Canberra answers miners\u2019 prayers, with $7b production tax credit at centre of $22b Future Made in Australia program
\nThe budget announcement could see 10% of operating costs for downstream processing in critical minerals like nickel, vanadium, lithium and rare earths returned to miners as a tax credit
\nAMEC CEO Warren Pearce says the announcement will put Aussie critical minerals proponents on a level playing field with North American competitors<\/p>\n
The Federal Government has acceded to demands from the mining industry, committing $7 billion over the next decade in a tax credit for companies who process and refine critical minerals on shore.<\/p>\n
A key demand of the Association of Mining and Exploration Companies, the Critical Minerals Production Tax Incentive will cover 10% of relevant processing and refining costs for the downstream processing of any of Australia\u2019s 31 critical minerals for production between 2027-28 and 2039-40 as long as they reach FID by 2030.<\/p>\n
Those metals include lithium and nickel, added to the Critical Minerals List in February after a price crash caused by oversupply from Chinese-funded miners in Indonesia which saw a swag of Aussie nickel mines bite the bullet.<\/p>\n
The Federal Government will also provide $10m to work with States on pre-feasibility studies to develop common-user critical minerals infrastructure.<\/p>\n
The announcement of the production tax credit, the most substantive government funding promise for battery metals, has been cautiously welcomed by miners.<\/p>\n
\u201cMinRes welcomes the Federal Government\u2019s announcement. This policy will help Australia move further down the battery supply chain to add more value to our critical minerals and create the jobs of the future,\u201d a MinRes spokesperson said yesterday.<\/p>\n
Its billionaire founder Chris Ellison has called for Government support for downstream processing which he says is otherwise a business which only offers single digit returns.<\/p>\n
The policy was lobbied with information from a range of miners and developers across the critical minerals spectrum from Andrew Forrest\u2019s Wyloo and ASX giants like MinRes and Pilbara Minerals (ASX:PLS),<\/strong><\/a> to mid-sized developers like Arafura Rare Earths (ASX:ARU)<\/strong><\/a> and Liontown Resources (ASX:LTR)<\/strong><\/a> to juniors like nickel hopeful Ardea Resources (ASX:ARL)<\/strong><\/a> and even Elon Musk\u2019s EV behemoth Tesla.<\/p>\n AMEC CEO Warren Pearce said the policy placed Australia and WA\u2019s miners on an even playing field with Inflation Reduction Act era USA and other western jurisdictions as an investment destination for downstream.<\/p>\n \u201cIn this case, what we\u2019ve done is leveled up. So where we were two or three years ago, when Western Australia and Australia were attracting that investment for downstreaming, particularly in lithium, that was before the inflation Reduction Act, and most of those market interventions internationally,\u201d Pearce told Stockhead<\/em>.<\/p>\n \u201cNow, we\u2019ve got ourselves back on the playing field. So we\u2019re putting ourselves back in a position to be on a much more level footing with our international competitors.<\/p>\n \u201cAnd because we\u2019re the ones producing the minerals that comparative advantage now plays back in our favour, where it really was being overtaken by international incentives.\u201d<\/p>\n It also provides a potential window forBHP (ASX:BHP)<\/strong><\/a> to improve the economics of its Nickel West operations, currently at risk of closure but one of Australia\u2019s few operations to already refine a value-added product domestically.<\/p>\n \u201cIt makes every one of those projects 10% more competitive than they were yesterday. We think this will make a quite substantial difference helping companies turn those on,\u201d Pearce said.<\/p>\n \u201cNickel\u2019s now a critical mineral so obviously that will apply to the existing nickel producers as well of the value added products so you assume nickel West will get it which will obviously be some support for them.<\/p>\n \u201cWe\u2019re looking at the vanadium, the rare earths, lithium and the nickel players as being the most obvious but we\u2019ve also highlighted graphite and cobalt, which we think are essentially the suite of commodities where there are substantial proposals around going downstream.\u201d<\/p>\n There are a few things we already knew were factored into the budget when it comes to the mining sector.<\/p>\n Prime Minister Anthony Albanese used a pre-budget jet to Perth to announce a $566 million for pre-competitive data to be collected by Geoscience Australia over the next decade.<\/p>\n It would be used to map Australia\u2019s soil and seabed depths including for iffy things like carbon capture and storage, a continuation of the sort of good and important work GA has been funded to pursue over the long haul, albeit double the previous commitment.<\/p>\n But while rates of discovery are not what they once were, it could easily be noted that isn\u2019t where new projects are typically falling down.<\/p>\n Plenty of deposits have been known about for years but funding, approval timeframes and inflating operating costs have kept them in the ground.<\/p>\n Competition for funding from heavily subsidised jurisdictions like China and now the USA is also an issue. Case in point, local manganese explorer Firebird Metals (ASX:FRB)<\/strong><\/a> yesterday announced a large funding package from local authorities including a massive rebate on its land purchase to build a high purity manganese sulphate factory in the Middle Kingdom.<\/p>\n That will take ore from the Oakover project in the Pilbara and convert it to battery materials in China, the home of the world\u2019s largest (and thus far highly subsidised) EV industry.<\/p>\n Element 25 (ASX:E25)<\/strong><\/a>, owner of the Butcherbird manganese mine also in WA\u2019s north, will ship its material to a plant in the USA, close to the base of its biggest backer and global carmaking giant Stellantis.<\/p>\n Australia has, heretofore, not yet made available the piles of cash on offer in the world\u2019s two largest economies.<\/p>\n But some funding, largely in the form of low cost loans and linked to the \u2018Future Made in Australia\u2019 program, were revealed before the budget was officially announced.<\/p>\n Rare earths proponent Arafura Rare Earths (ASX:ARU)<\/strong><\/a> got $840m in grant and loan support for its Nolans rare earths project, while Liontown Resources (ASX:LTR)<\/strong><\/a> will also get $230m in Clean Energy Finance Corporation and Export Finance Australia loans as part of a larger $550m package also backed by commercial banks for the Kathleen Valley lithium mine.<\/p>\n Also in for a combined $585m in funding were Alpha HPA (ASX:A4N)<\/strong><\/a> and Renascor Resources (ASX:RNU),<\/strong><\/a> owners of a high purity alumina plant in Gladstone and graphite project in South Australia respectively.<\/p>\n (The latter was \u2018revised\u2019 but not published due to \u2018commercial sensitivities\u2019.)<\/p>\n Like weather forecasts, commodity forecasts are often well off the mark.<\/p>\n In the case of budgets, wiser treasuries than those of the past now tend to go full bear on prices in the hope of \u2014 yippee \u2014 announcing a surprise surplus down the line from the extra tax revenues.<\/p>\n A $3.5b cost of living package signposted by a $300 energy bill discount was among the headline announcements of a budget getting ready for an election in a year\u2019s time.<\/p>\n That comes off the back of a $9.3 billion surplus this year helped by iron ore prices expected to remain higher by just about everyone except Treasury.<\/p>\n A deficit is coming in 2024-25 of $28.3bn, again likely to be trimmed by stronger than expected commodity forecasts. Though you can\u2019t forgive some skepticism from the public that some of Albanese and Chalmers\u2019 predictions will actually be met.<\/p>\n Notably, they think those \u2018cost of living\u2019 measures will help bring inflation within the target band of 2-3% by next financial year while still projecting GDP growth of 1.75% in 2023-24 and 2% in 2024-25. That zags the RBA, which last week said it didn\u2019t see prices falling into the target range until the second half of 2025.<\/p>\n As for why commodity prices are so important consider this: A US$10\/t movement in iron ore prices will be worth $5.3b to Australia\u2019s GDP either way in 2024-25 or $500m to the Federal Government\u2019s tax haul.<\/p>\n Canberra assumes iron ore prices fall to US$60\/t FOB by the March quarter of 2025. They\u2019re US$115\/t today.<\/p>\n Met coal \u2014 US$250\/t today \u2014 would fall under Treasury\u2019s projections to US$140\/t by that point, with LNG at US$10\/mmBtu and thermal coal halving to US$70\/t.<\/p>\n And while all this was happening Anglo American dropped its strongest riposte to BHP\u2019s blunted offers to acquire the storied mining house, announcing a strategy that will dramatically slim the business and beef up its balance sheet.<\/p>\n Its plan is to hit the Ozempic and trim down to just its copper and iron ore divisions \u2014 including the South African Kumba business BHP doesn\u2019t want any part in \u2014 snag billions selling off its Queensland met coal mines, demerge its platinum and De Beers diamond business (that one could be sold as well, depending on the structure) and push its nickel mines into a sale or care and maintenance.<\/p>\n Anglo will also keep its Woodsmith fertiliser project in the UK, banking the cash from its divestments to keep the multi-billion dollar investment on track.<\/p>\n It all comes a day after the London-listed miner (which copped a 2.5% hit early in the UK trading day to \u00a326.38) sent BHP packing with a $64.5b offer consisting of BHP scrip and slices of the demerged Kumba and AmPlats.<\/p>\n BHP had yet to say what its eventual plans would be for the nickel and diamond businesses, which would have been placed under review once the \u00a0\u00a327.94\/sh transaction completed.<\/p>\n Described by Anglo CEO Duncan Wanblad as the company\u2019s most radical change in decades, the announcement gives investors a fork in the road choice around which path they think delivers the best outcome.<\/p>\n Wood Mackenzie\u2019s metals and mining corporate research director James Whiteside said Anglo could realise $25bn in asset sales in the coming years.<\/p>\n But he also warned Anglo\u2019s plan to divvie up its assets leant credibility to BHP\u2019s bid with South African regulators.<\/p>\n \u201cAnglo American\u2019s strategic plan is undoubtedly bold and shedding the equivalent of 39% of 2024 earnings would be transformational,\u201d Whiteside said.<\/span><\/p>\n \u201cHowever, execution risk is substantial and borne entirely by Anglo American shareholders so if an increased offer from BHP did materialise, it could be seen as a more straightforward option for shareholders.\u201d <\/span>\u00a0<\/span><\/p>\n <\/span><\/p>\n The post Mission Critical: Albanese and Chalmers\u2019 budget delivers $7bn splash for critical minerals refiners<\/a> appeared first on Stockhead<\/a>.<\/p>","protected":false},"excerpt":{"rendered":"The bleeding obvious<\/h2>\n
Commodity forecasts<\/h2>\n
Meanwhile on planet BHP<\/h2>\n