Australia is positioning itself as a key source of critical minerals to underpin its transition to net zero, but faces strong competition from alternative investment destinations such as China, the US and Canada.
The proposed transition to net zero has prompted Australia, which aims to become a major investment destination and supplier of critical minerals in the next 5-10 years, to update its official critical minerals list to include copper and nickel in its newly created strategic materials list. Being on the list means easier access to direct public and private capital for investment, but also brings in tighter criteria for which entities can invest in the listed minerals.
Australia's updated critical minerals list consists of molybdenum, selenium, tellurium, fluorine and arsenic, with helium removed from the list. The strategic materials list consists of copper, nickel, aluminium, phosphorous, tin and zinc.
Australian prime minister Anthony Albanese announced additional financing of $A2bn ($1.37bn) for investment in critical minerals, over its $A2bn funding in 2021. Albanese, who made the announcement during a visit to the US in October, also pledged to de-risk investment in the critical minerals sector while building sustainable and secure critical minerals supply chains with the US.
The additional investment is likely to accelerate the development of a long list of exploration and early-stage critical minerals projects across Australia in 2024 and beyond.
Global investment in key energy transition minerals more than doubled in the five years to 2022 and needs to increase further to meeting rising demand, the International Energy Agency says. Western governments are increasingly rolling out policies to encourage investment and try to reduce the sector's heavy dependence on China — with measures such as the US' Inflation Reduction Act, the EU's Critical Raw Materials Act and Canada's Critical Minerals Strategy already in place.
States' investments
States' efforts to encourage critical minerals development have supplemented the federal government's push.
Western Australia, which accounts for 50pc of global lithium production and is a major exporter of nickel, cobalt, manganese and rare earth elements, invested A$40mn in April to accelerate critical mineral discoveries. The state has also invested A$134mn to cut greenhouse gas (GHG) emissions, including A$60mn in new energy projects and A$74mn into multiple other initiatives to fast-track the state's journey to net zero emissions.
Queensland state, which has earmarked A$425mn for the sector, will open a state-owned critical minerals facility in Townsville in 2025, initially focused on vanadium processing. This will aid Australia's ambitious 2030 target to emerge as a major global supplier of critical minerals.
The Townsville facility complements an existing vanadium battery manufacturing facility in Queensland and is a key action under the Queensland Resources Industry Development Plan to deliver clean, reliable and affordable energy.
Queensland resource minister Scott Stewart had week-long meetings in the US from 4 December last year to secure partnerships with government and industry representatives to grow the state's critical minerals industry.
Foreign investments
Australia is actively seeking investments to unlock its potential in the critical minerals sector and inclusion for tax credits with the US, as part of the Climate, Critical Minerals and Clean Energy Transformation Compact, the third pillar of an alliance between the two countries.
The compact is part of the Indo-Pacific Economic Framework which was joined by Australia and 13 other countries in September 2022, to launch negotiations across four core pillars, including trade, supply chains, clean economy and fair economy. This collaboration will strengthen Australia's position alongside aligning its critical minerals list with current global conditions.
Australia has also been trying to improve its relationship with China after some difficult years. China ended its unofficial ban on Australian concentrate imports in November this year. Meanwhile, Chinese export restrictions, effective 1 December on graphite, which includes high-purity, high-strength and high-density synthetic graphite materials, could provide an opportunity for Australian producers. There is plenty of potential for Australia to support graphite production, with South Australia holding 65pc of the Australia's graphite resources, according to Australia's Office of the Chief Economist (OCE). Beijing had introduced the restrictions in October last year in response to US and Canadian bans on Chinese investments in North American critical minerals.
