Australia risks losing pole position in critical minerals race

Cobalt Blue Holdings

30/03/2023 22:00

(Repeats story published late on Thursday, no changes to text)

        * 
      Dash on to break China's grip on battery materials
    

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      Australia lagging U.S., Canada, EU incentives
    

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      Industry wants subsidies, land access, faster permitting
    

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      Funding, technology pose challenges
    

  
    By Melanie Burton
       MELBOURNE, March 30 (Reuters) - Australia is at risk of
losing its head start in critical minerals processing because it
has not yet laid down a national strategy, even as other
governments are splashing out incentives to grab market share
and bolster security.
    Supplier of nearly half of the world's lithium, Australia is
also the world's third-largest cobalt exporter and a significant
producer of rare earths, copper, graphite, manganese and other
minerals key to the global energy transition. 
    However those minerals are largely processed in China,
including into materials essential in batteries and magnets for
products from electric vehicles to missiles. Western nations
want to ease its grip after supply was disrupted during the
COVID-19 pandemic. 
    Consultants say Australia should at least move to producing
the chemicals and battery active materials needed for cell
manufacturing.
     "There's lots of discussion and talk on various domiciles
wanting to move forward, but ultimately it's all about actions,"
Pilbara Minerals  PLS.AX  CEO Dale Henderson told Reuters.
    The Grattan Institute, a think tank, estimates the critical
minerals industry could add more than $400 billion to the
economy by 2050, a bigger contribution than the coal industry,
Australia's no.2 export, today.
    Industry executives are calling for a national strategy to
speed that development by fast-tracking permitting, offering
preferential access to industrial land and subsidies, among
other measures.
    They want rapid action in light of new competition from the
U.S., Canada and the European Union, which have laid out
critical minerals strategies including billions of dollars in
incentives.
    Top global miner BHP Group's  BHP.AX  CEO Mike Henry told
media last month Australia was at risk of other countries moving
to "eat our lunch".
    
    AID NEEDED
    With Canberra's help, Australia needs to play to its
strengths, which include having abundant renewable energy
sources and being a reliable supplier to its global partners,
consultants say.
    The government has provided more than A$250 million ($167
million) in support to Pilbara Minerals, the country's biggest
independent lithium miner, which approved a lithium expansion in
Western Australia on Tuesday.
    CEO Henderson said he was encouraged by federal and state
efforts, but added: "Of course, the government could always do
more."
    In the first ministerial round table on critical minerals
strategy in three years, state and federal ministers last week
agreed development of the sector was a national priority,
discussed how to support growth, and committed to hold regular
round tables, Resources Minister Madeleine King said.
    King said on Wednesday a critical minerals strategy would be
released "soon". However the government has not said when it
would deliver its national battery strategy.
    "There is a window of opportunity to become a key player in
battery manufacturing here in Australia," Industry Minister Ed
Husic said last week. "We cannot let it close." 
    
    FUNDING HURDLES 
    Australia has battled to overcome its reputation as a
supplier of raw materials that fails at manufacturing, partly
because its distance from major markets means it struggles to
build scale to overcome high labour costs.
    While major players, including BHP, Tianqi Lithium Corp
 002466.SZ  and Albemarle Corp  ALB.N , are building up
operations that will turn ore into battery chemicals, for
smaller players the key obstacle is funding. 
    Making the right product grades consistently is also a
challenge. Bankers are wary of lending to a capital-hungry
sector developing new technologies, especially to companies with
small balance sheets, typical of the sector, executives said.
        Cobalt Blue Holdings Ltd  COB.AX , with a market value
of A$140 million, won a small grant and fast-track permitting
status but still faces a funding shortfall and wants government
assistance to secure a refinery site for its A$560 million
project, investor relations manager Joel Crane said.
    "One of the largest issues we face is project funding,"
Crane said.
    Arafura Rare Earths  ARU.AX , capitalised at A$1.1 billion,
is counting on loans from the Australian and German governments
to fund more than half its A$1.8 billion Nolans mine and
processing plants.
    "The elements for an effective critical minerals strategy
are in place. The challenge is to stitch them together and
deliver. This is a once-in-a-century opportunity," the Grattan
Institute said in a report last month.
    
     ($1 = 1.4984 Australian dollars)

 (Reporting by Melanie Burton; Editing by Sonali Paul)
 ((melanie.burton@thomsonreuters.com Twitter: @MelanieMetals;
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