Well fmd dead
Lithium miners plead‘foreign entity’ case to US over China links
Big Australian lithium miners say it would be“counter-intuitive” for the United States government to label them “foreign entities of concern” over their China links, as local miners prepare to fight for access to lucrative US critical minerals subsidies.
The US government considers China, Russia, Iran and North Koreato be “foreign entities of concern” and has sought to ensure critical minerals that are “subject to the control” of those nations are not eligible for the subsidies offered under the Infrastructure Investment and Jobs Act nor the Inflation Reduction Act
Battery and carmakers in the US can access tax breaks if theysource a defined proportion of their battery components from Australia, Canadaand the US, but most Australian lithium would be ineligible under the currentindustry structure given close to 90 per cent of it is processed in China.
Final rules published by the US Department of Energy this month also make clear that a company is disqualified if it is registered in China, or is 25 per cent owned by a foreign entity of concern.
The focus on Chinese ownership has raised doubts over whethertwo of Australia’s biggest lithium mines, Greenbushes and Mt Marion, will be deemed foreign entities of concern because they are 26 per cent and 50 per cent owned by Chinese companies Tianqi and Ganfeng respectively
Senior lawyers acting for Australianlithium miners believe all lithium produced at Greenbushes and Mt Marion wouldbe deemed ineligible under the literal interpretation of the final USgovernment rules published on May 6.
Benchmark Mineral Intelligence analyst Cameron Perks said thefinal rules were open to interpretation, but he also believed the mines wouldbe labelled foreign entities of concern by the US.
Mt Marion is owned by Australian registered company ReedIndustrial Minerals, which is 50 per cent owned by a subsidiary of ASX-listedMineral Resources and 50 per cent owned by a Hong Kong-registered subsidiary ofGanfeng called GFL International.
Mineral Resources director of corporate strategy and growth TimPicton said his company would be disappointed if all product from Mt Marionwere flagged because of Ganfeng’s Chinese origins.
As an Australian company selling lithium that we have mined froman Australian mine, we believe our share of Mt Marion offtake to be compliant.The alternative would be completely counter-intuitive and achieve the oppositeof the IRA’s stated objectives,” he said.
“We are awaiting further guidance on the process forcertification.”
Australia’s biggest and best lithium mine, Greenbushes, is ineffect 26 per cent-owned by China’s Tianqi, 49 per cent-owned by Americancompany Albemarle and 24 per cent-owned by Australia’s IGO.
The corporate structure has the mine directly held by Australianregistered company Windfield Holdings, which is 51 per cent-owned by UnitedKingdom registered company Tianqi Lithium Energy Australia, which itself is 51per cent-owned by China’s Tianqi Lithium Corporation.
Albemarle and Tianqi are understood to be preparing to appeal tothe US government for Greenbushes to win exemption from the literalinterpretation of the foreign entity of concern rules.
A clause in the May 6 rules about foreign subsidiaries ofChinese companies may help their case.
The relevant clause implied that Australian or Britishregistered subsidiaries of Chinese companies may escape foreign entity ofconcern status.
“When an entity is a FEOC due to it being ‘subject to thejurisdiction’ of a covered nation, subsidiaries of the FEOC are notautomatically considered to be FEOCs themselves based solely on their parentbeing a covered nation jurisdictional entity,” said the DOE in an update to thefederal register on May 6.
“United States or third-party country subsidiaries of entitiesthat are headquartered within a covered nation do not necessarily pose the samerisk to the battery supply chain as subsidiaries that are FEOCs by virtue ofthe government of a covered nation holding, directly or indirectly, 25 per centor more of the equity interests, board seats, or voting rights of thesubsidiary.”
A spokesman for Albemarle said: “We are reviewing the finalguidance to understand how it applies to our global operations.”
Mineral Resources’ Wodgina and Bald Hill lithium mines shouldescape foreign entity of concern status if they send their product tonon-Chinese destinations for processing, given there is no Chinese ownership inthose mines.
Pilbara Minerals sends the majority of its Australian lithium toChina for processing and that material would be deemed as from a foreign entityof concern under the US rules.
But Pilbara and its partner POSCO have newly completedconstruction of a lithium hydroxide processing plant in South Korea, and thatmaterial should be eligible for US subsidies.
Liontown Resources’ Kathleen Valley mine is also being builtwith almost no participation from Chinese investors nor lenders.
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