Australian Lithium Miners May Lose US Subsidies Due to Chinese Ties
TL/DR –
Chinese companies Ganfeng and Tianqi, major shareholders in Australia’s lithium industry, might be ineligible for US subsidies under draft suggestions that a 25% “equity interest” from a Chinese company could make an entity “subject to the direction” of China. This could impact a larger part of the Australian lithium sector, as 98% of Australia’s major lithium product was sent to China in the year to June. A draft US Department of Energy document suggests miners could fall foul of new rules if 25% of their stock is “cumulatively” held by Chinese investors.
Ganfeng, Tianqi Influence in Australia’s Lithium Industry
Chinese companies Ganfeng and Tianqi, early foreign investors in Australia’s lithium industry, are major shareholders in notable mines such as Mt Marion and Greenbushes. Greenbushes accounted for approximately 45% of Australia’s lithium in the last year, solidifying its status as the world’s largest and finest hard rock lithium mine. Tianqi, based in Chengdu, owns 26% of Greenbushes and 51% of the Kwinana refinery, a key processing facility for Greenbushes ore into battery-grade lithium hydroxide.
Eligibility for US Subsidies
However, both Greenbushes and Kwinana could be disqualified for US subsidies due to draft legislation proposing that a 25% equity interest from a Chinese company would subject an entity to Chinese control. In contrast, Mt Marion, 50% owned by Ganfeng and the other half by Mineral Resources, could be affected if the US adopts the draft’s stance on processing of critical minerals. Furthermore, China’s potential to cease operations of foreign-owned processing facilities on its soil is classified as a major concern in the draft.
Australian Lithium Sector and US Government Subsidies
Notably, the draft indicates that companies operating in multiple jurisdictions may still be eligible for subsidies for critical minerals processed outside of China. This means Albemarle, America’s largest lithium producer, could potentially be eligible for US government subsidies for lithium hydroxide processed at Kemerton in Western Australia, not for lithium produced at its Meishan and Qinzhou plants in China. Moreover, Mineral Resources, which wholly owns the Bald Hill lithium mine, could benefit from this provision.
Wesfarmers and Liontown’s Potential Benefits
Wesfarmers, currently building a lithium hydroxide processing plant at Kwinana, could also benefit from such regulations as its lithium production chain could be eligible for US subsidies. The company’s lithium production largely comes from the Mt Holland mine in Western Australia, owned by Wesfarmers in a partnership with Chilean company SQM. On the other hand, Liontown could also benefit from the draft rules as it has signed off-take agreements for spodumene concentrate with non-Chinese companies like LG Chem, Tesla, and Ford.
Potential Impact on Australian Rare Earths Sector
The proposed regulations concerning Chinese ownership could have significant effects on the Australian rare earths sector. Companies with significant Chinese investors could potentially lose out to those without. For instance, Treasurer Jim Chalmers is currently investigating the register of rare earths aspirant Northern Minerals, where several Chinese investors are involved in a boardroom struggle.
Consultation Phase of the Draft Legislation
The published draft by the US Department of Energy is now entering a consultation phase. Although the regulations could change before being finalized, significant changes seem unlikely due to the draft’s alignment with the approach taken to foreign ownership by President Biden’s “Chips Act”. The draft also suggests that Chinese links may prevent Australian miners from accessing opportunities within the US political system, such as the reform of the Defence Production Act (DPA).
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