Critical Minerals - Funding initiatives & the 2024 Federal Budget

KWM INSIGHT SERIES – CRITICAL MINERALS

Following the recent announcement of the 2024 Federal Budget and the upcoming Future Made in Australia Act,^[1] the Federal Government’s end-to-end energy transition focus is clear. Importantly for critical minerals developers and stakeholders in the energy transition, as highlighted in our earlier insight, Minister for Resources Madeleine King has indicated that critical minerals funding will be vital in building the foundation of the Future Made in Australia Act, which was reflected in the 2024 Federal Budget announcements.^[2]

“The 2024-25 Budget supports the further development of Australia’s rich endowment in critical minerals, while investing in programs for downstream processing and manufacturing technologies needed to help the world lower emissions.”^[3]

In this insight, we consider the recently announced Federal and Western Australian funding initiatives for critical minerals projects (which is a focus for all States, either through their budgets and/or strategies^[4]). We also consider the current status in Queensland, ahead of the Queensland budget to be handed down on 11 June 2024.

Federal funding initiatives – 2024 Federal Budget (15 May)

Critical minerals announcements

In the Federal Budget, the Government announced it will provide over $7 billion through the next decade to support refining and processing of critical minerals, including:

• A Critical Minerals Production Tax Incentive (CMiPTI) from FY27/28 to FY40/41 to support downstream refining and processing of Australia’s 31 critical minerals^[5] to improve supply chain resilience. The CMiPTI will provide a production incentive valued at 10 per cent of relevant processing and refining costs for Australia’s critical minerals. This incentive will be applicable for up to 10 years per project, for production between FY27/28 and FY39/40 by projects that reach final investment decisions by 2030.
• $10.2 million for pre-feasibility studies to develop critical mineral common-user processing facilities to enhance Australia’s capacity to process critical minerals, sovereign capability and economic resilience.
• $1 million for a pilot educational program, to strengthen the capabilities of Australia’s critical minerals sector to detect, prevent and mitigate foreign interference.

Minister for Resources, Madeleine King, also noted in a press release on 14 May that the Federal Government is investing $5.8 million over 3 years from FY24/25 for a critical minerals trade enhancement initiative.^[6] The initiative will be implemented by the Department of Industry, Science and Resources and the Department of Foreign Affairs and Trade.^[7]

Ongoing funding for exploration

The Government will provide $1.7 billion funding over ten years from FY24/25 for investments in innovation, science and digital capabilities to support a Future Made in Australia. Funding includes:

• $566.1 million over 10 years from FY24/25 for Geoscience Australia to map Australia’s national groundwater systems and resource endowments to increase industry investment and identify potential discoveries of all current critical minerals and strategic materials. This extends the existing $225 million Exploring the Future program,^[8] reshaping it as the Resourcing Australia’s Prosperity program.
• $448.7 million over 11 years from FY23/24 to continue an ongoing partnership with the US Geological Survey, in the Landsat Next satellite project. This project will map the changing surface of the Earth and support mining exploration.

Continued funding for Critical Minerals Facility & NAIF

The Federal Government will also make up to $1.2 billion in strategic investments in priority critical minerals projects including up to $655 million under the Critical Minerals Facility.

How the FY24/25 Budget fits with prior funding initiatives

The funding announced in the FY24/25 Budget builds on the Federal Government’s establishment in 2021 of a ‘Critical Minerals Facility’ to provide financing to projects aligned with Australia’s Critical Minerals Strategy.^[9] While the facility was initially funded with $2 billion, the Albanese Government announced a $2 billion expansion in October 2023, doubling the capacity of the facility to ‘solidify Australia’s position as a world leading provider, help the transition to net zero, boost the economy and support more jobs and opportunities for Australians.’^[10]

To date, the Government has approved the following loans under the Critical Minerals Facility:  

• Iluka Resources: $1.25 billion loan for the development of its Eneabba Rare Earth Refinery Project in Western Australia;
• Renascor Resources: $185 million loan for its Siviour Graphite Project in South Australia; and
• EcoGraf: US$40 million loan for its Battery Anode Material Facility in Western Australia.

Earlier this year in February, the Federal Government also announced its plans to strengthen international critical minerals projects through a four-year $40 million grant program. The grants, which aim to help advance international partnerships that support Australian processing and diversify supply chains, will provide between $2 million and $20 million in co-funding for early to mid-stage critical minerals projects in Australia.^[11] Eligible activities for the grants include:

• pilot and demonstration plants, capacity expansions, and research and development activities;
• development or commercialisation of technology and intellectual property;
• critical minerals processing technologies; and
• development of downstream processing capability.

As part of the Critical Minerals Strategy, the Federal Government also allocated $500 million to NAIF to ‘support proponents and end-users by investing in the reliable supply of critical minerals through project development and encouraging upstream investment’.^[12] Following announcement of the FY24/25 Budget, it is now clear that this includes:

• up to $200 million of NAIF funds for the Alpha HPA alumina project in Queensland; and
• up to $200 million of NAIF funds for Arafura Rare Earths’ Nolans Project near Alice Springs.

Western Australia’s funding initiatives

Western Australia Treasurer Rita Saffioti handed down the State’s FY24/25 budget on 9 May 2024, which preceded the release of a refreshed ‘Battery and Critical Minerals Strategy 2024 – 2030’ in late May.^[13] In this budget, the WA Government committed significant funding to accelerate the implementation of its refreshed Critical Minerals Strategy and to support its view that ‘critical minerals are the centrepiece of WA's economic diversification story’.

The Government's vision, as set out in the updated Strategy, is to establish an 'internationally competitive, ethical and value-adding battery and critical minerals industry'. This vision is intended to be delivered by focussing on the following key areas:

• upstream production of critical minerals, through ongoing support for WA's well-established exploration and mining capabilities; and
• midstream processing capability, with the goal of capturing a larger share of the (rapidly growing) global midstream processing market (which includes the refining and processing of critical minerals into battery chemicals and other active materials).

Downstream processes, such as battery manufacturing, are identified as a 'target opportunity' in the updated Strategy. This is an area anticipated to evolve over time, as there was no commitment of resources to this target in State’s FY24/25 budget.

The new funding initiatives announced by WA Government in the FY24/25 budget are outlined below, which are intended to complement existing funding initiatives such as the Investment Attraction Fund,^[14] the Exploration Incentive Scheme,^[15] the Nickel Finance Assistance Program^[16] and the Industrial Lease Incentive.^[17]

$500m Strategic Industries Fund

The first addition to the WA Government’s commitment to critical minerals is the establishment of the $500 million Strategic Industries Fund. This funding will be used to create ‘Strategic Industrial Areas’ across regional and metropolitan WA. By preparing land and delivering the infrastructure to connect these Strategic Industrial Areas to the rest of the State, the Government intends to ensure that the State is primed to facilitate increased industrial activity.

$200m Critical Minerals Advanced Processing Hub

The WA Government has also proposed to establish a $200 million Critical Minerals Advanced Processing Common-User Facility (CMAP). The intention is that this will be co-funded by the Commonwealth Government on a 50:50 basis, with the State’s contribution to be funded by additional Mining Tenement Rental revenue.

The CMAP will aim to provide the common use pilot plant equipment required to support the growth and diversification of Western Australia’s resources industry. CMAP is intended to be ‘a central critical mass’ in research and training, with the facilities, capital equipment and knowledge/personnel required to stimulate a pipeline of new entrants into the midstream critical mineral processing industry.

$36.4m Approval Acceleration Funding

The WA Government has also committed $36.4 million to accelerate project approvals by boosting its resourcing of the Government departments responsible for administering Western Australia’s approvals framework. This is expected to ensure proponents receive approvals in a timely manner, without compromising the integrity of the approvals process.

Queensland’s funding initiatives (current ahead of June budget)

In June 2023, the Queensland Government released its own Critical Minerals Strategy, which built on the Queensland Resources Industry Development Plan (QRIDP).^[18] The Critical Minerals Strategy sets out four key objectives:

• Move faster, smarter: Accelerate the development of the critical minerals sector and the downstream value chain by streamlining government processes, maximising the potential of existing and abandoned mines, fostering partnerships and collaborations, and investing in key infrastructure and exploration.
• Maximise investment: Attract and retain investors by establishing a clear value proposition, reducing rent for exploration permits, profiling and promoting Queensland internationally, and delivering the Critical Minerals and Battery Technology Fund.
• Build value chains: Diversify and enhance the export potential of Queensland's critical minerals sector by developing onshore processing and manufacturing industries, integrating with the renewable energy supply chain, and creating common-user infrastructure and facilities.
• Foster research and ESG excellence: Position Queensland as a leader in critical minerals by investing in research and development, partnering with industry and research institutions, and improving ESG performance and reporting.

To give effect to the four key objectives, the Strategy sets out $245 million of initiatives including the following:

To move faster, smarter…

• As part of the total funding under the existing $22.6 million Collaborative Exploration Initiative, $5 million to assist companies to undertake drilling within tailings and waste-rock dumps on abandoned and operating mines sites.
• Establishment of “Critical Mineral Zones”, the first of which is located in the Mt Isa region, and $75 million in funding to support investment in advanced critical minerals projects.
• $5 million to explore mineralisation in mine tailings and waste rock, which hold substantial mineral deposits and value, on abandoned and operating mine sites.
• Development of a regulatory framework to enable the secondary prospectivity of minerals to realise the potential of previously disturbed land.

These funding initiatives build on the Queensland Government’s previously announced infrastructure developments to move faster, smarter to support the development of the critical minerals industry:

• The Queensland Government has committed $5 billion to own and deliver the CopperString 2032 project. This project will connect the North West Minerals Province in Queensland with the largest renewable energy zone on the east coast of Australia, and the National Electricity Market, and will enable the development of critical minerals projects.
• The Queensland Government had previously committed $75 million for the Queensland Resources Common User Facility. This facility will be developed at the Cleveland Bay Industrial Park in Townsville to trial production processes for commercialisation, enabling prospective miners to begin producing mineral samples at scale.

To maximise investment…

• $55 million in reductions of rent (to $0) for new and existing minerals exploration permits for the next 5 years, which builds on the deferral of rental payments from the QRIDP.
• $1 million in promotional activities, including the development of an investor-focussed portal to provide key information on Queensland’s critical minerals opportunities.
• As announced in the QRIDP, $5 million in funding for geoscience research on existing copper, cobalt, rare earth, indium and other critical mineral deposits to better understand their occurrence and distribution.

To build value chains…

• The Queensland Government, with the Queensland Investment Corporation, will deliver the previously announced $100 million Queensland Critical Minerals and Battery Technology Fund to ‘accelerate the pit-to-product supply chain and meet the growing demand for clean energy technologies’. The Fund will provide support for local businesses and industry-led consortia to build industry capability in Queensland.
• The Queensland Government has also previously announced $5 million under the QRIDP to Develop the Queensland Battery Industry Strategy (released in February 2024)^[19], $500 million under the Queensland Energy and Jobs Plan (QEJP) for government-backed grid scale and community batteries, and $11.6 million under the QEJP in manufacturing capacity to build the renewable energy supply chain.

To foster research and ESG excellence…

• $1 million in funding to improve ESG performance and reporting, and to develop a new ESG network to develop ESG initiatives.
• $8 million in funding to undertake research and development in circular economy and mineral discovery, extraction, processing and recycling, and develop a research institute–government minerals alliance – including to support existing programs in Japan, Korea, the United States of America, Canada and Finland.

These initiatives will be led by Critical Minerals Queensland, an office of the Queensland Department of Resources, which is a dedicated office based in Townsville and is a point of contact for investors to engage with the Queensland Government about critical minerals.^[20]

Queensland’s FY24/25 State Budget is to be released on 11 June 2024.