$4b for mining companies to produce minerals for US renewables

Mining companies will gain an extra $2 billion to expand the production of critical minerals needed for renewable energy and high-tech devices under a federal plan to meet soaring demand for the components tightly controlled by China.

Prime Minister Anthony Albanese will double the finance available to key exporters from $2 billion to $4 billion in the hope of unlocking vast reserves of lithium, nickel and other essential elements for batteries and other renewable technologies.

Albanese, who is visiting Washington, will announce the plan ahead of talks with US President Joe Biden and a state dinner at the White House that will include more than 100 political and business leaders as well as a performance by American 1980s new wave band the B52s.

Biden is also expected to host a private dinner with Albanese at the White House on Tuesday night (Washington time), when the two leaders will be joined by their partners, Jill Biden and Jodie Haydon.

The private dinner highlights the effort by the Biden administration to ensure the success of the Australian visit when a Republican leadership crisis in US Congress is making it harder for Albanese to secure cross-party support for the AUKUS defence pact.

The $2 billion pledge will double the scope of the existing critical minerals facility to $4 billion at a time when Australia and the US are negotiating ways to increase the supply of resources and reduce their reliance on China, linking commercial and security goals.

Resources Minister Madeleine King will meet US Commerce Secretary Gina Raimondo and industry chiefs in the US capital on Tuesday to discuss the financing plan, amid hopes that Australian supplies could alleviate shortages at American companies making batteries, wind turbines and other technology.

“Australia is committed to building sustainable and secure critical minerals supply chains with the United States. This is central to building a clean energy future and delivering economic growth,” Albanese said.

King said finding and exporting more critical minerals would be vital to achieving the national target to increase renewable energy and cut carbon emissions to net zero levels by 2050.

“The road to net zero runs through Australia’s resources sector,” she said.

Australian ambassador to the US Kevin Rudd and Prime Minister Anthony Albanese in Washington on Monday.Credit: Alex Ellinghausen

The critical minerals facility was set up by the Morrison government in 2021 and has made a series of deals including a $1.25 billion loan to Iluka Resources last year to develop a refinery in Western Australia to produce neodymium, terbium and other materials for magnets.

The facility, run by Export Finance Australia, has also put $220 million towards a project run by Liontown Resources to produce about 500,000 tonnes of lithium each year for customers including LG in South Korea and Tesla in the US.

Global demand for lithium grew by 300 per cent in the past five years, according to the International Energy Agency, which estimated a 70 per cent increase for cobalt and 40 per cent rise for nickel over the same period. The International Energy Agency said the market for “energy transition minerals” grew to $503 billion last year.

The finance scheme will underpin a formal agreement between Australia and the US called the Climate, Critical Minerals and Clean Energy Transformation Compact, which Albanese and Biden announced at a meeting in Japan earlier this year.

Tensions have emerged, however, over mammoth US subsidies for renewable energy under the Inflation Reduction Act, prompting warnings from some business leaders about the damage to investment in Australia when the subsidies are so large in the US.

Treasurer Jim Chalmers and Energy Minister Chris Bowen unveiled a $2 billion fund for renewable fuel in the May budget, called the Hydrogen Headstart, but the specific subsidy is yet to be set for hydrogen produced from renewable energy such as wind and solar power.

Some Australian executives fear that the Australian plan cannot compete with the US subsidies, worth about $581 billion.

Mining magnate Andrew Forrest, whose company Fortescue has a green hydrogen project in Centralia, in the state of Washington, has described the Inflation Reduction Act as a “really serious economic multiplier” for new industries such as green hydrogen.

The Centralia project will use a remediated coal mine adjacent to Washington’s last coal-fired power plant, which is scheduled to be retired permanently in 2025.

The company also announced this month that it is on track to receive up to $US150 million ($235 million) in subsidies after the collective it belongs to progressed to a final round of funding negotiations with the Biden administration, through a funding scheme called the Bipartisan Infrastructure Law.

Asked about the benefits of the Inflation Reduction Act, Forrest said: “It’s just a lesson to other economies – including Australia – that if you back a new industry like renewable energy, then you’re creating an economic multiplier and economic growth engine within your economy, which gets to pay for taxes, or increases in education, hospitals, and the whole box and dice.”

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