Australia's explorers and Western Australia's state government are pressing the federal government to open up about what the state needs to do to win its bid for a cooperative research center and become a downstream processing hub for battery minerals, an industry some believe could be worth A$2 trillion by 2025.
Western Australia's mines and petroleum minister, Bill Johnston, renewed the push at the Paydirt Battery Minerals Conference in Perth on March 14, saying such a move would ensure a range of supply chain opportunities and a smoother pathway for the state's many battery minerals projects to proceed.
The Minerals Research Institute of Western Australia is trying to coordinate an energy industry cooperative research center, but the grant to set one up comes from the federal government, and Johnston said it would be a "tragedy" if it was awarded to another state.
"We have a stable energy supply system, plenty of industrial land, transport infrastructure, a skilled workforce capable of moving from one industry to another, a community that's used to dealing with major projects and a regulatory environment that allows a rapid response for large industry to gain approvals," Johnston told conference delegates. "We are also a jurisdiction that accepts 100% foreign ownership and allows repatriation of profits, which are important to compete against other jurisdictions."
Association of Mining and Exploration Companies CEO Warren Pearce said his group believes that Western Australia was the "logical" choice but major partnerships were needed to make it happen.
"Companies in that space have spent a lot of time developing their technology and experience, and for us to get into that space quickly, we're going to need partners who can provide that expertise and join with our companies with the mining expertise to get access to the minerals they need," he told S&P Global Market Intelligence.
"We know there's a lot of things happening behind the scenes quietly. We need the government to come out and make it really clear to the market what Australia, and Western Australia, needs to do to attract these businesses from overseas.
"We think we're reasonably cost competitive because we've got all the minerals in one place. Processing firms in Japan and South Korea need to get the minerals from all over the world, including Australia, and their costs aren't necessarily lower than ours."
While countries such as China have lower costs and wages, Lithium Australia NL managing director Adrian Griffin said it also held significant downsides that work in Western Australia's favor.
"If you look at the supply chain up until today, all of the conversion capacity is in China … that is going to change," Griffin told S&P Global Market Intelligence. "That conversion capacity has been a real supply constraint problem, which has driven up the carbonate price, not lack of resources — there's plenty of lithium source spodumene lying around the place — you just can't squeeze them through the plants in China. So the supply chain is constipated."
He said taking spodumene from Australia into China incurs a nonrefundable 17% value-add tax on the way in and moving that chemical out attracts an export tax of about 20%.
"Why wouldn't you produce it here [in Western Australia] and pay a 3.5% state royalty? It's a no-brainer. Why do you think Tianqi Lithium Australia Pty. Ltd. is building a refinery in Kwinana? It's not because the operating cost unit-for-unit is cheaper than China, it's tax."
Future Smart Strategies managing director Ray Willis told the conference that Australia had about A$870 million worth of value in lithium in 2017, which is a two-thirds share of the world's investment.
"Australia is actually pretty good at building battery systems and energy management systems but is only worth about A$50 million," he said.
Willis said a battery minerals processing industry could be worth A$1.3 trillion by 2025, though "we have talked about A$2 trillion for whole value chain … however, with recent announcements, we're afraid those estimates might be too small."
