The Australian Federal Government is accelerating the introduction of production tax credits to support the struggling nickel mining sector, with plans to extend this aid to lithium miners if necessary.
The Albanese Government initially pushed back against the introduction of tax credits, however, warnings by BHP (ASX:BHP) Group and other miners that operations may cease and jobs lost, have forced the government’s hand.
BHP has issued a warning that it may close its entire nickel division in Western Australia, a move that could affect approximately 3,000 employees.
The nickel and lithium industries are facing significant challenges. The current price of nickel is US$15,941.00. Nickel prices have fallen nearly 50% since the January 3, 2023 peak, putting severe pressure on companies involved in its exploration and production.
Prime Minister Anthony Albanese arrived in Perth for a cabinet meeting, which will include discussions on bolstering the nickel industry, deemed essential for Australia's future, especially in clean energy initiatives.
“We are looking towards smart, targeted, time-limited support. This is a short-term issue for what is in the long term, a very critical industry for Australia,” Albanese told reporters in Perth.
“Nickel will be a critical mineral going forward. It’s critical for batteries and for other sources as the global economy shifts, as we are seeing, to clean energy.”
This strategic decision aims to provide support to navigate what is viewed as a temporary challenge in a critically important industry.
The initiative also reflects a broader effort to enhance Australia's competitiveness in green technology investment, mirroring aspects of the United States' Inflation Reduction Act without matching its financial outlay. Instead, the focus is on leveraging policy strengths to support the nickel and potentially lithium sectors, amidst global shifts towards clean energy.
Nickel listed as critical mineral
The government's response to this potential crisis includes listing nickel as a critical mineral and announcing significant support measures, such as a 50% royalty discount for Western Australia's nickel miners facing market pressures from international competitors.
Furthermore, industry stakeholders, led by the Association of Mining and Exploration Companies (AMEC), have advocated for a 10% production tax credit scheme to lower costs and encourage investment in the processing of essential minerals.
This proposal aims to stimulate the Australian economy and job creation, backed by a report forecasting the benefits and costs of such a policy through to 2035.
The news comes as some relief to Australia’s small cap nickel explorers including the likes of NickelX Ltd (ASX:NKL), Resource Mining Corporation Ltd (ASX:RMI), St George Mining Ltd (ASX:SGQ), Legend Mining Ltd (ASX:LEG), Leeuwin Metals Ltd (ASX:LM1), Great Boulder Resources Ltd (ASX:GBR), Corazon Mining Ltd and others.
However, while leaders in the nickel industry have expressed appreciation, it comes with a sense of dissatisfaction, towards the government's measures in the face of competition from Indonesian counterparts who benefit from up to 20 years of tax exemptions.
The mining sector's discontent stems from the perceived delay in governmental intervention, which only gained momentum following BHP's announcement regarding the potential closure of its nickel operations and the jeopardy of thousands of jobs.