Article by Noah Yim & Brad Thompson, courtesy of The Australian.
A doubling up of green tape and mandatory Indigenous consultations sparked by Anthony Albanese’s Future Made in Australia agenda will threaten the development of the critical minerals industry and hamper the nation’s chances of competing with China, miners and security experts warn.
As Anthony Albanese kicked off the election year in the resource states of Queensland and Western Australia promoting his wider FMIA push, rules for miners trying to access proposed tax breaks to build up critical minerals projects have come under scrutiny for being too broad and duplicating many of the requirements the sector already faces.
The government estimates its critical minerals production tax incentive – for which legislation is currently before the House of Representatives – would cost around $7bn in the next 10 years, and lauded it as a plan to create “secure jobs” for thousands of Australians.
But the nation’s top mining industry lobby, the Minerals Council of Australia, warned that the “community benefit principles” requirement of the tax incentive would create uncertainty for a critical minerals industry already struggling to launch amid strong global competition.
“There are already extensive and rigorous approvals processes that mining and mineral processing projects must adhere to,” its submission reads.
“It also could have the unintended consequence of creating uncertainty as to eligibility and mean that companies have to reapply on a year-by-year basis (for the minerals tax break).”
Community benefit principles include priorities such as “supporting First Nations communities and traditional owners to participate in, and share the benefits of, the transition to net zero”. Miners already have to adhere to strict rules on the environment, carbon emissions and Indigenous heritage.
The principles also demand projects should provide “safe and secure jobs”, “more skilled and inclusive workforces” and “strengthening domestic industrial capabilities”.
Industry warnings come amid a global race for critical minerals, with governments around the world, including the US and China, pumping money into the enterprise.
Critical minerals such as nickel, copper, cobalt and rare earth elements are key ingredients in high-value products often with national security and defence implications, such as batteries, computer chips and fibre-optic cables.
Downstream processing of critical minerals in Australia hangs in the balance with two lithium hydroxide plants in Western Australia that would qualify for the tax breaks battling for survival amid a big drop in commodity prices. WA launched a rescue package for the lithium industry late in 2024 after a string of mine closures that followed the collapse of the nickel sector and 7000 job losses.
The Albanese government recently committed more taxpayer funding to build Australia’s first fully integrated rare earths refinery.
Iluka Resources, the company behind the rare earths refinery, and other critical minerals players have accused China of using its market dominance to manipulate prices to thwart efforts by Australia and the US to create Western world supply chains.
Australian Strategic Policy Institute national security director John Coyne said it was imperative for Australia to develop resilient supply chains for critical minerals given China’s dominance in the market and its previous history of using it in a coercive way.
“When it comes to critical minerals and rare earths, China has a history of manipulating the market,” he told The Australian.
“If we look at rare earths, it did weaponise rare earths for a period of 90 days against the Japanese after an issue in the Senkaku Islands.
“So, you know, it’s not a hypothetical. What we’ve seen is investments and price setting, and the prevention of exporting and processing technologies.
“The only way forward in this is to have a very clear-eyed focus that the aim here isn’t about cutting China out of the market. It’s about creating resilient alternative supply chains.”
A spokesman for Resources Minister Madeleine King clarified that businesses would not have to reapply each year and that, instead, “eligible businesses would receive the credit after lodging their tax return”.
The government also defended the inclusion of the community benefit principles, saying they “are about ensuring the benefits of investment flow to local workers, industries, and communities right around Australia”.
“The $7bn Critical Minerals Production Tax Incentive will create secure jobs and diversify global supply chains by encouraging processing here in Australia rather than shipping critical minerals overseas to be refined.
“The incentives are supported by industry stakeholders and were designed with significant input from industry.”
Chamber of Minerals and Energy WA chief executive Rebecca Tomkinson said while she “strongly supports” the tax incentives, overly prescriptive requirements could discourage access to financial support.
Ms Tomkinson said requirements should recognise any land use agreements with native title holders and avoid overlap with other requirements such as Aboriginal cultural heritage processes. She also warned against onerous labour requirements such as limiting projects to unionised workforces.
“Mandating a unionised workforce, especially in the current industrial relations climate, would introduce significant risk for proponents and severely disincentivise uptake,” she told The Australian.
“It would also ignore the reality that average weekly earnings in the Australian mining sector are already the highest in the nation, despite just 10 per cent of the workforce being unionised.
“It is essential CBPs recognise any Indigenous land use agreements that may exist and avoid overlap with federal and state engagement requirements under native title, Aboriginal cultural heritage and other approval processes.
“Early and genuine engagement with First Nations communities to share the benefits of resources projects is already a legislative requirement.”
Association for Mining and Exploration Companies acting chief executive Neil van Drunen said the last thing critical minerals players needed was more red tape. AMEC, which led the campaign for the tax credits with the support of Tesla and companies such as Liontown Resources, Pilbara Minerals, Arafura Rare Earths and Andrew Forrest’s Wyloo, said the legislation needed to avoid approval duplication and repetition.
“Critical minerals will create even more benefits for the community if they are downstream-processed in Australia. The last thing anyone wants is for Australia’s critical minerals downstream opportunity to be stifled by red tape,” Mr van Drunen said.
It is understood Treasury has acknowledged the legislation needs fine-tuning.
AMEC is lobbying for the community benefit principles to be measured across the entire tax group, rather than project by project. In its submission to the Senate committee, it explained the need to clarify community benefit principles so they could be satisfied at registration rather than annually.
