INTERVIEW: Australia's critical minerals reserve may compete with miners, lobby group CEO warns

With the return of the Labor Party's leadership after Australia's May 3 federal election, the Association of Mining and Exploration Companies (AMEC) is cautious about the government's proposed overhaul of environmental standards and laws, which will be overseen by Murray Watt, the new minister of environment and water appointed on May 12. The industry also faces challenges from the rollout of decarbonization.

Platts, part of S&P Global Energy, spoke to AMEC CEO Warren Pearce on what the industry sees ahead for the federal government and how the transition to net zero is impacting miners.

The following is a transcript of the interview edited for length and clarity.

Platts: Do you have any more clarity on the A$1.2 billion critical minerals strategic reserve that Prime Minister Anthony Albanese proposed in response to US tariffs?

Pearce: We know a bit more about it since before the election. The critical minerals strategic reserve is there as a last resort for Australia and our strategic partners if, for some reason, they can't get access to particular minerals or various trade restrictions or export bans are in place elsewhere. It meets a need of those with a strategic alliance with Australia. Who are they talking about? The US, Japan, South Korea, India and the like. We have these resources. We're not necessarily producing some of them at the moment so there's an incentive to try and start producing them.

It's unclear to whom the government would sell the stockpiled material, or what that means for the existing industry. Once you sell material from a stockpile, there's an issue where you're competing with existing local producers. That bit hasn't been quite worked through and needs some serious industry consultation.

National offtake agreements with participating companies for the stockpile is voluntary, but the idea is the government enters into a minimum floor price arrangement with producers. That makes sense, and it matters to companies because when you're trying to secure investment in a space where the emerging market is small and really volatile, that doesn't look like a particularly desirable investment for investors. If you have a floor price, you know what the upside is from where your floor is. So that could work for us. What happens now is the pricing can go so far below your operating cost, you're out of business pretty quick.

Now the question is, is A$1.2 billion enough to actually do that in a meaningful way, either in a global market for critical minerals, even in niche ones? Or can they afford to buy enough material to actually give some resilience against market manipulation like we're seeing at the moment? We don't know the answer to those questions yet. There'll be more industry consultation to work it out. But it's a good concept as an investment, and one that we could utilize to help get some of these projects that are struggling to attract investment off the ground.

Platts: You expressed disappointment leading up to the election that the Labor Party has not yet supported a continuation of the A$100 million Junior Mineral Exploration Incentive (JMEI). Given that Minister Madeleine King retained her resources portfolio, what are your hopes there?

Pearce: She's done a great job for us. When we asked her to help us out with critical minerals value adding, she managed to win the production tax incentive. When we asked for exploration support, she secured a A$3.4 billion program to map the continent over 35 years. This is important to keep investment coming and keep learning about where these resources are. She does support the JMEI, but we're working on it. [King] has found a way every other time. So we'll keep the faith.

We're hopeful we can win an extension on the JMEI and we're working with government on that at the moment. We really wanted an election commitment from Labor about it, but it wasn't forthcoming. I can't overestimate the importance of that program. It's always been an important program, but right now getting investment into the exploration industry is really, really hard, and if we're serious about finding critical minerals, turning them on and having a strategic reserve, we will need to find the minerals before we're able to mine them. The JMEI has been a really important way of getting private investment in exploration, so we've got to find a way.

Platts: What impact have you seen from global tariffs?

Pearce: We export a few hundred million dollars of steel and aluminum each into the US, which has no ability to replace them internally. And since everyone else pays the same tariff, we're no worse off, so they're going to keep buying our steel and aluminum at small quantities albeit at a higher price. You'd have to have those tariffs in place for a long time before you can rebuild an aluminum and steel industry in the US.

So the real issue for us in terms of the impact of tariffs isn't actually going to be on our direct exports to the US, but how that plays out with the economy in China, where most of our minerals get sent. If that demand weakens because the Chinese economy or its recovery slows, then we can have a big impact pretty quick. You see the price come off on iron ore, coal and other things. We're talking about a shrinking of the global economy if the tariffs continue. Our Treasury has already forecast a 1% decline in GDP as a consequence of it, but there are much bigger risks here.

Tariffs have also helped shelve the recovery that was happening in our exploration investment. Late last year, finally after a couple of years, we started to see money flow back in, mostly for gold exploration off the back of a high gold price. Just as we started to see companies raise money again and it looked like things are on the up, Donald Trump got reelected, along came "Liberation Day" and worldwide tariffs, and the investment environment for exploration disappeared.

What happens when people are concerned about a global recession? They get liquid and they get out of speculative investments. So we absolutely are seeing the impacts.

Platts: How important is the overhaul of the Environment Protection and Biodiversity Conservation (EPBC) Act?

Pearce: For over a year, [former] environment minister [Tanya Plibersek] chose not to engage in meaningful consultation with the industry over a major environmental legislation change to the EPBC Act, so we could not get the reasons why we are advocating for change. It's probably helpful that we've got a new minister who can have a fresh look, have a bit of a reset with the industry, and actually sit down again and have a conversation about what we are trying to achieve.

We are all for strong environment protections, but we're also trying to achieve greater efficiency in the process. We've got state and federal governments essentially doing the same thing in duplicate, so why don't we find a way to remove a huge amount of the process without reducing the environmental protections that are being put in place? No one in the industry is advocating for reduced environment protections. It's important for our investors and the community to see we actually take this stuff seriously because if we don't, our ability to get these projects approved and move forward is going to be zero.

Platts: The Iberian Peninsula's blackout in April prompted calls for grid investments to back up increasing renewables penetration. Is that a challenge for the new environment minister?

Pearce: Often we can build the renewable energy projects faster than we can build the grid infrastructure for them, otherwise the risk is that what happened in Spain can happen here. Miners have to deal with maybe one or two Native Title bodies, but building transmission lines across the country will see governments have to deal with 10 or 12 Traditional Owner groups, all of whom are particularly well resourced to talk to you about it. So federal and state governments must get serious about sorting out the process and the efficiency that runs through the Native Title, heritage and environment processes, which require the consultation that is slowing all this down.

The other issue for renewables is that if explorers don't know they have a project yet as they're still trying to find a commercial deposit, and someone comes along and has the land earmarked for solar or wind farms with a A$100 million project, the renewables asset is going to win out. Once those go ahead, the exploration opportunity disappears and whatever is under the ground that belongs to the people and the states is essentially sterilized for the life of that renewable project.

We've got to get back on an equal playing field, otherwise it's a big risk to our sector. We need to be thinking about what benefits the state and the country, as well as what's going to be attractive to investors. The more governments can push industries to work together, the more likely projects can progress.