Australia has been the “lucky country” and has tried to live up to the “clever country” moniker adopted by politicians and industry leaders in the 1980s and 90s. But if there was ever a time to merge the country’s abundant natural advantages with its collective IP it was now, to “unlock a once in a generation economic opportunity”, the inaugural AusIMM Critical Minerals Conference in Perth heard.
The talk was, of course, about Australia’s chance to move past the “dig-and-ship” resource development model and add orders of magnitude more value to domestically produced lithium, graphite, cobalt, vanadium, rare earths and other minerals through downstream processing and even manufacturing of electric-vehicle and energy storage components.
The need to capture more value from relatively small but growing new-energy supply chains to replace future dimming of critical coal and ultimately gas export earnings is already clear. More speculative at this stage is the extent to which competitive domestic downstream activity can underpin new industry development and growth.
“Australia’s strong economy reflects geological blessings,” Tesla’s regional business development and policy manager, Dev Tayal, said at the Perth conference.
“Our economy has largely relied on our commodity exports – mineral ores, coal, agriculture – that have been critical to our economic prosperity for decades. If we want to unlock the full potential of future growth we need to expand and reshape our industrial mindset.
“And the battery opportunity is the one to focus on to help us with this ambition.
“Battery production needs to scale exponentially from under one terawatt hour of production capacity today, to around 240 terawatt hours, to transition the world to a fully sustainable energy economy, using battery storage to decarbonize our electricity grid and electrify our transport fleet.
“That is 240 trillion watt hours, or a multi-trillion-dollar opportunity for Australia.”
Tayal, who repeated his call for production tax credits to fire new investment in the lithium-battery supply chain within Australia, was among a number of keynote industry and government speakers at the Western Australia critical minerals event. Typical of AusIMM’s format, it platformed policy, finance and technology, and drew more than 650 delegates from over 15 countries.
The real opportunity for Australia, the conference heard, was to ensure it positioned itself to maximise its share of the new energy economy, having demonstrated over the past 50 years it could be a leader across a range of bulk commodity markets.
Key challenges include fundamental differences in the current scale, and complexity, of many of the new growth markets, the shifting state of trade routes, and domestic cost and regulatory pressures.
“At a general level these are different from the standard resource plays that Australia’s made, which have been based on geology, exploration capability and building mines in difficult remote areas at scale and getting low-cost ore into ships,” Liam Franklyn, head of Australian operations at lithium producer Allkem, said.
“That old model … isn’t going to translate into the critical minerals space the way it has for met coal, iron ore, and many of the other industries we’ve developed since the second World War. The existing playbook isn’t going to work.
“How do we come up with a new one?
“I think that’s really what people are kind of grappling with.”
Franklyn said incentivising higher-value production made sense.
“[Former Australian mining heavyweight] Western Mining went from a mine in Kambalda [to] a refinery in Kwinana, and then they built a nickel smelter in Kalgoorlie – an integrated supply chain for nickel sulphide to matte, to pellets – in less than a decade,” he said. That was 50 years ago.
“You couldn’t do that today. Not a chance.
“If we truly want to emulate such a supply chain, which in critical minerals is the vision and the aspiration, there does need to be some sort of incentivising.
“There does need to be something. And that [production tax credit] is quite a quite reasonable something.”
But the conference heard a broader transition was needed.
“Most of the critical minerals are critical because the processing and downstream is happening in one particular location,” chief operating officer of Australia’s Future Battery Industries Cooperative Research Centre, professor Jacques Eksteen, said.
“We see a lot of market manipulation … particularly on the downstream side, which means that our companies trying to raise funds through the ASX and so on are a very exposed.
“There is a market failure in the way that we address things and where government actively needs to support the industry. Because the industry itself is very small compared to iron ore and coal. If you combine all critical minerals together it’s still a drop in the bucket compared to those two major minerals, or compared to oil and gas.
“So raising funds is really hard. If we look at this international competition that we are seeing for investment, I’m concerned that the safety nets to support our critical minerals industry are just not there at the moment in Australia, not at the level that we need them to be to support an industry which can easily be manipulated price-wise.”
Australian Industry Group chief economist Jeffrey Wilson said: “If as a country we think this is part of the qualitative industrial transformation we need to make, there does need to be some things we do [in the name of] equalisation.
“Australian market entrants come up against incumbents who have been receiving subsidies – effectively interest free loans, in China, from the Chinese banking system – for the entire existence of these industries.
“There’s a question there for us as a nation as well … We can have that discussion. But if others are going to do that there’s no chance that Australia is going to break into markets because you can’t compete with lower ESG standards and free finance.
“We’ve talked about subsidies [but] there’s a lot of other stuff that drives costs into this industry in Australia that we’d really like to see government address.
“We’ve talked about permitting, we’ve talked about skills, in some cases there is infrastructure, particularly with larger processing plants, so separate to a discussion around the producer tax credit we’d like government to look at the range of things that add to costs, or could reduce cost, in these industries.
“That should be a whole of regulatory impost effort, rather than just looking at driving cost in through permitting and then taking it back out through a subsidy, which is effectively a pretty inefficient way to do things.”
Benchmark Mineral Intelligence principal analyst Cameron Perks told the conference China was forecast to supply 61% of the world’s refined lithium this year despite accounting for about 16% of mined lithium. Its dominance of spodumene conversion, cathode production (82% of global supply in 2023), anode production (93%) and lithium-ion battery output (79%) had spurred the US Inflation Reduction Act and its circa-US$1 trillion of energy security spending, and the less weighty European Critical Raw Materials Act (CRMA).
Tayal said Australia currently had exposure, through mining, to about 10% of a Li-ion battery supply chain worth about $85 billion in 2022 and forecast to grow to $400b in 2030.
“There’s an immediate opportunity in front of us, across refining, active materials and cell production, collectively worth 70% of the total supply chain’s value,” he said.
“As a start refining what we mine locally would more than double our income. And producing active materials could more than double it again and so on as we move along the supply chain.
“However, we’re currently mostly stuck at the bottom of the supply chain, leaving much of the value behind.
“Australia has only just started refining the lithium feedstock it goes into batteries, with over 95% of ore still being exported. Building refineries domestically is the crucial next step we need to take.
“Whilst it’s fantastic to see three lithium refineries ramp up [in Western Australia] from Covalent and Tianqi in Kwinana, and Albemarle in Kemerton, we need 30 of these not three if we’re to compete on the world stage, which in turn requires political and societal will to enable this to happen.
“We must be bolder in our ambition for this country.
“It will be necessary but not sufficient to streamline approvals and facilitate supporting infrastructure to encourage more investment in Australia.
“Local refining at scale will also require a skilled workforce. Government support will be critical in re-skilling, building on our mining capabilities, and expanding R&D will ensure worker availability to meet increasing demand.
“And on financing, the Australian Government is already taking some initial steps in grants and loan programs for critical minerals. The small allocations of upfront grants are a helpful start for emerging players but on their own they’re not sufficient, and often lack transparency and timeliness to accelerate the sector as a whole.
“In addition, most countries targeting battery investments already have some form of grant or capital investment incentive to attract mineral players scanning for opportunities, meaning Australia would be placed in a sea of competition for subsidised capital.”
And the competition extended to other critical areas.
Mining industry leader Jacqui Coombes said while industry and government spending on trade apprenticeship training in Australia had soared in response to forecast skills shortages, research showing a widening gap between demand for, and supply of, key professionals was not eliciting the same urgency.
“Our industry is looking for professionals,” Coombes said in Perth.
“I’m not saying it isn’t good to develop apprenticeships, but there’s nothing in [the latest national strategic review] about how do we develop the professional skills, the reasoning capability; the ability to tackle our biggest problems.
“The skills shortage has to be recast as a critical thinking shortage.”
On its primary historical advantage, Australia offered a “geological Lego box of minerals and elements”, the conference heard.
But in rare earths, battery minerals, nickel, copper, titanium and tungsten, so did other parts of the world.
“Japan … was our partner that established a seaborne trade in bulk iron ore and met coal in the 60s and repeated the same in [Western Australia] for seaborne LNG, at big scale, in the late 80s, early 90s,” Wilson said. The wide-ranging alliance had been underwritten by Australia’s geology and Japanese steel, shipping and trading company, and government, support.
“Australia has often hoped that we could get another Japan in one of these other partners.
“But the US and the EU are not Japan, for a number of reasons. But probably the most significant reason is that Japan has a unique anxiety around its resource security, because it has none. These other countries don’t. They do have domestic industry.
“Just as we’ve talked about our domestic capability and how can we do it here, it’s completely reasonable these other countries have that same discussion. So it becomes a question of actually finding a landing point where you can devise a value chain in an economically rational way that’s going to mean everyone’s going to benefit from it.
“They’re harder questions with Europe and America than they are with China.”
