Ive done some reformating so it doesnt hurt my soul to read. hope it comes out in HC o.k
Chinese ties exclude Australian lithiumminers from US cash Some 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 draftguidance on Saturday that defined a “foreign entity of concern” as any companymore than 25 per cent owned by Chinese, North Korean, Iranian or Russian shareholders.Such foreign entities will be excluded from billions of dollars of subsidiesoffered under US President Joe Biden’s two major green innovation reforms: the$US369 billion ($553 billion) Inflation Reduction Act and the$US550 billionInfrastructure and Jobs Act.
Australian miners had expected to be bigwinners out of Mr Biden’s green agenda, which has incentivised US battery andcar makers to source minerals such as lithium, nickel and cobalt from nationslike Australia that have free trade agreements with the US. But China’s role asthe dominant customer and original investor in the Australian lithium sectorwill prevent many miners from accessing the subsidies, while rewarding playerssuch as Wesfarmers and Lion town Resources that have built non-Chinese lithiumbusinesses in WA
Chinese companies such as GanfengandTianqi were the earliest foreign investors in Australia’s lithium industry, andremain big shareholders in major mines like Mt Marion and Greenbushes respectively.Greenbushes produced about 45 per cent of Australia’s lithium last year and iswidely viewed as the world’s biggest and best hard rock lithium mine. Chengdu-basedTianqi owns 26 per cent of Greenbushes and 51 percent of the Kwinana refinery –located in the electorate of Resources Minister Madeleine King – that turns theGreenbushes ore into battery-grade lithium hydroxide. Ms King, who visitedWashington in October, said the government continued to work with the US to“ensure Australian companies benefit from the IRA”.
Both Greenbushes and the Kwinana assetswould be ineligible for US subsidies under the draft’s suggestion that a 25 percent “equity interest” from a Chinese company would make an entity “subject tothe direction” of China. Mt Marion is 50 per cent owed by Ganfeng, with theother half owned by Rich Lister Chris Ellison’s Mineral Resources. An evenlarger part of the Australian lithium sector could be ruled out if the USadopts the draft’s approach to processing of critical minerals. China was thedestination for 98 per cent of Australia’s major lithium product – spodumeneconcentrate – in the year to June, and the Department of Energy said it wantedto account for the fact that several critical segments of the battery supplychain are “predominantly processed and manufactured within covered nationboundaries”.
China’s ability to halt foreign-ownedprocessing facilities operating on Chinese soil was directly highlighted as aconcern in the draft.“ A covered nation will be able to exercise legalcontrol(potentially forcing an entity to cease production or cease exports)over an entity with respect to any critical minerals that are physicallyextracted, processed, or recycled, any battery components that are manufacturedor assembled, and any battery materials that are processed within those boundaries,”said the draft.
However, the draft made clear that companiesworking in several jurisdictions could still be eligible for subsidies for thecritical minerals they processed outside of China. The clause appears to meanthe biggest American lithium producer, Albemarle, could theoretically beeligible for US government subsidies for the lithium hydroxide it processes atKemerton in WA, but not for the lithium produced at its Meishan and Qinzhouplants in China.
Kemerton has traditionally been fed withore from Greenbushes, but Albemarle could claim there was no Chinese involvementif Kemerton was fed with ore from WA’s Wodgina mine, which it shares withMineral Resources.
Mineral Resources also wholly owns theBald Hill lithium mine and has minority stakes in numerous lithium explorationcompanies. Wesfarmers, Liontown may still benefit Wesfarmers is building alithium hydroxide processing plant at Kwinana that will be fed with ore fromWA’s Mt Holland mine. Both assets are owned by Wesfarmers under a partnershipwith Chilean company SQM. Chile is not considered a “foreign entity of concern”by US lawmakers, suggesting the Wesfarmers lithium production chain will beeligible for US subsidies. But Wesfarmers may need to keep a close watch onChinese involvement with SQM, given Tianqi already owns 23.77 per cent of theChilean company.
The draft rules could also benefitLiontown, which has avoided Chinese customers when signing offtake agreementsfor the spodumene concentrate its Kathleen Valley mine will start producingnext year. Liontown will instead sell 90 per cent of its product to non-Chinesecustomers like South Korea’s LG Chem and American companies Teslaa nd Ford. Whilethe Greenbushes and Mt Marion mines have big individual Chinese shareholders,Saturday’s draft suggested that miners could fall foul of the new rules if 25per cent of their stock was “cumulatively” held by Chinese investors.
For the purposes of determining controlby a foreign entity (including the government of a foreign country),control isevaluated based on the combined interest in an entity held, directly orindirectly, by all other entities that qualify,” the draft said. That clausecould have local miners scanning their share registers to ensure that at least75 per cent of their stock is held by non-Chinese share holders.The“collective” clause highlights the importance of the big changes on theregister of $11 billion lithium exporter Pilbara Minerals this year; Ganfengowns almost 6 per cent of Pilbara and Chinese battery maker CATL sold its 7 percent stake in March, Australian Super spent big in November to acquire morethan 5 per cent of Pilbara, which has recently sought to build a strongrelationship with US ally South Korea.
Directors of Pilbara Minerals were intheKorean city of Gwangyang on Friday to attend the official opening of the company’snew lithium hydroxide processing joint venture with Korean giant POSCO.BHP,IGO, Wyloo may benefit. The hardline approach to Chinese ownership couldbenefit Australian nickel miners such as BHP, IGO and Andrew Forrest’s Wyloo,given many of their Indonesian nickel rivals have significant levels of Chineseownership.
IGO’s win in nickel could be offset by thefact it is Tianqi’s partner in the Greenbushes and Kwinana lithium assets. TheUS draft could also bifurcate the Australian rare earths sector between thosewith significant Chinese investors and those without.
Treasurer Jim Chalmers is currentlyprobing the register of rare earths aspirant Northern Minerals, where severalChinese investors are involved in a boardroom struggle. Chinese investors havealso established a significant foothold in the many small companies hoping tounlock Australia’s next major mineral sands and rare earths province in WesternVictoria.
Ms King said mechanisms crucial for theUS to enforce its foreign ownership policy in the critical minerals sector–such as transparency and traceability – were an area of collaboration between Canberraand Washington, after her October visit to the US.“ We continue to work withAustralian industry and the US government to ensure Australian companiesbenefit from theIRA,” she said.
The draft published by the US Departmentof Energy on Saturday will now enter a consultation phase, meaning the rulescould yet change before they are finalised. But major changes appear unlikely,given the draft largely echoes the approach taken to foreign ownership by MrBiden’s “Chips Act”, which sought to break China’s strangle hold on the supplyof semiconductors.
It also raises the likelihood that Chineselinks will prevent Australian miners from accessing the next big opportunitywithin the US political system; the looming reform of the Defence ProductionAct. Mr Biden has pledged to make Australia a “domestic source” under the DPA,thereby increasing the chances that the US Defence Department’s procurementteams will turn to Australian producers of rare earths, tantalum and otherminerals to help make equipment such as night-vision goggles, helicopter rotorsand fighter jets.
While the Inflation Reduction Act has capturedheadlines for its promise of tax credits for carmakers that use prescribedlevels of US and Australian minerals in their batteries, some mining industryexecutives believe the DPA could ultimately be more significant for Australianindustry, given “domestic” status would permanently advantage Australianproducers. Many of the incentives in the IRA, on the other hand, are subject tosunset clauses, meaning Australian miners may struggle to access certain IRAsubsidies beyond 2032.
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