A little lengthy but well worth the effort to...

A little lengthy but well worth the effort to read.
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Chinese ties excludeAustralian lithium miners from US cashSome of Australia’s biggest lithium mines could be ineligiblefor US government subsidies after Washington issued rules excluding criticalminerals with high levels of Chinese ownership or processing.The US Department of Energy issued draft guidance on Saturday that defined a “foreign entity of concern” as any company more than 25 per cent owned by Chinese, North Korean, Iranian or Russian shareholders.Such foreign entities will be excluded from billions of dollarsof subsidies offered under US President Joe Biden’s two major green innovationreforms: the $US369 billion ($553 billion) Inflation Reduction Act and the$US550 billion Infrastructure and Jobs Act.Australian miners had expected to be big winners out of MrBiden’s green agenda, which has incentivised US battery and car makers to source minerals such as lithium, nickel and cobalt from nations like Australia that have free trade agreements with the US.But China’s role as the dominant customer and original investorin the Australian lithium sector will prevent many miners from accessing thesubsidies, while rewarding players such as Wesfarmers and Liontown Resources that have built non-Chinese lithium businesses in WAChinese companies such as Ganfengand Tianqi were the earliest foreign investors in Australia’s lithium industry,and remain big shareholders in major mines like Mt Marion and Greenbushesrespectively. Greenbushes produced about 45 per cent of Australia’s lithiumlast year and is widely viewed as the world’s biggest and best hard rocklithium mine.Chengdu-based Tianqi owns 26 per cent of Greenbushes and 51 percent of the Kwinana refinery – located in the electorate of Resources MinisterMadeleine King – that turns the Greenbushes ore into battery-grade lithiumhydroxide.Ms King, who visited Washington in October, said the governmentcontinued to work with the US to “ensure Australian companies benefit from theIRA”.Both Greenbushes and the Kwinana assets would be ineligible forUS subsidies under the draft’s suggestion that a 25 per cent “equity interest”from a Chinese company would make an entity “subject to the direction” ofChina.Mt Marion is 50 per cent owed by Ganfeng, with the other halfowned by Rich Lister Chris Ellison’s Mineral Resources.An even larger part of the Australian lithium sector could beruled out if the US adopts the draft’s approach to processing of criticalminerals.China was the destination for 98 per cent of Australia’s majorlithium product – spodumene concentrate – in the year to June, and theDepartment of Energy said it wanted to account for the fact that severalcritical segments of the battery supply chain are “predominantly processed andmanufactured within covered nation boundaries”.China’s ability to halt foreign-owned processing facilitiesoperating on Chinese soil was directly highlighted as a concern in the draft.“A covered nation will be able to exercise legal control(potentially forcing an entity to cease production or cease exports) over anentity with respect to any critical minerals that are physically extracted,processed, or recycled, any battery components that are manufactured orassembled, and any battery materials that are processed within thoseboundaries,” said the draft.However, the draft made clear thatcompanies working in several jurisdictions could still be eligible forsubsidies for the critical minerals they processed outside of China.The clause appears to mean the biggestAmerican lithium producer, Albemarle, could theoretically be eligible for USgovernment subsidies for the lithium hydroxide it processes at Kemerton in WA,but not for the lithium produced at its Meishan and Qinzhou plants in China.Kemerton has traditionally been fedwith ore from Greenbushes, but Albemarle could claim there was no Chineseinvolvement if Kemerton was fed with ore from WA’s Wodgina mine, which itshares with Mineral Resources.Mineral Resources also wholly owns the Bald Hill lithium mine and has minority stakes in numerous lithium exploration companies.Wesfarmers, Liontown may still benefitWesfarmers is building a lithiumhydroxide processing plant at Kwinana that will be fed with ore from WA’s MtHolland mine. Both assets are owned by Wesfarmers under a partnership with Chilean company SQM.Chile is not considered a “foreign entity of concern” by USlawmakers, suggesting the Wesfarmers lithium production chain will be eligiblefor US subsidies.But Wesfarmers may need to keep a close watch on Chineseinvolvement with SQM, given Tianqi already owns 23.77 per cent of the Chileancompany.The draft rules could also benefit Liontown, which has avoidedChinese customers when signing offtake agreements for the spodumene concentrateits Kathleen Valley mine will start producing next year.Liontown will instead sell 90 per cent of its product tonon-Chinese customers like South Korea’s LG Chem and American companies Teslaand Ford.While the Greenbushes and Mt Marion mines have big individualChinese shareholders, Saturday’s draft suggested that miners could fall foul ofthe new rules if 25 per cent of their stock was “cumulatively” held by Chineseinvestors.For the purposes of determiningcontrol by a foreign entity (including the government of a foreign country),control is evaluated based on the combined interest in an entity held, directlyor indirectly, by all other entities that qualify,” the draft said.That clause could have local minersscanning their share registers to ensure that at least 75 per cent of theirstock is held by non-Chinese shareholders.The “collective” clause highlights theimportance of the big changes on the register of $11 billion lithium exporterPilbara Minerals this year; Ganfeng owns almost 6 per cent of Pilbara andChinese battery maker CATL sold its 7 per cent stake in March,AustralianSuper spent big in Novemberto acquire more than 5 per cent of Pilbara, which has recently sought to build a strong relationship with US ally South Korea.Directors of Pilbara Minerals were inthe Korean city of Gwangyang on Friday to attend the official opening of thecompany’s new lithium hydroxide processing joint venture with Korean giantPOSCO.BHP, IGO, Wyloo may benefitThe hardline approach to Chineseownership could benefit Australian nickel miners such as BHP, IGO and AndrewForrest’s Wyloo, given many of their Indonesian nickel rivals have significantlevels of Chinese ownership.IGO’s win in nickel could be offset bythe fact it is Tianqi’s partner in the Greenbushes and Kwinana lithium assets.The US draft could also bifurcate theAustralian rare earths sector between those with significant Chinese investorsand those without.Treasurer Jim Chalmers is currently probing the register of rare earths aspirant Northern Minerals, where several Chinese investors are involved in a boardroom struggle.Chinese investors have alsoestablished a significant foothold in the many small companies hoping to unlockAustralia’s next major mineral sands and rare earths province in WesternVictoria.Ms King said mechanisms crucial forthe US to enforce its foreign ownership policy in the critical minerals sector– such as transparency and traceability – were an area of collaboration betweenCanberra and Washington, after her October visit to the US.“We continue to work with Australianindustry and the US government to ensure Australian companies benefit from theIRA,” she said.The draft published by the USDepartment of Energy on Saturday will now enter a consultation phase, meaningthe rules could yet change before they are finalised. But major changes appearunlikely, given the draft largely echoes the approach taken to foreignownership by Mr Biden’s “Chips Act”, which sought to break China’s strangleholdon the supply of semiconductors.It also raises the likelihood thatChinese links will prevent Australian miners from accessing the next bigopportunity within the US political system; the looming reform of the Defence Production Act.Mr Biden has pledged to make Australiaa “domestic source” under the DPA, thereby increasing the chances that the USDefence Department’s procurement teams will turn to Australian producers ofrare earths, tantalum and other minerals to help make equipment such asnight-vision goggles, helicopter rotors and fighter jets.While the Inflation Reduction Act hascaptured headlines for its promise of tax credits for carmakers that useprescribed levels of US and Australian minerals in their batteries, some miningindustry executives believe the DPA could ultimately be more significant forAustralian industry, given “domestic” status would permanently advantageAustralian producers.Many of the incentives in the IRA, onthe other hand, are subject to sunset clauses, meaning Australian miners maystruggle to access certain IRA subsidies beyond 2032.
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Renascor....Australian owned Tier 1.