Critical Minerals Strategy 2023: discussion paper

Daniel Walton, National Secretary, the Australian Workers’ Union | February 2023

A RESILIENT
FUTURE
The Australian Workers’ Union’s vision for the Australian
Government’s National Critical Minerals Strategy
Background
The Australian Workers’ Union (AWU) welcomes the opportunity to make a submission to the Australian
Government’s Discussion Paper on the National Critical Minerals Strategy (‘the Strategy’).

The AWU represents around 70,000 members nationally in a diverse range of industries, many of them relevant to the critical mineral supply chain:

• mining of critical minerals such as lithium, rare earths, graphite, manganese and bauxite, as well as
traditional minerals such as iron ore and copper

• smelting, processing and refining of minerals into intermediate products such as alumina

• manufacturing and construction of renewable energy, including wind towers and hydro power

• energy-intensive manufacturing such as steel, aluminium, cement and plastics

• hydrogen generation

• existing energy resources such as oil and gas.

The AWU welcomes the Government’s initiative in developing a new National Critical Minerals Strategy to ensure
Australia is well-placed to capture the significant opportunity on the horizon for the industry. The below submission canvasses the economic and strategic importance of building Australia’s domestic capacity in critical minerals extraction and processing, and identifies policy options for the Government to consider in the
Strategy.

The AWU’s vision for the Strategy would be a net job creator, and will play a critical role as governments in
Australia and abroad pay greater attention to the task ahead in achieving a just energy transition.

The AWU is keen to engage further with the Government as required to support the development and implementation of the Strategy.

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THE AWU’S VISION FOR THE NATIONAL CRITICAL MINERALS STRATEGY

Executive summary

The markets for critical minerals are set to expand enormously in the next twenty years as the energy transition,
technological advances and military expansion drive increasing demand for battery minerals, rare earth
elements and the materials essential to high-end electronics.

Demand for some of these materials is forecast to increase more than ten-fold, creating new multi-billion global
industries. They will also become the focus of intense international competition where countries like China will
seek to dominate markets and control supplies of vital minerals.

Australia is uniquely placed. It has some of the largest ore reserves of critical minerals – but this alone does not
guarantee an industry and potential jobs. The mining boom of the early 2000s was not accompanied by a jobs
boom because the minerals were mostly mined and exported in unprocessed form.

With the right policies, however, Australia can expand its mining activities, process minerals here to create value
added metals, chemicals and materials instead of shipping rocks to places unwilling to or incapable of sourcing
them domestically. Currently, much of Australia’s mined critical minerals are processed in China. This now
represents a strategic risk.

Australia is working with its strategic allies to ensure critical mineral supply chains do not become a national
security threat. It could expand this to be a world leader in critical materials – not just the minerals, but the alloys
and manufactured items that come from them.

This will create more jobs with higher wages for Australians and secure our own economic future. Just
maintaining Australia’s current share in critical mineral supply while processing 50% of the mined ore
domestically could see high paying skilled jobs increase from 18,800 in 2021 to 48,000 in 2030 and over 90,000
by 2040. If the 100% of the processing occurred onshore, then direct employment could be more than 50,000 in
2030, and over 100,000 by 2040.

To support this industry, another 180,000 to 200,000 jobs would also be created in construction, energy and
chemical supplies and transportation industries.

If this was expanded to copper, aluminium and green steel, the numbers would be significantly higher.

Achieving, and allowing Australian workers to benefit from greater employment opportunities requires Federal
and State governments to work together; it requires innovative policy thinking that fixes the problems that have
plagued Australia’s approach in the past.

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THE AUSTRALIAN WORKERS’ UNION

Findings and recommendations

Scope of critical minerals definitions

Finding 1: The Australian Government’s current list of critical minerals excludes key strategic resources, particularly those where Australia already has a comparative advantage in exporting refined and processed products.

Recommendation 1: The National Critical Minerals Strategy should expand the definition of ‘critical minerals’ to include copper, aluminium/alumina/bauxite and zinc.

Securing Australia’s strategic advantage

Finding 2: Australia is already falling behind other developed countries in prioritising the processing and refining of critical minerals, creating considerable strategic risks.

Recommendation 2: The Australian Government should consider a tax-and-subsidy scheme to invest in domestic critical minerals processing and keep pace with our strategic partners, by:

• Applying a $1 per tonne levy on unprocessed ore exports (particularly iron ore and bauxite), and a
$10/tonne levy on exported concentrates (which only undergo milling rather than high-value-add
refining).

• Developing a scheme of production tax credits for processed critical mineral projects, with reference
to the US Inflation Reduction Act and proposed measures in Europe and other jurisdictions.

• Applying a more rigorous assessment of foreign investment in critical minerals, through a lens of
sovereign capability and national security.

Improving mining regulation

Finding 3: Australia’s mining regulation is recognised as world-class, but uncertainty at the beginning of a project about if and when approvals can be given are limiting the growth of critical minerals projects.

Recommendation 3: In their ongoing implementation of the Graeme Samuels review of the Environment
Protection and Biodiversity Conservation (EPBC Act) Review, Federal and State governments should create a separate streamlined class for critical projects, with shorter statutory timeframes, prioritised assessment, and
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THE AWU’S VISION FOR THE NATIONAL CRITICAL MINERALS STRATEGY

specialised training for approval officers.

Access to energy

Finding 4: Australia’s energy supplies have historically been a key competitive advantage, but these are at risk
due to rapid changes in the energy supply chain underway over the last decade and in the next decade.

Recommendation 4: The Government should commit in its Strategy to supporting energy access for critical
minerals processing projects as a priority under the National Reconstruction Fund, Powering the Regions Fund
and its initiatives on access to energy sources, including renewable energy, hydrogen, coal and gas.

Workforce development

Finding 5: Australia’s mining workforce has the capacity to support us taking a global leadership position on
critical minerals.

Recommendation 5: The Australian Government should commit to a workforce development strategy, including
training and measures to support displaced workers in the mining sector enter the critical minerals industry.

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THE AUSTRALIAN WORKERS’ UNION

Table of Contents
Background .............................................................................................................................................................................................................................. 2
Executive summary.............................................................................................................................................................................................................. 3
Findings and recommendations ................................................................................................................................................................................. 4
1. Introduction ................................................................................................................................................................................................................... 7
1.1 The opportunities in critical minerals ..........................................................................................................................................................................7
1.2 Australia’s current state of play in critical minerals ........................................................................................................................................ 10
2 The case for domestic processing ................................................................................................................................................................ 12
2.1 Manufacturing is the key to high-paying jobs in an advanced economy ...........................................................................................12
2.2 The mining boom was not a jobs boom ............................................................................................................................................................13
3 The international state of play ......................................................................................................................................................................... 17
3.1 The United States’ Inflation Reduction Act has changed the game ....................................................................................................... 18
4 Goals for Australia’s National Critical Mineral Strategy ...................................................................................................................19
4.1 Critical minerals should include all strategic resources ........................................................................................................................ 19
4.2 Keeping up with our trade partners, economically and strategically ........................................................................................... 20
4.3 Improving regulation of critical minerals sites ............................................................................................................................................25
4.4 Need for reliable low-cost energy ....................................................................................................................................................................... 26
4.5 Developing Australia’s workforce .........................................................................................................................................................................28
Appendix 1 – critical minerals lists ...........................................................................................................................................................................29

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1. Introduction
1.1 The opportunities in critical minerals
Global economic growth is creating rising demand for all resources – steel, copper, cement and energy
commodities.

Within this economic story, rapid advances in technology is creating booming demand for new metals – lithium,
cobalt, rare earth elements, and tungsten that are essential to many advanced electronics goods, but produced
in small quantities. Around the world, they have come to be known as critical minerals.

Geoscience Australia defines a critical mineral as:

a metallic or non-metallic element that has two characteristics: It is essential for the functioning of our modern technologies,
economies or national security, and there is a risk that its supply chains could be disrupted.1

The demand for critical minerals is widely expected to rise in the long-term.

Not only are computers becoming more powerful using critical minerals, but rising incomes are giving millions
of new consumers in emerging economies the purchasing power to buy modern consumer electronics in ever
increasing volumes.

Without secure sources of high purity silica, tantalum, dysprosium and even gold, a hi-tech electronics industry
is not possible.

World-wide commitment to reduce carbon emissions is creating large increase in demand for sources of
electricity such as solar panels and wind turbines that are full of critical minerals. The International Energy
Agency forecasts wind and solar generation to respectively increase 1,001% and 1,993% in the next 30 years in
order to achieve the net-zero ambitions of the world.2

A global deployment of large-scale battery systems will be needed to manage the growing reliance on these
intermittent energy sources. While there are different types of batteries being developed, they are all reliant on
critical minerals – some use lithium, nickel, cobalt and graphite, others vanadium or zinc.

Consequently, the future opportunities in critical minerals supply are enormous. In its 2021 report The Role of
Critical Minerals in Clean Energy Transitions, the International Energy Agency forecast world lithium demand to
grow 14 times over its current sizes in the next twenty years – from 73,000 tonnes today to 1.16 million tonnes in
2040.

1 Geoscience Australia website, viewed 1 July 2022.
2
International Energy Agency, World Energy Outlook 2021, Sustainable Development Scenario, Table A3.C, p. 307.

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THE AUSTRALIAN WORKERS’ UNION

The outlook in this report is for substantial growth in the consumption of all critical minerals that support the energy transition.

Though the percentage change in copper in this figure appears smaller, it is coming off a much larger base and results in the largest volume increase of any metal – an additional 9 million tonnes of copper will be needed in
2040 compared to 2020.

Figure 1. Critical mineral demand will sky-rocket if the world is to achieve net-zero emissions

Consumption Growth, 2020 - 2040

1600%

1400%

1200%

1000%

800%

600%

400%

200%

0%
Lithium Cobalt Nickel Neodymium Copper

Source: International Energy Agency.

Renewable energy is dependent on critical minerals. Wind turbines need copper, rare earth elements and nickel; solar panels use large amounts silicon, silver and gallium; and battery storage technologies are reliant on lithium, nickel, cobalt and manganese. The emerging hydrogen industry is also mineral intensive and will require large amounts of platinum, copper, nickel and rare earth elements.3

3
International Energy Agency, Mineral Requirements for Clean Energy Transitions, 2021

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THE AWU’S VISION FOR THE NATIONAL CRITICAL MINERALS STRATEGY

Table 1. Critical Mineral needs for clean energy technologies

Source: International Energy Agency, Minerals Requirements for Clean Energy Transitions.

The rapid rise of electric vehicles, and the likelihood that many developed nations will require all new cars to be
zero-emissions by 2030, provides just one example of the global growth opportunity in critical minerals off the
back of clean energy (Box 1).

Box 1 – Electric vehicles
The move away from the internal combustion engine used in cars, buses and trucks is spurring an investment
rush among global automobile manufacturers developing new battery electric vehicles and hydrogen
powered trucks. Both technologies are reliant on the critical minerals to deliver comparable performance.
Governments across the OECD are working closely to support this shift in production with policies to cease
production of automobiles with internal combustion engines to expedite the shift to electric vehicle
manufacturing.

Source: International Energy Agency.

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THE AUSTRALIAN WORKERS’ UNION

Electric vehicles are resource intensive machines. An EV with a 75 kWh battery pack using nickel-manganese-
cobalt cathode requires:

•66 kg of graphite
• 53 kg of copper
• 40 kg of nickel
• 24 kg of manganese
• 13 kg of cobalt
• 9 kg of lithium
• 0.5 kg of rare earth elements4
If government policy or market forces eventually lead to a complete substitution of the internal combustion
engine passenger car, then around 80 million electric vehicles would be manufactured every year – before
accounting for any growth in the number of cars produced per year.
This means 720,000 tonnes of lithium would be required for EV production each year. Current global output is
around 100,000.
In the case of nickel, that means 3.2 million tonnes of battery grade nickel could be required unless there are
improvements in battery cell technology that reduce the amount of nickel required. If not, then the electric
vehicle industry will need 20% more nickel than was produced in all the world’s nickel mines in 2021. The
world will likely still require nickel for other uses such as steel production and to produce larger batteries
used to stabilise electricity grids.
And this is just the requirements of the passenger vehicle segment of automobile industry. The outlook for
these critical minerals will also be supported by heavy transport vehicle manufacturing and the energy
storage systems needed to back-up electricity grids as renewable energy becomes more widespread.

1.2 Australia’s current state of play in critical minerals
Australia already has a world-leading mining industry and is the largest producer of iron ore, bauxite and mineral sands. Our critical minerals industry is booming too – Australia is the largest producer of lithium, third largest miner of cobalt and one of just a few countries supplying rare earth elements. If Australia is to maintain its current market share in these key minerals, over 150,000 new jobs will be created (Figure 2).

4
International Energy Agency, The Role of Critical Minerals in Clean Energy Transitions.

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THE AWU’S VISION FOR THE NATIONAL CRITICAL MINERALS STRATEGY

Figure 2. Critical minerals jobs boom in Australia
120,000

100,000

80,000

60,000

40,000

20,000

0
2021 2030 2040

Lithium Nickel Cobalt Copper Neodymium

Sources: Western Australia Department of Mines, Industry Regulation and Safety & calculations based on maintaining current global market shares.

However, both sectors already demonstrate our policy shortcomings. Australia continues to mine and export
unprocessed mineral ores, allowing other nations to use them in their own downstream processing industries.

There are still significant employment opportunities in mining critical minerals. Resources policies must continue
to foster growth in Australia’s mining industry including diversification to ensure a broader set of commodities
are produced and in more states. While there are proposed critical minerals mining projects around the country,
Western Australia is currently the only state mining lithium, nickel, cobalt and rare earth elements. Copper is
produced more broadly with every state except the Northern Territory and Australian Capital Territory producing
the red metal.

Based on data from the Western Australia Department of Mines, Industry Regulation and Safety, employment at
critical minerals mines in 2021 included:

• 3,254 jobs at lithium mines

• 6,490 jobs at nickel mines and processing sites

• 1,427 jobs at cobalt mines5

• 362 jobs at rare earth elements mines6 7
In addition, the Australia Bureau of Statistics estimates there are 7,342 jobs at copper mines across Australia.8

5
Minera’s Murrin Murrin mine that produces both cobalt and nickel
6
Rare earth elements estimate is based on 262 jobs at the Mt Weld mine, up to 80 at Iluka’s Eneabba heavy mineral sands mine that produced a rare earth element by-product and 20 jobs at
Northern Minerals’ Browns Range test facility.
7
Department of Mines, Industry Regulation and Safety, 2021 Economic Indicators data.
8
Australian Bureau of Statistics, Australian Industry.

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THE AUSTRALIAN WORKERS’ UNION

With appropriate policies in place to attract investment, the number of site-based operational jobs at critical minerals mines could surge in Australia over the next twenty years.

2 The case for domestic processing
2.1 Manufacturing is the key to high-paying jobs in an advanced economy
Manufacturing capability is a hallmark of all modern economies. It supplies a nation with advanced goods, creates greater employment opportunities and stimulates innovation. It makes an economy more robust and resilient to shocks as it is more capable of sustaining itself in times of crises – as Australia and many nations are once again realising in the era of post-pandemic supply chain disruption.

This decline is borne out by Harvard University’s Country and Product Complexity Rankings which measures the ability of a country to make products and deliver it to customers – or put another way, the complexity and sophistication of a national economy. In 1995 Australia was ranked 55th, by 2019 it had fallen to 86th – the lowest ranked and biggest fall of any G20 country.9

Over the last 45 years, rather than protect and build its manufacturing capabilities, Australian policy put market forces in control that acted against the national interest. The evidence is clear: slowly, our manufacturing base reduced – outsourced to regions paying the lowest wages and delivering the highest profits.

We lost jobs, a critical source of productivity-driving innovation and with some business closures, a source of national pride. Incredibly, manufacturing employment in Australia peaked in 1989 and has since declined 28%.

This trend has accelerated since the Global Financial Crisis of 2008-09. In the last ten years, the output of the
Australian manufacturing has fallen following a series of large closures in our automotive, metal processing, petroleum refining and chemicals industries. Whereas new manufacturing businesses had previously started up utilising new technologies or producing new goods, instead predominantly service-based industries were left to fill the void as Australia’s economy underwent a period of structural change.

A major consequence is the workforce has become more focused in major metropolitan centres. Jobs in the services industries tend to be more concentrated in major cities while the manufacturing industries they have replaced were more dispersed across regional Australia. This has had a secondary effect of reducing economy diversity in regional Australia with many areas now more reliant on agriculture and mining than before.

Second, it has diminished Australia’s capacity to produce a broad range of goods. The implications of this were

9
Atlas of Economic Complexity, Harvard University

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THE AWU’S VISION FOR THE NATIONAL CRITICAL MINERALS STRATEGY

made clear during the COVID pandemic when Australia faced shortages of protective gear and became reliant
on imports of vaccines at a time when the sources of these vital supplies were subject to domestic reservation
policies by the host country’s government.

More broadly, Australia is now reliant on international supply chains that are under stress. Even the remaining
goods that are assembled here are over-reliant on materials and components sourced from international
suppliers. Our economy may have benefitted from cheap overseas labour, but it has come at the cost of our
economic security and stability.

As seen in Figure 3, the Australian economy has pivoted towards an economy growth model focused on a small
number of key industries – mining, healthcare, professional services, the returns on real estate and financial
services. In contrast, the industries that had been the backbone of the Australian economy underperformed. The
construction, transportation and electricity industries stagnated but worst of all, the economic output of
Australia’s once proud manufacturing industry declined.

Figure 3. Growth in real industry value added, by industry 2010-11 to 2020-21

Mining
Health Care and Social Assistance
Professional, Scientific & Technical Services
Ownership of Dwellings
Financial and Insurance Services
Public Administration and Safety
Wholesale Trade
Retail Trade
Rental, Hiring and Real Estate Services
Education & Training
Information media and Telecommunications
Construction
Administrative & Support Services
Other Services
Accommodation & Food Services
Arts and Recreation Services
Transport, Postal and Warehousing
Electricity, Gas & Water
Agriculture, Fisheries, & Forestry
Manufacturing
-20,000 0 20,000 40,000 60,000 80,000
Real Industry Gross Value Added, A$ million

Source: Australian Bureau of Statistics

2.2 The mining boom was not a jobs boom
It cannot be overlooked though that trends in employment growth are notably different. Whereas mining is
driving growth in GDP, it has failed to provide a proportionate boost to employment.

Employment growth in Australia has, over the last decade, instead been focused in service-based industries such

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THE AUSTRALIAN WORKERS’ UNION as healthcare, professional services and education.

Figure 4 shows the clear failings of government policy on Australia’s manufacturing industry. Over the last decade employment in manufacturing in Australia has fallen by 97,000. And despite a mining boom providing increased material availability, Australia’s primary metal and metal product manufacturing sector shed 20,000 jobs.

Rather than use Australia’s minerals production to create jobs in more downstream manufacturing industries, it was used to create profits for a few companies.

Mining has been the largest driver of Australian economic growth, an enormous source of business investment and significant payer of taxes and royalties – $43 billion in 2020/21 according to the Minerals Council of Australia.10

But for all this growth, the mining industry today provides employment for just 270,000 Australians. Just 2.1% of the total workforce.

The proceeds of mining are principally directed towards corporate profits with just 14.3% of total factor income going to employees in 2020-21 compared to 58% for the manufacturing industry.11

Mining has become a more capital-intensive industry through the boom and the employee share of factor income declined from 31% in 1990-91 to 14.3% in 2020-21. This is not a balanced outcome for Australian workers.

It is a trend that for 30 years has reduced the benefit for a broader set of economic stakeholders – particularly the Australian public who own the non-renewable mineral wealth being extracted and exported.

10
Mining industry contributed a record $43 billion in company tax and royalties in financial year 2020-21, Minerals Council of Australia, 4 July 2022
11
Australian Bureau of Statistics.

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Figure 4. The industries driving employment growth in Australia, 2010-11 to 2020-21

Health Care & Social Services
Professional, Scientific & Technical Services
Education & Training
Public Administration & Safety
Construction
Retail Trade
Financial & Insurance Services
Accommodation & Food Services
Transport, Postal & Warehousing
Mining
Other Services
Arts & Recreation Services
Administrative & Support Services
Rental, Hiring & Real Estate Services
Electricity, Gas, Water & Waste Services
Agriculture, Fisheries & Forestry
Information Media & Telecommunications
Wholesale Trade
Manufacturing
-200 -100 0 100 200 300 400 500 600
Thousand Jobs

Source: Australian Bureau of Statistics

Figure 5 below shows just how unbalanced the distribution of proceeds from mining have become. According to
estimates from the Australian Bureau of Statistics, the total wages paid to all workers in the industry has grown
at low rates for nearly a decade, with profits increasing eight-fold in just the last 6 years.12

Figure 5. Mining industry profits have grown exponentially while wages paid stagnated

Australian Mining Industry
A$ billion
180
160
140
120
100
80
60
40
20
0
2001 2003 2005 2007 2009 2011 2013 2015 2017 2019 2021

Company profits before income tax Wages and Salaries

Source: Australian Bureau of Statistics

12
Source: Australian Bureau of Statistics, Business Indicators.

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THE AUSTRALIAN WORKERS’ UNION

Even though Australia’s economy has enjoyed significant growth over the last twenty years, the focus on shipping unprocessed minerals and an absence of industrial policy has cost the nation dearly. But it didn’t have to be this way.

Australia could have still expanded its mining industry in response to the rapid growth in world demand for resources, but used the same minerals produced to drive expansion in downstream industries that processed the minerals in Australia – creating new jobs for thousands of workers and business opportunities across regional Australia. Instead, these value-adding opportunities were exported to other nations.

Thousands of highly paid, secure jobs for Australians processing our mineral wealth into the steel, aluminium and a variety of other refined metals the world needed in ever-growing quantities could have been created in
Australia; instead these industries have stagnated and, in some cases, contracted (Figure 6).

Australia’s metal manufacturing sector remains at serious risk, even while the markets they supply continue to grow.

Figure 6. The mining boom did not spread to Australia’s metals manufacturing industry

Australian metal production
Thousand tonnes
12,000

10,000

8,000

6,000

4,000

2,000

0
1990–91

1992–93

1994–95

1996–97

1998–99

2000–01

2002–03

2004–05

2006–07

2008–09

2010–11

2012–13

2014–15

2016–17

2018–19

2020–21

Steel Aluminium Refined Copper

Source: Department of Industry, Science, Energy and Resources.

Every tonne of unprocessed ore exported from Australia creates revenue, but it also comes with an opportunity cost – a job in metal manufacturing that wasn’t created, a downstream supply opportunity not provided, an energy sector not expanded, and an innovation ecosystem not supported.

Luckily, this story is far from over.

The rapidly growing markets for critical minerals are an opportunity for Australia to set things right. To create

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THE AWU’S VISION FOR THE NATIONAL CRITICAL MINERALS STRATEGY

new jobs in both the mining and processing of our mineral wealth into metals, alloys and manufactured goods.

3 The international state of play
The critical minerals rush has started. Both governments and the private sector are now acting urgently to secure
their supplies of the minerals needed in their manufacturing industries.

Each country has its own different definition and considers different minerals to be critical based on the needs
of its manufacturing industry, the availability of its own domestic sources and national security concerns with
supply chains dominated by countries that pose geo-strategic challenges.

For some countries though, the definition has broadened to include a mineral that it produces and which delivers
significant economic benefit. A full list of the scope of critical minerals in different countries is provided in
Appendix 1.

Table 1. Examples of the various definitions of critical minerals among countries.
Country Description
United States A non-fuel mineral or mineral material essential to the economic or national security of the U.S. and
which has a supply chain vulnerable to disruption. Critical minerals are also characterized as serving
an essential function in the manufacturing of a product, the absence of which would have significant
consequences for the economy or national security.13
United Kingdom The United Kingdom, in its first critical minerals strategy in 2022, defined critical minerals as ‘minerals
with high economic vulnerability and high global supply risk.’ It added a further 5 minerals to its
‘watchlist’ with potentially increasing criticality due to rapidly growing demand or emerging global
supply risks.
India Strategic minerals are those for which India is extensively reliant on imports. Both economic
importance in relation to impact on manufacturing and supply risk are considered.14
EU The European Commission carries out a criticality assessment at EU level on a wide range of non-
energy and nonagricultural raw materials. The main parameters used to determine the criticality of a
material for the EU are economic importance and supply risk.15
Canada Minerals considered critical for the sustainable economic success of Canada and its allies and to
position Canada as the leading mining nation.16
Australia Australia’s critical minerals list highlights priority critical minerals. The list is based on global
technology needs, particularly around electrification, advanced manufacturing and defence.17

The first notable aspect of critical minerals policies is that most countries do not consider iron, aluminium, copper

13
United States Geological Survey
14
Department of Science and Technology India, Government of India
15
European Commission
16
Natural Resources Canada
17
Department of Industry, Science, Energy and Resources, 2022 Critical Minerals Strategy.

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THE AUSTRALIAN WORKERS’ UNION and zinc to be critical minerals even though these are the most consumed metals in the world with the highest value markets.

They are the metals essential to creating the buildings we live in, the infrastructure our economies need and the machines that power modern economies.

They are markets that offer substantial jobs and economic benefits, but governments’ critical minerals policies are instead focused on commodities with smaller, less transparent commodity markets that present risks of supply chain disruption.

Most OECD countries are focused on securing their supplies of the critical minerals to minimise potential disruption to their manufacturing base. Not just the manufacturing of metal, but the next stages in the value chain – the batteries and electric vehicles, the microprocessors in computers and especially the components in military equipment.

Australia would benefit from incorporating an explicit reference to national security issues in its definition of critical minerals. This would align it with the definitions of key allies such as the United States, while reflecting the reality critical mineral supply chains are central to national security considerations.

3.1 The United States’ Inflation Reduction Act has changed the game
On August 16, 2022, US President Joe Biden signed into law the Inflation Reduction Act (IRA), a comprehensive piece of legislation aimed at not just reducing inflation, but ensuring energy security and affordability alongside the country’s Paris Agreement commitments. Among the measures applying to critical minerals are:

• A production credit equal to 10 per cent of production costs for critical minerals on the list

• Observing the coming global surge in electric vehicles (box 1 above), tax credits of $7500 for vehicles
assembled in the country, where 40 per cent of the critical minerals in the EV’s battery are sourced
either from the United States or one of the country’s free-trade partners.

Australia has been reluctant to provide tax credits to domestic heavy industry, frequently citing global trade regulations against preferencing local industry. Indeed, some European countries have already objected to the
IRA on these grounds.18 However, many US trade partners are viewing the IRA’s new approach as an opportunity to make the most of “friendshoring”. And early signs are that the US will negotiate with their trade partners to permit the use of similar approaches in their own countries. For example, the European Union has negotiated that vehicles manufactured in its country will be permitted to access the tax credits without supply chain changes,19 and subsequently announced its intention to establish its own production incentives similar to those

18
https://www.csis.org/analysis/electric-debate-local-content-requirements-and-trade-considerations
19
https://ec.europa.eu/commission/presscorner/detail/en/IP_22_7869
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in the IRA.20

For Australia, these early signs indicate that we can – and should – pursue the support of our own domestic
industry in pursuit of maximising our country’s opportunity in the critical minerals sector.

4 Goals for Australia’s National Critical Mineral Strategy
4.1 Critical minerals should include all strategic resources
Australia currently considers 26 minerals and elements to be critical. This list has taken a focus on resources
that are facing, or will face, dramatic increases in demand for use in technology, and where a supply chain
disruption is assessed as possible.

But Australia already has a comparative advantage in production of other resources, in some cases going back
many years, that are equally important and must be secured for strategic reasons.

• Copper, in particular, is likely to be in short supply in the future. Recent analysis by S&P Global showed
world copper demand would nearly double by 2050 as countries progress towards net-zero energy
systems; yet world-wide copper supply would struggle to meet this demand growth.

Furthermore the report noted:

In the 21st century, copper scarcity may emerge as a key destabilizing threat to international
security. Projected annual shortfalls will place unprecedented strain on supply chains. The
challenges this poses are reminiscent of the 20th-century scramble for oil but may be
accentuated by an even higher geographic concentration for copper resources and the
downstream industry to refine it into products.21

In this scenario Australia could benefit considerably from international agreements to boost its copper
industry and create even more jobs from mining, smelting and refining that previously forecast.

• Aluminium, and the minerals used to produce it (alumina and bauxite) are also not presently
recognised as critical minerals, despite being one of the world’s most consumed metals, having a high-
value market, and Australia being a net-exporter of both the raw resource and the manufactured
product. The US, Canada and Europe all recognise bauxite and aluminium as critical, as does the CSIRO’s
Critical Minerals Roadmap. The Prime Minister, Anthony Albanese, also spoke of aluminium as a critical

20
https://www.cnbc.com/2023/01/17/davos-2023-eu-announces-new-green-proposals-to-rival-bidens-ira.html
21
S&P Global, The Future of Copper: Will the looming supply gap short-circuit the energy transition?, July 2022, p. 9

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THE AUSTRALIAN WORKERS’ UNION

resource in 2022.22 Indeed, Australia’s successful aluminium industry owes part of its success to an
industry policy and government intervention considering national security implications (Box 2).

• Zinc also warrants inclusion as a critical mineral: Australia today has 20% of the known zinc-lead
resources, and is the largest producer and exporter of refined zinc products to the world. Zinc is
particularly critical for the production of galvanized steel, but also other alloys, chemicals, and batteries
among other industrial products. It is also used in the production of coinage, brass, and zinc oxide.
Maintaining a strong domestic zinc industry is crucial for Australia's sovereign capability, as it helps
ensure the availability of this critical mineral for domestic manufacturing and defense-related
applications.

Finding 1: The Australian Government’s current list of critical minerals excludes key strategic resources,
particularly those where Australia already has a comparative advantage in exporting refined and processed
products.

Recommendation 1: The National Critical Minerals Strategy should expand the definition of ‘critical minerals’
to include copper, aluminium/alumina/bauxite and zinc.

4.2 Keeping up with our trade partners, economically and strategically
Most advanced nations are not only aware of the importance of critical minerals but acting urgently to either secure their future supply chains or attract investment into their mining industries. National security interests are paramount, with the need to access the processed metals, alloys and manufactured goods derived from critical minerals. The various definitions of critical minerals of various countries outlined above are closely linked to their national security objectives.

A key driver of this has been the growing concern of the degree to which critical mineral production is concentrated in just a few countries. Rising geo-political tension has created a growing risk to critical mineral supplies and emerging strategic partnerships.

Underpinning this a recognition that global supplies of critical minerals tend to be dominated by a small number of countries.

Figure 7 below highlights the extent to which global minerals production is concentrated with nearly all major

22
Prime Minister Anthony Albanese, Speech at the Sydney Energy Forum, 12 July 2022.

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THE AWU’S VISION FOR THE NATIONAL CRITICAL MINERALS STRATEGY

commodities having just five countries account for large shares of global supply. And this is not just in the critical
minerals space – even bauxite used to make aluminium (the world’s second most consumed metal) is
concentrated with the top five countries accounting for 86% of world supply.

Figure 7. In most commodity markets a few countries dominate supply
Share of mine supply

Lithium

REE

Bauxite

Cobalt

Iron ore

Nickel

Zinc

Copper

0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100%

Country 1 Country 2 Country 3 Country 4 Country 5

Australia is the world’s largest producer of lithium, bauxite and iron ore, the third largest of cobalt, fourth largest
for rare earth elements and fifth largest for nickel. Recognising that these minerals will be critical to a carbon-
neutral future, we have the opportunity to make a strategic play at maximising our role in the sector. Australia
has a proud history of defending its strategic resource assets – as demonstrated by the approach taken to
aluminium towards the end of World War 2 (Box 2).

Box 2 – the national security origins of Australia’s aluminium industry
Towards the end of World War 2 aluminium was identified as a critical material – essential to produce aircraft,
and with a supply disruption risk that had national security implications.

Then, like now the Australian government acted to secure its supply chains.

Through the Australian Aluminium Act of 1944 the Australian Aluminium Planning Commission was formed.
Although the war ended soon after, the commission noted in its first annual report to parliament:

Nevertheless the Commission has, since its inception, kept firmly in mind the desirability of
establishing an industry able to fulfil its primary function of providing for war-time needs, but capable
also of economic operation under peace conditions, supplying the Australian consumer with ingot at

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THE AUSTRALIAN WORKERS’ UNION

competitive prices after providing for amortization of capital investments and returning to the
subscribing Governments interest on funds contributed. Throughout its planning the Commission
has proceeded with this aim in view, and by carefully testing each step in a large and technically
complex project involving expenditure of large sums, is endeavouring to safeguard national funds in
the same manner as would a commercial company protecting its shareholders’ investments.23

This led to the establishment of the Bell Bay alumina refinery and aluminium smelter in Tasmania in 1955.
Ironically, it was initially supplied with bauxite from Malaysia.

Soon after, Australia began exploring extensively for bauxite. A bauxite mine in Weipa began supplying the
Bell Bay operations in 1961 and soon after major bauxite and alumina operations began south of Perth with
the formation of Alcoa of Australia.

Government policy and plans worked to establish Australia as a world leader in mining bauxite, refining
alumina and smelting aluminium. Today, this industry employs over 15,000 Australians – with considerable
scope to create more jobs via investment in downstream processing. Less than 10% of the bauxite mined in
Australia is manufactured into aluminium. The majority is exported as either raw mineral or alumina.

With more focused strategic concerns that have been amplified by Russia’s invasion of Ukraine, Australia has an opportunity to work with strategic allies in developing a critical minerals industry to ensure the reliable supplies of critical minerals.

This is seen in the Minerals Security Partnership, that includes Canada, Finland, France, Germany, Japan, the
Republic of Korea, Sweden, the United Kingdom, the US and the European Commission. Australia joined on 12
July 2022.24

While these OECD countries indicate a preference for domestic supplies of minerals, they have hedged their bets with a series of MOUs with potential supply partners to lock away the raw minerals they require.

The US, for example, has repeatedly stated a policy target of boosting its domestic mine production of rare earth elements. Yet its restrictive regulatory environment makes it difficult to start new mines in the timeframes to match its climate ambitions. Instead, it provides government funding to establish downstream processing facilities that will source minerals from Australia, such as seen with the US Department of Defence’s US$120 million contract with Lynas Rare Earths.25 The Inflation Reduction Act (considered in 3.1 above) only expands this investment in downstream processing.

23
Australian Aluminium Production Commission, First Annual Report for period 1st May 1945, to 30th June, 146. Released 9 September 1946. Page 6.
24
Minister for Trade and Tourism & Minister for Resources Joint Media Release – Australia joins global minerals security partnership, 12 July 2022
25
Lynas Rare Earths, Lynas Awarded Us$120m Contract To Build Commercial HRE Facility, ASX release, 14 June 2022.
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THE AWU’S VISION FOR THE NATIONAL CRITICAL MINERALS STRATEGY

In contrast countries aiming to attract investment in critical minerals mining, like Canada and Australia, have
policies focused around promoting their geological potential and stable investment environment. However, there
remains a risk merely attracting investment will not guarantee Australia’s sovereignty over its own minerals.
China’s aggressive approach to controlling the critical mineral supply chain means that it now controls 35 per
cent of global upstream resources, and (as illustrated in Figure 7 above) dominates lithium and other critical
minerals. Some Australian mines – many with Chinese investment – have signed deals to export the bulk of their
output to other Chinese state-owned enterprises. One analyst described China’s approach as trying to make itself
the only global buyer of critical minerals.26 The Foreign Investment Review Board (FIRB) rejected an application
by a Chinese state-owned entity to invest in Australia’s largest rare earths miner – the largest non-Chinese miner
globally – and Treasurer Jim Chalmers has flagged that the FIRB may apply stronger scrutiny to critical minerals
projects going forward.27

To seize such opportunities Australia must act now. The experience of the last 20 years has clearly shown – it is
easier to plan, approve and build manufacturing capacity than it is to build mines. In many cases, it takes over
10 years to progress a mine from first ore body discovery to production.

On the other hand, governments with a focus on securing imports of critical minerals to support their
manufacturing industries also need to act to manage their potential supply chain risks. Slower progress in mine
development may result in material shortages in the future, thereby resulting in higher costs for raw materials
and a less competitive manufacturing industry.

Finding 2: Australia is already falling behind other developed countries in prioritising the processing and
refining of critical minerals, creating considerable strategic risks.

Australia has the resources to be a key part of the supply response, but more than minerals in the ground is
needed to maximise investment and job creation.

A strong policy agenda is critical to ensuring Australia not only develops its mineral wealth but fosters a critical
materials industry. If done right, the same policy agenda can also correct the policy mistakes of the mining boom.

Creating a new industrial boom will create thousands of highly paid jobs for Australians in all parts of the country.

The AWU proposes two complementary measures to achieve this:

• Apply a $1 per tonne levy on unprocessed ore exports (particularly iron ore and bauxite), and a

26
https://www.aspistrategist.org.au/breaking-chinas-near-monopoly-on-rare-earths-will-be-easier-said-than-done/
27
https://www.afr.com/politics/federal/rivals-back-limits-on-chinese-investment-in-critical-minerals-20221130-p5c2j0

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$10/tonne levy on exported concentrates (which only undergo milling rather than high-value-add
refining). On recent export volumes, these measures would raise a combined $1.1 billion in tax revenue.
• With this revenue, develop a scheme of production tax credits for processed critical mineral projects,
with reference to the US Inflation Reduction Act and proposed measures in Europe and other
jurisdictions.
The AWU believes that the proposed levy amounts are sufficiently modest to allow Australia to retain its comparative advantage in the unprocessed ore sector. Used correctly, these levies could facilitate the necessary investment for Australia to compete with a world where government intervention for processing, refining and manufacturing of critical mineral products is becoming more and more common.

Expanding both our mining and processing capacities simultaneously could have a massive pay-off. Modelling based on the forecast consumption growth rates from the International Energy Agency and Australia maintaining its current market share in key critical minerals markets, shows direct jobs in the critical minerals sector would rise from around 18,800 in 2021 to 48,000 in 2030 and over 90,000 by 2040. This is based on 50% of the mined ore being processed in Australia. 28

If this was increased to 100%, as a number of other countries are seeking to do, then direct employment could be more than 50,000 in 2030, and over 100,000 by 2040.

This increase in jobs reflect the increase in mining activity and mineral processing, and the application of a productivity dividend found in larger scale projects.

In comparison, in 2021 the coal sector directly supported around 45,000 jobs and the iron ore sector around
80,000.

The minerals industry also has extensive local supply chains and creates job opportunities through these.

Research from the Reserve Bank of Australia has estimated this to be as high as two supply chain jobs created for every direct job in mining. Based on these estimates, an expansion of the critical minerals industry in Australia would result in 180,00 to 200,000 additional jobs in the construction, energy, chemical supply and transportation industries.

Recommendation 2: The Australian Government should consider a tax-and-subsidy scheme to invest in
domestic critical minerals processing and keep pace with our strategic partners, by:

28
Based on the forecast consumption growth rates from the International Energy Agency; Australia maintaining its current market share in key critical minerals markets; and state proportions of lithium, rare earth elements and nickel processed in Australia.

24
THE AWU’S VISION FOR THE NATIONAL CRITICAL MINERALS STRATEGY

• Applying a $1 per tonne levy on unprocessed ore exports (particularly iron ore and bauxite), and a
$10/tonne levy on exported concentrates (which only undergo milling rather than high-value-add
refining).

• Developing a scheme of production tax credits for processed critical mineral projects, with reference
to the US Inflation Reduction Act and proposed measures in Europe and other jurisdictions.

• Applying a more rigorous assessment of foreign investment in critical minerals, through a lens of
sovereign capability and national security.

4.3 Improving regulation of critical minerals sites
When making decisions to proceed with the projects needed to meet the coming minerals boom, investors need
to be satisfied the businesses will make a profit.

While Australia’s regulatory and approvals regime provides clear guidance to companies and ensures world-
class standards, they are, in some cases, cumbersome. Australia’s regulatory approval processes mean it is
easier to invest in countries that have significantly lower standards.

It currently takes around ten years to develop a mine, with approval processes taking up to three years.29
Downstream processing projects are subjected to similar approval processes which must be simplified and
shortened.

The Samuels Review of the Environment Protection and Biodiversity Conservation Act highlighted the length of
time it took for complex resource projects to be assessed and approved – almost three years on average.30 Even
when legislation requires a decision is made in 20 business days, decisions have taken as long as 7 months. The
Review made a series of recommendations that would improve environmental outcomes while also expediting
approval times.

The AWU recommends that critical minerals, given their strategic importance, be given a streamlined pathway
through Federal and State approval processes, with shorter statutory timeframes and priority in assessments.

There is no need to diminish regulatory standards. Australia should maintain the highest levels of environmental
management as we expand our critical minerals mining and processing industries. With rising international
demand for sustainably sourced materials, such standards will in fact remain essential to enhancing our

29
PwC, Mine 2022: A Critical Transition, p.10.
30
Professor Graeme Samuel AC, Independent Review of the EPBC Act – Final Report, October 2020, p. 9.

25
THE AUSTRALIAN WORKERS’ UNION reputation.

But business needs a clear and rapid pathway to decide whether to develop a project.

A faster decision-making process for project approvals in Australia can be a source of competitive advantage.
Around the world regulatory processes are becoming increasingly complex and businesses find themselves engaged in unnecessarily long government approval processes – often with high-risks of legal action or change in government leading to the cancellation of a project approval.

Australia can position itself as a better place to invest by not repeating these mistakes.

Australia can implement approvals processes that do not diminish standards. But doing so requires the cooperation of Federal and State governments.

Improving Australia’s regulatory framework will require improving the public service’s capacity to analyse projects and implement the rules. This requires new investment by the government in personnel and skill development.

Finding 3: Australia’s mining regulation is recognised as world-class, but uncertainty at the beginning of a
project about if and when approvals can be given are limiting the growth of critical minerals projects.

Recommendation 3: In their ongoing implementation of the Graeme Samuels review of the Environment
Protection and Biodiversity Conservation (EPBC Act) Review, Federal and State governments should create a
separate streamlined class for critical projects, with shorter statutory timeframes, prioritised assessment, and
specialised training for approval officers.

4.4 Need for reliable low-cost energy
Minerals processing and metal manufacturing are energy-intensive activities. For example, to produce a tonne of aluminium, requires about 17 MWh of electricity and a tonne of refined copper up to 3 MWh.

Critical minerals such as lithium, rare earth elements and battery grade nickel are less energy-intensive than smelted metals as they are processed using a series of heating and chemical reactions to create compounds rather than pyro-metallurgical methods that produce pure metals.

Nevertheless, energy still represents a significant portion of operating costs for these downstream chemicals.

Over the past 20 years Australia’s low-cost energy advantage has disappeared. The recent upheavals in
Australian energy markets reflect a range of issues that have emerged. These include:
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THE AWU’S VISION FOR THE NATIONAL CRITICAL MINERALS STRATEGY

• Older baseload plant closing without replacement capacity.

• Unwillingness to invest in new baseload power generation and transmission for a reimagined
electricity grid for the past 15 years.

• Aside from Queensland, the privatisation of power generators by State governments which has meant
governments have no real ability to ensure adequate supplies of on-demand power.

• Allowing LNG exporters to take precedence over Australian gas users.

• Focusing on intermittent power sources, like wind and solar, that are incapable of providing low-cost
reliable power required for 24/7 mineral processing and manufacturing operations.
The consequence is Australia now has uncompetitive electricity and gas costs, along with an increasingly
unreliable supply that is incapable of meeting the needs of Australian manufacturing businesses.

Worse still, Australian families are having to make the hard choice of whether to put food on the table or heat
their homes.

Australia faces a stark choice – either it continues down the current path where State governments (with the
notable exception of Queensland) remain oblivious to the energy emergency confronting the country, or it starts
to invest again in new baseload capacity. The AWU is technology-neutral, and if renewable electricity can provide
the massive amounts of power for mines and processing sites, it should be supported. But many industrial uses
require high heat that can only be obtained through coal and gas. These industries will require longer-term
technology solutions to their energy needs – but they should not face a death sentence prematurely when they
can make a significant contribution in the medium-to-long term to the decarbonisation of Australia and the world.

The finger pointing between regulators, government and businesses is not solving the crisis. Nor are wishful
engineering documents like the Australian Energy Market Operator’s Integrated System Plan.

What is needed is for all energy options to be considered, irrespective of technologies. This is what is now
occurring in Europe and North America, along with India, China and most other parts of the world.

It is not good enough to say these are too hard. Australia has no choice. Failure to deliver reliable and affordable
energy supplies will not just short-change Australian workers but set Australia on the path to economic
irrelevancy.

Finding 4: Australia’s energy supplies have historically been a key competitive advantage, but these are at
risk due to rapid changes in the energy supply chain underway over the last decade and in the next decade.

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THE AUSTRALIAN WORKERS’ UNION

Recommendation 4: The Government should commit in its Strategy to supporting energy access for critical
minerals processing projects as a priority under the National Reconstruction Fund, Powering the Regions
Fund and its initiatives on access to energy sources, including renewable energy, hydrogen, coal and gas.

4.5 Developing Australia’s workforce
The closure and decline of Australia’s metals processing industries has led to the loss of capability within our workforce. Increasing and re-skilling a workforce able to meet the demands of an expanded Australian minerals processing and manufacturing industry will be critical.

Training should focus on meeting skill demands for workforces at new and existing facilities, capable of operating a range of critical functions at sites. The Federal government should:

• Build on the existing TAFE structures and company-provided training to develop national skills
standards applicable across a broad range of employment categories that will be required.

• Introduce paid accelerated Certificate IV courses to be completed in 12 months or less.

• Increase focus on tertiary courses such as mine engineering, metallurgy, geoscience and advanced
manufacturing. As Australia increases its mining presence and downstream processing, there will be
greater demand for appropriately trained personnel.
This will not be small undertaking. Ongoing funding of up to $1 billion per year will be required to ensure skills development and training is provided to the required standard while meeting the needs to an expanding industry.

Finding 5: Australia’s mining workforce has the capacity to support us taking a global leadership position on
critical minerals.

Recommendation 5: The Australian Government should commit to a workforce development strategy,
including training and measures to support displaced workers in the mining sector enter the critical minerals
industry.

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THE AWU’S VISION FOR THE NATIONAL CRITICAL MINERALS STRATEGY

Appendix 1 – critical minerals lists

US EU Japan India Canada Australia
Aluminium/Bauxite P P O O P O
Antimony P P P O P P
Beryllium P P P P O P
Cerium P O O O O O
Cesium P O P O P O
Chromium P O P P P P
Cobalt P P P O P P
Coal O P P O O O
Copper O O O O P O
Graphite P O O P P P
Hafnium P P P O O P
Limestone O O O P O O
Lithium P P P O P P
Magnesium P P P O P P
Manganese P O P O P P
Molybdenum O O P O P O
Nickel P O P O P O
Niobium P P P P P P
Phosphate O P O O O O
Platinum Group P P P O P P
Potassium O O O O P O
Rare Earth Elements P P P P P P
Rhenium O O P P O P
Scandium P P O O P P
Silicon O P P P O P
Strontium O O P P O O
Tantalum P P P P P P
Tin P O O O P O
Titanium O P P O P P
Tungsten P P P O P P
Uranium O O ? O P O
Vanadium P P P O P P
Zirconium P O P P O P
Zinc P O O O P O

P– indicates a mineral is on the country’s national critical minerals list.
O – indicates a mineral is not on the country’s national critical minerals list.
? – indicates it is unclear whether a country considers a mineral a critical resource.

29