Australia must ‘play to its strengths’ as it capitalises on critical minerals

Australia may not be able to make electric cars or wind turbines but it has the ability to upgrade critical minerals before they are exported, says ARENA boss Darren Miller.

Australian Renewable Energy Agency CEO Darren Miller. Picture: Britta Campion / The Australian

Australia needs to make some realistic decisions about how much manufacturing it could develop onshore, the chief executive of the Australian Renewable Energy Agency (ARENA), Darren Miller, said on Friday.

“We need to rethink what we mean by manufacturing,” he told the summit on critical minerals hosted by The Australian and PwC.

“We mustn’t get too greedy about wanting to do it all,” he said.

“We don’t manufacture cars, but we manufacture a lot of the components which go into supply chains globally.”

Mr Miller said Australia had a comparative advantage in many areas including having a large land mass and good supplies of raw materials, including critical minerals, and a trusted government system.

But he said it had a competitive disadvantage in areas such as the cost of labour and the cost of capital, given that some governments were prepared to subsidise their local industries.

“We have to play to our strengths and move up the value chain if we are able to.”

He said Australia may not be able to make electric cars or even wind turbines, but it had the ability to upgrade minerals before export.

He said Australia should also be prepared to use its position as a supplier of essential raw materials to negotiate deals with buyers to ensure long term access to the finished products which were made with Australian raw materials.

Darren Miller, CEO Australian Renewable Energy Agency (ARENA). Picture: Britta Campion / The Australian

“We need to establish the right alliances so that when we add to the world’s supply chains, we are in a secure position to get finished products back.”

“How do we ally ourselves with others who are part of the supply chain we have an interest in and make sure the minerals and the expertise we provide are valued and secure?”

Mr Miller said Australia could play a role in developing new materials which were needed for the renewable energy sector which were “better, more efficient, more abundant than the existing materials.”

One example was Australian company SunDrive had found a way to replace expensive industrial silver needed for the manufacture of solar panels, with copper which was much cheaper.

Mr Miller said it was important that the development of the critical minerals industry took place in a way which was environmentally sustainable.

“People are saying there is no net zero without the mining industry,” he said.

“But there is also no mining industry without net zero.

“The mining industry needs to have a credible pathway to net zero.

“The mines need to decarbonise, use renewable energy and new technologies as part of their production processes.

“It’s not enough to start up a new lithium mine and a lithium hydroxide processing industry.

“In Australia, it needs to be sustainable from an ESG perspective, have low emissions and have a credible pathway to net zero if these projects are to gather the support they need, including financial support.”

The chief executive of ASX listed Australian Strategic Materials, Rowena Smith, which mines critical minerals in Dubbo in western NSW, said there was concern among international investors at the delays in the permitting processes for new mines and processing plants.

“It’s just so slow,” she said.

She said critical minerals were needed to support the clean energy transition in Australia and around the world.

“We have to do the right thing and the right way, but our processes are inadequately resourced and incredibly slow,” she said.

She said governments needed to work towards more efficient permitting processes if they wanted to attract more investment in the critical minerals sector.

She said new companies moving into the sector in Australia would also be greatly assisted to develop their projects if they could get financial support from governments in the form of equity investment.

“The equity piece is the biggest hurdle for us to get across,” she said.

“Once my project, and others like it, can get up and running, it throws off a lot of cash which we can use to service debt.”

“We have a forecast of getting to $400m a year free cash flow annually.”

“But the challenge is the equity hurdle.

“If government can assist with that, it would really make a big difference to the pace that these projects can get up.”

PwC partner and chief economist, Amy Auster, said there needed to be closer collaboration between government and industry to help develop the critical minerals sector in a range of areas.

She said this included areas of project approvals and environmental approvals.

“We have a lot of land, but we are rightfully protective of our land.

“It is an area where industry needs to work with government.”

She said there was also a need to consider the skills needed for the development of a critical minerals sector and local manufacturing.

“We need to bring more people into the Australian pipeline,” she said.

“We’re seeing internationally so many countries looking at accelerating the development of their supply chain locally.

“I don’t think we really recognise how much competition we are going to have for those skills.”

She said there were “pockets” of areas where skills were needed such as specialised engineering.

“Some of these very specialist skills have dissipated over time as industries have closed down,” she said.

She said government and business could also work together more closely to address issues of the “social license to operate” by the mining industry, including the critical mineral industry which was producing materials needed for the transition to clean energy.

She said there was a need to “bring back industry policy” in Australia to manage the challenge of the energy transition in a considered way which saw co-operation between government and business.

“We have an opportunity, but we also have a massive risk,” she said.

“The energy transition needs to happen.”

“It’s not enough for government to say (to business) ‘this is what we need to do, go away and do it’.”