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Miners hope forbudget tax credits

Lithium and nickel miners who lobbied for tax breaks are set tobe among the big budget winners as the Albanese government tries to shore upits “made in Australia” plans.

Mining industry leaders are convinced the government will unveilproduction tax credits for downstream processing of critical minerals in thebudget on Tuesday but the details and any limits on eligibility are unclear

Under a scheme modelled on assistance available in the US and inother jurisdictions, those in line to benefit in lithium include billionaireChris Ellison’s Mineral Resources, Pilbara Minerals, Wesfarmers, IGO Limitedand the Gina Rinehart-backed Liontown Resources.

In nickel – where almost 2000 job losses havebeen announced since December – Andrew and Nicola Forrest’s Wyloo, industry heavyweights Glencore and BHP, and aspiring producers such as Ardea Resources could be buoyed by tax breaks.

Industry players said they walked away from talks on thesidelines of Prime Minister Anthony Albanese’s visit to Perth last weekconfident about tax credits despite lingering unease within Labor at theperception of bailing out the likes of BHP and billionaire Dr Forrest in nickel

The budget support will be based ona model put forward by the Perth-headquartered Association of Mining andExploration Companies that gained traction with Resources Minister MadeleineKing.

That model was backed by electric car maker Tesla, along withpotential beneficiaries MinRes, Pilbara Minerals, IGO, Liontown, Wyloo, Ardeaand Australian Vanadium.

Scores of other critical minerals companies, including rareearths players Lynas, Iluka and Arafura, may also benefit.

The Australian FinancialReview reported on April 29 – as the axe fell on another 530workers in the nickel sector – that the Albanese government was under morepressure to come up with a bailout package that included production tax creditsas part of the budget.

BHP has been warning since February that tax breaks might not be enough to save its nickel business, which employs up to 3000 people in WA, as it struggles to survive the impact of Chinese-backed Indonesian producers flooding the global market with supply

The Association of Mining and Exploration Companies reportestimated a US-style 10 per cent production tax credit would cost thegovernment about $3.48 billion through to 2035. It said benefits would includean extra 4220 jobs and $1.79 billion in additional tax revenue.

Ms King talked up the prospect of production tax credits afterlithium and nickel industry crisis meetings in Perth in January.

Since then, lithium producers have started feeling more positiveon the back of a price rally in the second half of the March quarter thatprompted Pilbara Minerals boss Dale Henderson to speculate the sectors hademerged from a tough 12 months.

And in a positive sign for Australian nickel producers, majorpricing agencies – including Benchmark, Fastmarkets and Metalshub – havestarted to offer “green” premium options and noted some market support in thepast two months

Benchmark said market participants had requested new indices tohelp with greater transparency around nickel sourced from producers with highenvironmental, social, and governance standards.

It said the new indexes would be used to be used to supportcontract negotiations between buyers and sellers that “consider more than justthe underlying price of nickel and nickel chemicals”.

There is also support from the US as it tightens up eligibilityaround rebates available on electric vehicles under the Inflation ReductionAct.

The US Treasury Department reiterated at the start of May thatthe tax credits hinge on the origin of critical minerals used to make avehicle.

The percentage of materials in electric vehicle batteries thatmust come from the US or free trade partners like Australia rises to 60 percent in 2025, 70 per cent in 2026 and 80 per cent in 2027