Australia's federal and Western Australia's (WA) state governments are considering incentives including production tax credits and royalty reliefs for the nickel and lithium industry following meetings with industry representatives.
The urgent roundtables were held as Australian nickel and lithium producers have come under immense pressure in the slumping battery metals market. Multiple producers have been forced to suspend operations, announce cost-saving measures and cut capital expenditures as they have experienced significant reductions in revenues.
"I've committed to accelerate talks with [the] Treasury over the production of tax credits and how they might be applied into the nickel industry, and more widely into critical minerals sector," said Australia's federal resources minister Madeleine King on 25 January.
"Commodities traditionally go through natural and cyclical boom and bust cycles, but the potential prolonged impact this could have on Australia's energy transition, local workforce and development of Australia's minerals sector is a matter of great concern," said King earlier this week.
Short-term royalty relief opportunities are also being explored as the government looks into a wider royalty reform, although the focus right now is on the nickel industry, said WA's minister for mines and petroleum as well as ports, David Michael.
Deferred royalty payments will likely be the "most commercially impactful and administratively simple support measure" by the state government in the immediate term, said Rebecca Tomkinson, chief executive of peak resources sector representative body the Chamber of Minerals and Energy of WA.
Producers in a jam
Nickel producer Panoramic Resources suspended operations at its Savannah nickel mine earlier this month, after being put into voluntary administration last month.
This was closely followed by First Quantum halting mining at its Ravensthorpe mine, BHP reassessing its nickel operations, and Wyloo Metals announcing that it is putting its Kambalda operations into care and maintenance on 31 May.
Relatively mature lithium producers seem to be less affected by the market but are treading cautiously, while newer lithium firms are carefully managing their capital. Pilbara earlier this week cut its capital expenditure guidance for July 2023-June 2024 despite its relatively healthy balance sheet, while MinRes reported it is on track to achieving its production guidance.
Lithium developer Liontown saw its A$760mn debt funding deal get terminated by lenders. It is reviewing its plan and trying to settle for a smaller deal. Delta, another relatively new developer, is reassessing its capital allocations to prioritise its Yinnetharra lithium project exploration, it said.
"Another short-term commitment is to again look at how we can work on the approvals processes for mines and productions and refining, and I'll work on that with minister Michael," King also said, adding that the federal government will include strategic materials in its considerations for common user infrastructure.
Australia last year unveiled its critical minerals strategy, under which it revised its critical minerals list and created a new strategic materials list, the latter of which includes nickel, copper and aluminum.
But details under its critical minerals strategy are scarce, creating uncertainty about its practical support for the sector's immediate and longer-term sustainability and growth, said Tomkinson.
Accounting firm PricewaterhouseCoopers Australia in a report last year said Australia has made "positive" but "limited progress" for its critical minerals industry and is falling behind. It identified a total additional gross domestic product for Australia from the critical minerals industry to range from A$71bn-171bn ($47bn-114bn) in present value terms, but this will keep shrinking if it continues to drag its feet.
