest producer of rare earths.

Australian Government 2022 Critical Minerals Strategy

In March 2022, the Australian Federal Government announced its 2022 Critical Minerals Strategy, with the updated strategy building on the first Critical Minerals Strategy initially published in 2019. The Australian Government Department of Industry, Science, Energy and Resources notes that the revised strategy:

"has a vision to put Australia at the centre of meeting the growing demand for critical minerals. It will underpin our prosperity and security by improving access to reliable, secure and resilient supplies of critical minerals."

The key vision behind the 2022 Critical Minerals Strategy is for Australia to be a global critical minerals powerhouse by 2030, delivering stable supply, sovereign capability and regional jobs and growth to Australia.

The Australian Government plans to achieve its vision through:

  • De-risking projects: – helping de-risk projects at all stages of development to overcome barriers and attract private investment, through project facilitation, providing technical support and making strategic investments to scale up processing and lock in finance and offtake for production;
  • Creating an enabling environment: – policies which create an environment for Australia's critical minerals industry to thrive, including research and development, standards and accreditation and shared infrastructure and precincts to attract investment; and
  • Strengthening international partnerships: – building its relationships with key countries like the United States, Japan, the Republic of Korea, the UK, India and EU Members to improve collaboration, share knowledge of critical minerals and secure commercial offtake agreements that support the Australian economy.

Key takeaways from the 2022 Critical Minerals Strategy include:

  • there have been two new minerals added to Australia's critical minerals list, high purity alumina (HPA) and silicon, reflecting the expanding significance of mineral inputs in strategic applications like semiconductors and electrification – international aluminium and alumina producer Alcoa announced in September 2021 an intention to enter the HPA market through a joint development project with Perth based ASX-listed company, FYI Resources;
  • $200 million committed to a Critical Minerals Accelerator Initiative to support strategically significant early and mid-stage projects;
  • the establishment of a $50 million virtual Critical Minerals Research and Development Centre;
  • a $1.3 billion Modern Manufacturing Initiative fund, which helps firms pilot, demonstrate or scale up critical minerals processing; and
  • continuation of the $2billion Critical Minerals Facility (established in 2021) which will continue to finance projects aligned with the Critical Minerals Strategy to overcome gaps in private finance.

Critical Minerals Facility Funding

The Australian Government recently approved a $1.25 billion loan through the Critical Minerals Facility to Iluka Resources. The non-recourse loan, which will be administered by Export Finance Australia, will be used to assist with the construction and commissioning of Iluka's integrated Eneabba Rare Earths Refinery – the first of its kind in Australia.

The refinery will produce rare earth oxides neodymium, praseodymium, dysprosium and terbium, which are all critical inputs across a range of industries and technologies including electric vehicles, sustainable energy, advanced electronics, medical and defence. The Australian Government forecasts that the refinery could supply up to 9% of global demand for rare earth oxide products in 2026, when it is projected to come online.

This is the third such loan provided under the Critical Minerals Facility, with the Australian Government previously issuing:

  • a loan of up to USD$35 million to EcoGraf Limited under the Critical Minerals Facility to assist with the development of its Australian Battery Anode Material Facility in the Rockingham-Kwinana Strategic Industrial Area in Western Australia; and
  • a loan of up to $185 million to Renascor Resources under the Critical Minerals Facility to assist with the development of its integrated graphite mine and processing facility in South Australia.

US Government commits to financing Australian projects

The US Government announced last month its commitment to help fund Australian critical minerals projects through its export financing arms. The announcement came after the inaugural Australia-U.S Strategic Commercial Dialogue between US Secretary of Commerce Gina Raimondo and Australian Minister for Trade, Tourism, and Investment Dan Tehan. Secretary Raimondo and Minister Tehan released a joint statement on critical minerals and supply chain resilience, which noted:

  • the importance of securing a resilient and diversified supply of critical minerals to assist in the coming energy transaction;
  • the need to strengthen capabilities across all segments of the supply chain, including extraction and downstream processing; and
  • Australia and the United States will be looking at how their respective financing mechanisms can be better coordinated and leveraged to support private investment in supply chains.

The US Government recently updated its list of 50 critical minerals that it considers "essential to the economic or national security of the United States", many of which are supplied by Australian producers. Senator Raimondo noted that the US Government was committed to helping companies involved in Australian critical minerals projects with regulation and permitting requirements.

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Clayton Utz communications are intended to provide commentary and general information. They should not be relied upon as legal advice. Formal legal advice should be sought in particular transactions or on matters of interest arising from this communication. Persons listed may not be admitted in all States and Territories.