The state government will investigate reforming royalty payments to shepherd WA’s ailing nickel industry through a collapsing market spurred by a glut of cheap foreign supply.
The state government will investigate reforming royalty payments to shepherd Western Australia’s ailing nickel industry through a collapsing market spurred by a glut of cheap foreign supply.
Speaking after a crisis meeting with the state’s nickel bosses and industry stakeholders in Perth on Thursday, Mines and Petroleum Minister David Michael said royalty reform and short term deferrals were among the key issues raised by those around the table.
Mr Michael said he had committed to working with the Chamber of Minerals and Energy WA and Association of Mining and Exploration Companies to investigate the potential for such a move.
“One of the proposals put up today in terms of a royalty scheme based on price, I'd have to look at the implications and analyze that with the Department (of Mines and Petroleum),” he said.
“In terms of royalty relief, I'm hoping to get some options at least for government to look at what impact they would make on some of those mining operations that currently are teetering on the price point.
“What came up around the table was the opportunity for royalty reform. And these are things that I need to further understand with the industry of what that might look like, and how it might be applied into the future
“I understand the nickel industry are looking for some certainty in terms of these things, so I am hoping wouldn't take too long.”
Mr Michael said the state would also canvass ways to encourage new nickel exploration and common-user facilities.
AMEC acting chief executive Neil van Drunen said production tax credits – which would provide a 10 per cent credit for downstream producers – must also be considered.
“A PTC could be in place for the next federal budget,” he said.
“The PTC has strong support from lithium, nickel, rare earths and vanadium developers and producers, along with the broader industry and international electric vehicle maker Tesla.
“We believe in production tax credit would help secure Australian nickel and other commodities further down the value chain, and the further we can get down the value chain, the more stable it will be in the long term.”
Battery mineral woes
- Dec 13: IGO foreshadows major writedown of Cosmos nickel project, halts construction.
- Jan 5: Core Lithium suspends operations at Grants mine in the Northern Territory
- Jan 8: Administrators announce closure of Panaromic Resources’ Savannah nickel mine in Halls Creek
- Jan 15: First Quantum Minerals flags suspension of Ravensthorpe Nickel Operations
- Jan 17: Albemarle scales back Kemerton lithium refinery expansion
- Jan 21: South32 announces review of Colombian nickel operation.
- Jan 22: Andrew Forrest’s Wyloo Metals to mothball Kambalda nickel mines
- Jan 22: Liontown Resources reveals $760m debt funding deal for Kathleen Valley would be scaled back.
- Jan 23: Chalice Mining announces 40 per cent spending reduction
- Jan 23: BHP Nickel West to put Kambalda concentrator into care and maintenance
- Jan 24: Pilbara Minerals quarterly revenue slides 46 per cent on weak lithium price
- Jan 25: MinRes bullish despite lithium price collapse
Mr van Drunen said he felt the roundtable had proven a productive forum for nickel and lithium miners.
First Quantum Minerals, which recently announced its Ravensthorpe nickel operation would be put on care and maintenance, issued a statement this afternoon in which it confirmed it approached the state government at the end of last year to seek royalty and other relief.
"The company welcomes the WA Government’s active consideration of our request and we stressed the significance of this measure again at the meeting with State and Federal resource ministers today," the statement said.
"Companies in the nickel sector like First Quantum pay a number of substantial fees and charges to all levels of Governments, ranging from royalties to port user charges and collectively they represent a considerable cost of doing business in Western Australia. We believe that ensuring the local nickel sector remains globally competitive is essential for reasons that include supporting local employment through to the strategic importance of the battery minerals industry."
The price of nickel on the London Metals Exchange has collapsed in the past year from above $US30,000 a tonne in February 2023 to about $US16,400 today as Chinese investors fuel Indonesia’s giant nickel industry.
Lithium spodumene prices have suffered even greater falls from about $US7,500 in January 2023 to between $US800 and $US1,000 this month.
That pressure has led to major concern among WA’s battery metal players, which until recently were reveling amid a flurry of merger and acquisition activity while prices and forecasts were favourable.
Resources Minister Madeleine King said discussions around common-user infrastructure, portfolio engagement, approvals processes and advocacy for the application of ESG standards would be undertaken.
“I have committed to accelerate talks with treasury over production tax credits, and how they might be applied into the nickel industry and more widely into the critical mineral sector,” she said.
“I certainly can't make any commitments on the level of that tax credit or even indeed if we do it, but what I do want to assure those producers and anyone that's interested in this topic is that we are pursuing this.
“The thing I want to concentrate on in international fora is how we can have our standards of ESG that most consuming countries in the world agree to apply, that is a big project.”
The price collapse is being led by a glut of low-cost product from Indonesia where substantial Chinese investment into lower grade ores with at-times troublesome environmental, social and governance credentials has driven supply.
Despite being fingered as the cause of the problem, the price collapse does appear to be causing concern in Indonesia and China, with the latter's financial media group, Caixin Global, in December reporting the nickel rush may come to an end.
That call was made on the back of state-owned China Baowu Steel Group halting a potential $US4 billion spend on nickel assets in Indonesia.
The US’s Inflation Reduction Act will prevent Chinese-owned companies, which make up much of Indonesia’s nickel industry, from applying for tax credits.
