The surge in demand for critical minerals is expected to continue in 2023 and beyond, as battery and automotive sectors source these minerals to facilitate global decarbonisation targets. The investment in clean energy technologies – and in turn, the demand for the minerals which make up those technologies – is expected to quadruple by 2050. Australia has huge potential to succeed in this market, with its 'triple threat' combination of vast geological resources, a mature and skilled mining industry, and a stable economy. The industry has also seen generous State and Federal Government support through various funding initiatives, such as the development of onshore processing and manufacturing capabilities.
Notably, we have seen two discussion papers released by the Federal Government in the last six months, being:
- Australia's Critical Minerals Strategy: Discussion Paper (December 2022) (Critical Minerals Strategy); and
- National Battery Strategy Issues Paper (February 2023) (National Battery Strategy).
These papers reflect a national intention to reposition Australian players into all stages of the supply chain, from upstream exploration, mining and processing, right through to downstream manufacturing and supply to end users.
Critical Minerals Strategy
The Critical Minerals Strategy paper sought stakeholders' input on how Australia could leverage its unique resource and regulatory landscape to create more opportunities for the growth of the nation's critical minerals industry. Specifically, the Critical Minerals Strategy sought industry views on ways to promote the growth of domestic downstream manufacturing, facilitate project development, benefit regional and First Nations communities and attract foreign investment and international collaboration. Consultation on the Critical Minerals Strategy closed in February 2023.
National Battery Strategy
The National Battery Strategy paper called for public views on the challenges and opportunities to develop domestic battery manufacturing capability in Australia. While the Critical Minerals Strategy is aimed at supporting Australia in moving up the value chain on a holistic level, the National Battery Strategy is a complimentary strategy that targets the downstream manufacturing and assembly components of the value chain.
Although the market is optimistic about the opportunities to expand Australia's upstream and downstream capabilities, we expect that industry feedback on both discussion papers will acknowledge the difficulties of advancing onshore manufacturing and processing facilities, given the associated funding, regulatory, and technical challenges. In particular, private investment in onshore capability will be necessary – at all stages, but particularly in the early stages of R&D, feasibility, and construction to enable projects to get off the ground faster.
Other early-stage considerations for critical minerals projects include appropriate tax structuring, investment structuring and regulatory hurdles including foreign investment and ACCC approval.
In response, the Federal Government has announced support to overcome these hurdles, including:
- the announcement of the National Reconstruction Fund Corporation Bill 2022 (Cth) to establish a $15 billion National Reconstruction Fund (NRF). Public announcements indicate the NRF will provide finance (including by way of loans, guarantees and equity) in seven priority areas, including renewables and low-emission technologies, value-add in resources and enabling capabilities. Part of the NRF will include a $1 billion Value Adding in Resources Fund, which will aim to ensure a greater share of raw materials are processed in Australia. Public submissions to the Economics Legislation Committee's inquiry on the Bill closed in February 2023, and the Committee is expected to provide its report soon; and
- the establishment of Australia's first National Electric Vehicle Strategy (NEVS) to meet the enthusiasm of the car industry. The intention behind NEVS is to help Australia become a globally competitive market for EVs, improve affordability and choice, increase charging infrastructure, and increase local manufacturing.
Cross-sector EV partnership
With the expectation that global EV numbers will increase by 30% each year until 2050, it comes as no surprise that automotive giants like Tesla and Ford have looked to Australia to boost their supply of materials such as lithium and cobalt. Tesla was in talks with Northern Territory's Core Lithium in 2022 to supply 110,000 tonnes of lithium, although this deal did not ultimately progress. To ensure its production of EV batteries, Ford has entered into arrangements with BHP and Rio Tinto to secure supplies of nickel (BHP) and lithium, low-carbon aluminium and copper (Rio Tinto).  As we progress into 2023 and beyond, we expect to see even more cross-sector partnerships between raw material providers and car manufacturers to secure supply.
Public investment is following the trend towards critical minerals with the Australian Securities Exchange (ASX) recording a surge in lithium exploration spending at a record $600 million, constituting almost 60% of Australian minerals exploration spending. In fact, Australia's top five pure lithium companies now have a combined market capitalisation exceeding $50 billion as at the end of 2022 (up eightfold over the last eight years).
We continue to see the critical minerals industry growing in leaps and bounds. During Q1 2023, the Queensland Government has already announced the development of a $75 million critical minerals demonstration facility in Townsville, to support the state's expected mining and manufacturing boom. The facility, which was initially intended for vanadium processing, has been expanded to process cobalt, high purity alumina and rare earth metals. In Victoria, Recharge Industries and Scale Facilitation have announced plans to build a lithium-ion battery cell production facility in Geelong, Victoria, which is hoped to generate up to 30 gigawatt hours of storage capacity per year for EVs and stationary energy storage units.
While not without risks, the clear support from the Federal and State Governments for the whole critical minerals supply chain sets this sector apart when it comes to opportunities.
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