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US and Australia ink critical minerals funding pact
The United States and Australia have teamed up for the first time to help fund the next wave of critical minerals projects, as the US seeks to shore up non-Chinese supply chains and trade routes.
The United States government financier, Reta Jo Lewis, said the one-stop shop will help Australian critical minerals producers and US companies access support from both.
This arrangement is the first of its kind, said Ms Lewis, chairwoman of the US Export Import Bank, who was in Sydney last week to formalise the cooperation agreement with Australia’s government banker, John Hopkins, who leads Export Finance Australia.
“The single point of entry is a new approach for us,” Ms Lewis said. “It means that Australian and US critical minerals businesses may now approach US ExIm or EFA and receive streamlined access to both agencies’ financing support.
“This gives a potential borrower the ability to have a joint commitment from any entity, both of our entities. It gives us an ability to collaborate on any number of projects, up to our own and each, capacity.”
It bolsters a push that Washington and Canberra have already unleashed in their own right on ASX-listed miners in a bid to create non-Chinese supply chains in sectors where China typically produces between 70 per cent and 100 per cent of global supply.
The move to streamline funding between the US and Australian government lenders is part of a push to counter China’s market dominance. As such, Australia’s critical minerals producers have typically been funded by Chinese customers.
The US and its allies fear Beijing could weaponise its market power by cutting off supply of metals needed for decarbonisation and defence applications.
An Australian private banker, who was not permitted to speak on the record, said the deal between the US and Australia was an encouraging development because government funding helped bring ASX-listed Liontown Resources into production. The lithium miner does not have China-linked funding nor equity.
Australian banks are reluctant to back critical minerals projects because the markets for little known minerals are often opaque and offer uncertain returns. For better known commodities like lithium, producers are battling an oversupplied market.
Ms Lewis said the terms available from the governments are designed to reassure private financiers that there is a reasonable prospect of repayment.
In March, ExIm signalled its desire to lend a further $1.28 billion to ASX-listed rare earths companies via early stage “letters of interest” that may be formalised as loans at concessional rates in future.
Australian Strategic Materials received a non-binding pledge of $US600 million ($909 million) to help advance plans for a mine near Dubbo in NSW, while Meteoric Resources was given a non-binding pledge for $US250 million to help it develop a rare earths project in Brazil.
Neither loan is guaranteed and both would be tied to US companies winning contracts on the rare earths projects if they go ahead. American construction giant Bechtel has already won the contract to run the feasibility study for the Dubbo mine.
“ExIm’s prime mission is to facilitate exports and to support US jobs,” Ms Lewis said. “There always has to be a nexus when we’re looking at funding.”
It has also issued letters of interest Liontown, RZ Resources, Australian Vanadium and Sunrise Energy Solutions.
EFA issued a $US533 million loan to Northern Territory rare earths aspirant Arafura Resources in March. Liontown received its $230 million of loans from federal agencies this year.
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