The critical minerals sector has welcomed the federal government’s budget announcement about production credits as a positive step. However, the narrow focus of the policy means it will only apply to a few currently proposed projects. While this policy improvement is appreciated, the advancement of critical mineral processing projects will still require a confluence of factors, including regulatory approvals, offtake agreements, and viable cost structures, before companies commit to production facilities in Australia.
The production credits, scheduled to come into effect in the 2027-28 financial year for specific projects, are not expected to significantly mitigate the layoffs facing the nickel industry due to cheaper nickel imports from Indonesia.
Companies that could benefit from the credits include IGO, which holds a 49% interest in the Kwinana lithium hydroxide plant alongside Chinese lithium giant Tianqi, and Iluka, which is developing a rare earths refinery at Eneabba, 280km north of Perth. Other potential beneficiaries include Wesfarmers’ proposed lithium hydroxide plant at Kwinana, expected to start production in 2026, and BHP’s Nickel West processing plant in Western Australia. Additional projects like Albemarle’s Kemerton lithium hydroxide processing plant near Bunbury and Lynas’s rare earths processing facility at Kalgoorlie may also qualify. Australian Vanadium has confirmed it would benefit from the credits.
However, other notable companies such as Liontown and Mineral Resources, which are involved in lithium production, are not currently engaged in processing projects that would receive the credits. Liontown Managing Director Tony Ottaviano welcomed the government's measures, stating they support the expansion of Australia's critical minerals capacity, but confirmed that Liontown's planned lithium spodumene concentrate production plant at Kathleen Valley would not qualify for the production tax credit.
A spokesman for Mineral Resources (MinRes) praised Resources Minister Madeleine King for collaborating with the industry to add value to Australia's natural resources, noting that global investment in downstream projects is unlikely without government support. MinRes projects are not currently eligible for the credits, but the policy is seen as a sensible move to enhance Australia's competitiveness.
Lynas Rare Earths CEO Amanda Lacaze emphasized that developing a critical minerals industry in Australia would require various support measures at different stages. She welcomed the production tax credit but also called for government investment in infrastructure and improved approval processes to support project development.
Tania Constable, CEO of the Minerals Council of Australia, described the proposed production tax credits as a valuable tool to encourage downstream processing but noted they are only a small part of the broader framework needed to stimulate more processing of minerals in Australia. She highlighted that these credits, not due until 2027-28, would apply to existing or planned processing operations, with new projects still dependent on several factors including regulatory and industrial relations conditions and offtake agreements.
Lithium industry sources indicated that any decision to advance towards downstream processing would depend on market conditions, particularly given the current price volatility driven by China. Jarden mining analysts noted that the proposed credits would apply to the production of lithium carbonate and hydroxide but not to concentrated spodumene, with further details on midstream project incentives still being clarified.
Pilbara Minerals CEO Dale Henderson welcomed the budget initiatives but stressed the need for more government support, including production tax incentives, faster approvals, shared infrastructure, and government-backed loans and grants.
Potential opposition from the Coalition could pose a challenge to the policies, with Opposition Treasury Spokesman Angus Taylor indicating that the Coalition might oppose the $13.7 billion in production tax credits for green hydrogen and critical minerals, despite supporting the manufacturing and resources sectors.
Overall, while the federal government’s production credits are a welcome development, the critical minerals sector will need additional support and favorable conditions to fully realize its potential and advance Australia's role in the global energy transition.
