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17/06/2024
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Australian Lithium and Nickel Miners Seek Tax Credits and Emergency Funding Amid Global Price Crunch Challenges

Lithium and nickel miners will ask government officials at crisis talks in Perth on Thursday for tax and royalty relief, and request emergency funding support, after being crunched by sharp falls in battery mineral prices.

Dozens of industry representatives are scheduled to attend the meetings with the state and federal mining ministers. Some of the world’s biggest miners, such as BHP and Glencore, will also be represented.

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The emergency meetings come after a year of huge price declines that has upended the battery minerals industry, while also threatening political ambitions to develop Australia into a mining and processing giant to help underpin the global electrification of the automotive sector.

Neil van Drunen, the acting chief executive of the Association of Mining and Exploration Companies (Amec), said battery minerals were the backbone of the global energy transition.

“If we want to do downstream processing, we need to have operational mines,” Van Drunen said.

“One of our big international comparative advantages is having the rocks here.”

Amec is one of several resources groups that will ask for a deferment of royalties, which are payments miners make to the state government to extract the minerals, as well as a production tax credit designed to encourage processing.

There is also a push for financial support for smaller resources companies that are facing collapse so that they can suspend operations and resurrect production at a later date rather than fold altogether.

Since late 2022, lithium prices have fallen by more than 80%, while nickel is down by 40%, according to benchmark prices. Cobalt, another battery mineral, has shed 40% of its value.

While EV battery demand continues to grow, vehicle sales have lagged projections amid pandemic and inflation disruptions, allowing mineral supplies to build up.

As a result, miners in Australia with high production costs, operators with weaker balance sheets and resources companies that want to strategically wait for a price recovery have started suspending operations, leading to thousands of job losses.

Independent Perth-based mining analyst Peter Strachan said state and federal governments should be cautious in using taxpayer dollars to bail out the sector as too many high-cost miners got caught up in the euphoria of anticipated demand.

“When you look back, it was like tulip mania,” Strachan said, referring to the 17th-century Dutch economic bubble led by unsustainable demand for the brightly coloured flowers.

“It would be throwing bad money after bad. Taxpayers shouldn’t be subsidising companies who’ve made mistakes or gone down blind alleys and try to dig them out.”

Strachan said changing battery technology raised a cloud over demand forecasts for some minerals, with battery manufacturers adopting increasingly energy-dense and lower-cost materials that reduce the raw materials required.

After holding on during the 12-month price collapse, many lithium and nickel mines are now taking drastic measures.

Core Lithium announced at the start of January it would suspend operations at its project near Darwin, shortly before administrators at Panoramic Resources said they could no longer keep the Savannah nickel mine going in Western Australia.

Canadian miner First Quantum told investors it would cease mining at the Ravensthorpe nickel and cobalt mine, also in WA, while Andrew Forrest’s Wyloo Metals is shutting its nickel operations.

As the miners shut down, processing is curtailed.

On Wednesday, lithium project operator Pilbara Minerals told shareholders it was unlikely to pay a half-year dividend because it wanted to protect its balance sheet.

Ahead of the meetings, the federal resources minister, Madeleine King, said the prolonged impact the weak prices could have on Australia’s energy transition and local workforce was a matter of great concern.

“Lithium and nickel are both crucial to the energy transition as we decarbonise. The mining of these resources supports many local jobs,” King said.

“I am determined to ensure Australian miners can continue to compete with cheaper and lower-grade and high-carbon-intensity minerals produced elsewhere.”

Some Australian miners have blamed the low mineral prices on increasing supply from China-backed projects in Indonesia, creating a potentially cheaper nickel jurisdiction than WA with less environmental controls.

Adrienne LaBombard, the acting chief executive of the Chamber of Minerals and Energy of WA, said Australian governments needed to deliver on promises to streamline regulatory approvals and provide the policy and fiscal certainty that would improve the country’s competitive position.

“In the short term, targeted support for our lithium and nickel sectors, such as temporary royalty relief, should be considered and we are keen to work with government and move from discussion to action on a range of measures,” LaBombard said.

 

Source: The Guardian

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