VALUE-ADDED MINERALS BOOM OURS FOR TAKING | plus Safeguard Mechanism & Adani updates

3 March 2023

AUSTRALIA 2.0: A CRITICAL MINERALS VALUE-ADDING SUPERPOWER |

This week, we launched CEF's major new report on Australia's once-in-a-century critical minerals opportunity – “A Critical Minerals Value-Adding Superpower" – with a foreword and AFR op ed by former chief scientist Dr Alan Finkel, who reflects on our opportunity to transform from a petrostate to a leading global electrostate.

CEF director Tim Buckley and analyst Matthew Pollard present a detailed 120-page analysis of how Australia can leverage its world-leading geostrategic critical minerals reserves and renewables to process, manufacture and capture value onshore pre-export using our low-cost zero-emissions energy, diversifying away from our dependence on fossil fuel exports and reaping unprecedented economic and energy security benefits as the world decarbonises.

The global race is well underway, and we need to act fast and strategically, with increased policy and investment ambition. The report:

*catalogues a >$10bn pipeline of current investment proposals in resource value-adding including in lithium, nickel, cobalt, copper, vanadium, rare earths, green hydrogen, electrolysers, green ammonia and batteries  – with special focus on those powered by renewables.

* consolidates research identifying employment opportunities – of the order of ~35,000 jobs by 2030 – in energy transition materials processing and manufacturing

* examines the global energy policy and transition investment landscape – including China's current global dominance across all areas of decarbonisation, and the implications for Australia, including de-risking opportunities, such as providing global supply chain diversification for our key trade partners.

* reviews how the game-changing ~$400-800bn US Inflation Reduction Act and DoE Loan Program is turbocharging clean energy investment and energy transition in that country, and requires a major policy response from Australia given this is a global investment race

* presents a detailed overview of the domestic policy, regulatory and investment context, including Australian governments’ key energy transition funding agencies, programs and strategies

* reviews the potential for trade partnerships on energy transition supply chain with key partners including US, Japan, South Korea, India, Singapore and the EU, as well as China

* tracks investment flows into the sector and how public capital investment by governments is key to “crowding-in” private capital.

>>Read the full report (or 5 minute summary in the Key Findings) here. 

>>Tim Buckley was active in the media on the report – see his explainers on ABC TV's The Business, Radio National Drive, SkyTV and elsewhere. 

Update – On foreign investment into Australian critical minerals mining and refining, we note that this week Treasurer Jim Chalmers accepted FIRB's recommendation to reject Chinese-linked investment fund Yuxiao Fund’s bid to increase its stake in Northern Minerals Limited from just under 10% to 19.9%. The company aims to become the first substantial producer outside China of the rare earth dysprosium, used as an additive in neodymium magnets for electric vehicle motors. Read our analysis here: Finding Australia’s place in the geopolitical contest around energy and supply chain security 

ADANI UPDATE – EXISTENTIAL THREAT RAMPS UP WITH SEBI PROBE |

On 24 January, US based research firm and short seller Hindenburg dropped a bombshell on the Adani Group – a 100 page report alleging "the largest con in corporate history", longstanding “brazen accounting fraud, stock manipulation and money laundering,” and a substantial burden of debt and network of hundreds of tax haven and private family entities. Adani’s 400 page refutation called Hindenburg’s intervention baseless, and a “calculated securities fraud under applicable law”, with the Adani family claiming this is "an attack on India, its growth story and ambition” and threatening legal action. 

Since the accusations, Adani has suffered a major share price rout of over $130bn, with speculation swirling on its future. 

Overnight, the existential threat to the Adani conglomerate ramped up as India's Supreme Court ordered regulator the Security and Exchange Board of India (SEBI) to investigate whether Adani has "failed to disclose transactions with related parties” and if there has been "any manipulation of stock prices in contravention of existing laws”.

If the alleged wrongdoing is found this will have wide ramifications. Adani Group has close ties to the Indian government, exercises dominance over many sectors of the Indian economy and holds major assets of national strategic and security significance.

Since our last newsletter, we have been active in the media on the Adani story, including on the outrageous deal, facilitated by the Modi government, to supply Bangladesh with coal power from Adani's Godda plant  – an expensive, lopsided contract to replenish the pockets of the ex-richest man in Asia at the expense of Bangladeshis.

 >> Read our series of six Adani analyses. See all our media commentary, including in New York Times, Forbes, Economic Times, Washington Post, BBC, Bloomberg, ABC TV's The Business, News Breakfast, RN Drive, Renew Economy and more.

SAFEGUARD MECHANISM UPDATE |

The federal government's plan to pass its proposed Safeguard Mechanism reforms are in focus again as parliament resumes next week – with the pressure on to secure support before parliament rises at the end of March ahead of the pre-budget break. The SGM is a key policy centrepiece of scope 1 decarbonisation, designed to drive down emissions from Australia's 215 biggest emitting companies – and, just as importantly, put a rising, firm price on carbon emissions, which will massively mobile capital and incentivise investment in clean tech. 

Since our last update the Greens continue to hold out for a ban on new coal and gas, which energy minister Chris Bowen has ruled out. As for the Coalition, it has dealt itself out of relevance, again, by opposing the reforms.

CEF shares the widely-held view that the use of offsets in the mechanism should be strictly limited and their credibility re-established, and we urge the government to set a clear timeline for the phase out of coal and gas. This is a key call to action in the Climate Capital Forum’s decarbonisation roadmap to which CEF is signatory. 

However, the foundational premise of CEF is that financial markets are phenomenally powerful, but they need an explicit, high, permanent price on carbon to drive rapid decarbonisation and ensure alignment with 1.5°C. 

As we have previously written, CEF believes that the SGM reforms create a credible framework to re-establish a price on carbon emissions in Australia. They should be considered in the context of the suite of policy reforms that make up the supporting ecosystem for the SGM, e.g., the Climate Act, 82% RE by 2030, the $15bn Reindustrialising Australia Fund, the $20bn Rewiring the Nation program, progress on critical minerals, the global methane pledge and so on.

After nearly 10 years of going backwards under the ineptitude of the previous government, the SGM is massive win and the opportunities too huge to squander. 

>> Read our latest SGM op ed in The Canberra Times.

MEDIA |

CEF director Tim Buckley has been active in the media on a range of topics. See all our media here.

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Our previous newsletters covering major energy news can be accessed here. Our highlights tracking progress in 2022 and 2023 wishlist are here.

Feel free to get in touch anytime at the email below, and enjoy your weekend! 

Tim, Annemarie, Nishtha, Matt, Xuyang (see more on our team here).

This newsletter is not intended to provide, and should not be relied on for, tax, legal, investment or accounting advice, nor is it an offer or solicitation of an offer to buy or sell, a recommendation, endorsement, or sponsorship of any security, company, or fund. CEF is not responsible for any investment decision made by you. Unless attributed to others, any opinions expressed are our current opinions only. Certain information presented may have been provided by third parties. CEF believes that such third- party information is reliable, and has checked public records to verify it wherever possible, but does not guarantee its accuracy, timeliness or completeness; and it is subject to change without notice.