Certainty elusive on bumpy road to energy transition
- 16 November 2024
Permitting uncertainty and surprises, two things that are anathema to investors in large critical mineral projects anywhere in the world, continue to create headwinds for companies in Australia as they seek funding and offtake deals.
That was one of the core messages from an IMARC 2024 panel of leaders tasked with assessing barriers to faster project delivery in a country looking to move from a reliance on bulk commodities to many new smaller-scale specialty and strategic mineral and metal enterprises.
The panel featured MinterEllison partner and energy and resources industry leader, Simon Scott and included the CEO of an emerging rare earths company, Rowena Smith; gold major Newmont’s safety and sustainability head in Australia, Melissa Winks; AustralianSuper’s Luke Smith; and Stephen Galilee, CEO of the New South Wales Minerals Council.
Australian Strategic Materials boss Smith said while the rigor and regulatory certainty typically associated with mine approvals in Australia was lauded around the world, duplication of state and national agency functions slowed permitting and a certain high-profile gold mine case had spooked some investors.
“I think the opportunities for improvement are speed, and that's largely about administrative efficiencies and resourcing, and certainty,” she said.
Federal government intervention in the A$1 billion McPhillamys gold project on cultural heritage grounds, after it was approved for development by the NSW Government, “doesn't just impact that project, it impacts every other project that's out there touting for investment internationally”, Smith said.
“When I say my project is fully approved, they say to me, are you sure? That's very problematic.
“So getting that certainty around the approvals is critical.”
Gallilee said: “I have had people tell me that the McPhillamys project outcome in particular has done a lot of damage to the reputation of New South Wales as a place for investment and that's concerning to me and I'm sure to other panelists as well because we're competing for that investment globally to get these projects underway.”
MinterEllison’s Scott said the McPhillamys decision, made by a declaration under Section 10 of the Aboriginal and Torres Strait Islander Heritage Protection Act 1984, was an example of a “mismatch” between federal and state laws in an area “where there still needs to be the alignment … to get clarity and certainty”.
More broadly, he said, uncertainty about the timing of final project approval decisions was a recurring theme and this highlighted gaps in state regulatory regimes and also human capacity constraints that were talked about in various IMARC forums.
“One of the reasons that our timeframes are expanding so much is because there are so few people in the system,” said one veteran company leader. He was referring to a dearth of experienced professionals in mining, finance and government administration. “That people crunch really hurts us and it's universal. It's not just Australia it's around the world.”
Scott said: “The question we are forever asked in assisting with project approvals and investments is, how long before dirt can be turned?
“How long before you get clarity of return?
“There’s work to be done around the country to improve that. There are certain reviews being undertaken, including Queensland’s Law Reform Commission which is looking at [its mining laws].”
The panel also looked at capacity constraints in other areas impacting project financing and development, including product qualification integral to major processing investment decisions and offtake contracts.
A rapidly evolving downstream processing landscape for many electric vehicle and storage battery inputs, on the back of the unprecedented funding being poured into supply chains in North America, Europe and parts of Asia, means certainty and timing in this area is often also very much up in the air.
Scott said significant government support in Australia for common-user pilot processing facilities in Queensland and Western Australia, enabling mineral project proponents to test processes and generate product samples at reasonable scale, reflected recognition of the transitionary nature of the challenge.
“But the other issue is that some of the parties willing to fund and commit to offtakes are having challenges that they don't yet know where they're going to have their product qualified and at which facility in which country,” he said.
“Trying to negotiate long-term contracts where you're not sure of the destination of the mineral somewhere around the world, what qualification process will apply and how long it will take is challenging to say the least.
“What we're seeing is a lot higher degree of what a lawyer will call risk about the certainty of that contract, because it will have a number of reopeners in it.
“For offtake contracts in the critical minerals sector, particularly those technical minerals, there needs to be a great level of flexibility around contracting.”
