Super backflip spares self-managed funds from pain

The Keating intervention will have played a big role in Anthony Albanese’s intervention to save his Treasurer Picture: NewsWire / Martin Ollman

Australia dodged a bullet as a result of the backdown by Treasurer Jim Chalmers on his unindexed tax on unrealised gains on superannuation balances above $3m. Comments from readers of The Australian played a big role in showing how disastrous the tax would be and ways to overcome it.

My first detailed comment on the impact of the tax was back in May 2024, with many more to follow.

Chalmers was lucky. Had the coalition bothered to understand the impact of his mistake the election would have been much closer.

In backing down, the Treasurer is now recognising the importance of self-managed funds in the mobilisation of capital for family business, farms and around half the number of listed ASX stocks.

Many trustees of self-managed funds allocate a portion of their capital to new family businesses and smaller stocks on the ASX.

But few self-manged funds would have allocated capital to their farms or high-risk emerging enterprises when they had to pay tax on unrealised gains and because the tax was not indexed, middle Australia would have over time been hit.

The Treasurer’s estimates of amounts set to be raised were simply wrong. He did not understand that there would have been falls in investment in superannuation and a different investment policy for trapped money.

The whole issue became a live political affair when Paul Keating entered the debate.

The Keating intervention will have played a big role in the Prime Minster intervening to save his Treasurer.

But apart from myself, in the trenches from the early days were SMSF Association chief Peter Burgess and Geoff Wilson, chairman of Wilson Asset Management.

Chalmers will be wiser from the experience, and it should be remembered he did convince the community that a 30 per cent tax rate on balances above $3m was reasonable. A 40 per cent tax on balances balance above $10m will not raise a lot of money because amounts above $10m will be withdrawn.

This is one of the rare issues where the community, including readers of the Australian, played a huge role in changing policy. A rare event.

Australian rare earths strategy

When Australian Prime Minister Anthony Albanese meets US President Donald Trump, Albanese should open the conversation with 10 simple words - “Australia can solve the western world’s heavy rare earths crisis”.

As I set out below, those 10 words must be accompanied by eight actions and a confession. Among those action plans is the combination of Australia’s world-leading mining technology and a looming analysis of 29-year-old drill cores (drilled by BHP looking for gold) which could quickly break the Chinese stranglehold.

And our Prime Minister must remember that Trump now knows the difference between his “critical minerals” problems and the more serious heavy rare earth crisis.

Almost every day Trump is reminded of the heavy rare earths’ crisis via Russia’s mass firing of rockets and drones at Ukraine which is made possible by Russia’s unlimited access to the heavy rare earths terbium and dysprosium from China.

The ability of The US and Europe to respond is curbed by China’s clamps on supplying terbium and dysprosium. China’s refinery network controls some 99 per cent of the market. Heavy rare earths are also essential in a wide range of industrial applications outside defence.

If Australia can break the China stranglehold we will create a new source of resource prosperity for the nation.

The confession to Trump: Australia has become a hidden contributor to China’s global monopoly of terbium and dysprosium. China extracts heavy rare earths from pig iron slag obtained via Australian iron ore.

One of Australia’s heavy rare earths deposits is Northern Minerals’ Browns Range in WA 750km south of Darwin near the NT border.

Chinese investors had a major investment in the Northern Minerals and while the Australian government has ordered that Chinese equity in Northern Minerals be sold, a substantial part of its stock has been sold to interests linked to groups in Hong Kong.

Part of the Northern Minerals proposed production at Browns Range is contracted to be refined at the Illuka Resources refinery set to be completed next year at Eneabba but the Chinese may want a share of the Northern Minerals output shipped out of the Chinese leased Port of Darwin.

One of the reasons why Australia can solve the US heavy rare earths crisis is that after 20 years of research the Morgan family controlled Haoma group developed the so called Elazac process to overcome poor gold, silver and platinum recovery rates from Bamboo Creek ore using cyanide and other conventional extraction methods.

Haoma Mining was delisted from the ASX in 2018 for breaches of the market operator’s listing rules. Its auditor, BDO, in August, cast doubt over its ability to continue as a going concern given it is dependent on the financial support of a related party.

In solving that problem via Elazac it was much easier for Haoma to extract terbium and dysprosium concentrate.

Albanese must explain Australia’s eight steps to change the China heavy rare earths dominance. He will no doubt also have plans for other critical minerals. The eight steps are:

• Clean up the Northern Minerals situation, accelerate production and send all its heavy rare earths to the Illuka refinery. But be careful. Much of the Browns Range ore is underground which is more costly to mine than its surface material

• Do everything possible to maximise heavy rare earth production at the Illuka refinery via the company’s beach sands mining related stock piles.

• The current pilot plant of Haoma is producing gold and platinum from the Bamboo Creek tailings dump using the Elazac process. The plant should be expanded more rapidly and the terbium, and dysprosium concentrates sent to. Iluka or the US for refining. But beware---China will also almost certainly bid for the material

• In addition to the Bamboo Creek tailings Haoma has a major area of prospective heavy rare earth ore in the Bamboo Creek Valley .Analysis of bulk samples from the valley measured Terbium grades, ranging from 2,000ppm to 4,400ppm. These Terbium grades are much higher than other Australian mines.

In 1996 BHP drilled 23 percussion holes in the Bamboo Creek Valley tenements. The assays showed the presence of chromium and magnesium, which are strong indicators of heavy rare earths and critical minerals. Such materials were not then valuable.

BHP exited but Haoma kept the BHP drill hole samples and will soon conduct Elazac Process ‘trials’ and other tests to determine whether the drill cores duplicate the results from the recent samples taken from the Bamboo Creek Valley. If they are looking at a world changing deposit. These need to be accelerated

• Australia must also accelerate development of its clay deposits. Victory Minerals deposits has discovered terbium in clay deposits which are similar to those mined by China. Australian Rare Earths has clay based rare earths deposits on the South Australian and Victorian border but they are not as rich in terbium. Clay deposits are much cheaper to mine and treat than hard rock

• Australia needs to look at other areas of the Pilbara where heavy rare earths can be extracted

• Finally, given the deposits in Brazil, Greenland and Ukraine Australia should seek price guarantees in its US deals.

These are exciting times. They remind me of the early days of the iron ore boom when in the 1960s mining heroes like Ian McLennan, Russel Madigan and Maurice Mawby changed the outlook of the nation.