Is Australia letting its critical minerals opportunity slip?

Australia has the natural endowment to support global critical minerals supply chains, but how does it stack up against its competitors from an investment perspective?

The likes of Argentina, Brazil, Peru and Chile are quickly positioning themselves as likely critical mineral suitors, while many African nations are also flaunting their rich natural resources.

Renewable energy manufacturers, whether it be in China, the US or the European Union, are spoilt for choice when it comes to upstream supply.

But who do you choose?

South American countries have been beset with regulatory instability in recent years, with governments making decisions on a whim that affect operations.

This includes the Panamanian Government and its closure of the globally significant Cobre Panama copper mine.

First Quantum Minerals was forced to shut Cobre Panama in December following a Supreme Court ruling that rendered the mine’s contract unconstitutional. The mine had faced backlash from environmentalists, who believed it threatened water supplies and impacted coastal areas in Panama.

Peru, the world’s second largest copper-producing nation, has faced road blockades and protests demanding the resignation of President Dina Boluarte following former President Pedro Castillo’s ousting.

MMG was forced to halt its Las Bambas copper mine amidst the government turmoil and concerns over the mine’s impact on local communities.

The Economist Intelligence Unit (EIU) said South America has historically struggled to fully maximise its natural endowment.

“The (Latin America) region is home to more than half of the world’s reserves of lithium, more than a third of its copper and nearly one-fifth of nickel and rare-earth metals, but its share of global production has been diminishing in recent years amid lacklustre investment in mining projects compared with some other regions,” EIU said.

“The disparity between these bountiful reserves and low levels of investment can be traced back to an unstable regulatory environment in many countries in the region, as well as episodes of labour and social unrest and prevalent corruption.”

EIU believes South America’s economic reserves should trump its regulatory instability.

“Our comprehensive assessment of the business environment for critical minerals shows that the (Latin America) region’s huge, unexplored reserves largely compensate for these shortcomings, making many Latin American countries more opportune choices for investors than other major producer nations elsewhere in the world,” EIU said.

Australia has what South America doesn’t have: jurisdictional stability. But while Australia is a lithium powerhouse, it is closely followed by Chile in this regard, and Chile well and truly has Australia’s measure when it comes to copper production and reserves.

Then there are Chile’s neighbours, Argentina, Brazil and Peru, that Australia must be mindful of.

Never has the Australian Government played a more important role.

While accelerated permitting timelines can enable Australia to fast-track critical minerals development, government support is critical to local mining companies gaining international investment: the key to solidifying Australia as a global player in the critical minerals supply chain.

“Government support can validate and de-risk projects in the eyes of potential investors (especially inbound investors in our experience) – an important step in attracting new pools of capital,” PwC said.

“This support can be financial, but could also come in the form of accelerating land access, planning approvals and permitting processes, aggregating demand and creating market access by linking Australian critical minerals producers to global supply chains.”

Australia has established strong foundations for local investment through funding bodies such as Export Finance Australia and the Northern Australia Infrastructure Facility, but to catch the eyes of more international investors, governments must create an amenable regulatory environment to further encourage international players.

If Australia doesn’t prioritise this, the country could lose its critical minerals opportunity.