Why BHP is against ‘sugar hit’ subsidies for critical minerals

Australian companies such as Lynas, Syrah Resources and Jervois Global have also secured US government money to help accelerate their rare earths, graphite and cobalt projects respectively.

Mr Henry told The Australian Financial Review that government subsidies for mining projects were warranted in certain circumstances, but could distort markets by boosting uncompetitive projects if distributed recklessly.

“As a government, if you have a choice to make I would say focus as much as you can on getting the policy settings in a shape where it is attractive to invest capital in that country ... because if you do that, it has way broader benefit, and more sustained benefit than a bit of a sugar hit of a subsidy to an individual proponent,” he said.

“There is real potential that subsidies handled the wrong way reduce the drive for fundamental policy reform and create distortions in the market that actually harm long-run market efficiency.

“Provision of a subsidy here may disincentivise investment in a project that is actually more economic based on its fundamentals in another jurisdiction.”

Mr Henry singled out reform of project permitting processes as a way that governments could stoke investment in critical minerals without subsidies.

He said governments in the US and Canada were making a big effort to shorten project permitting schedules in recognition that time is “one of the biggest drivers of cost in a project”.

Mr Henry said lower project costs would translate into lower costs of capital and ultimately more investment.

“In order to address that [permitting reform] you have got to address all the politics associated with it, so I acknowledge it is harder, but actually that focus should be much higher than deploying a bit of funding here and there,” he said.

Australian, Japan talks

Critical minerals are likely to be on the agenda today when Mr Henry and other business leaders meet with major Japanese conglomerates including Mitsubishi and Mitsui at the Australia Japan Business Co-operation Committee conference in Melbourne.

“The more alignment there can be around what exactly constitutes a critical mineral the better,” Mr Henry said.

Critical minerals lists are a political construct rather than a scientific construct and each nation’s list is suited to their individual needs and supply chains.

Most of the 26 minerals deemed “critical” by the Australian government are also deemed critical by Japanese authorities but some – such as scandium, high-purity alumina and helium – are not.

The European “critical raw materials” list differs from most others by including coking coal for steelmaking, while the US list contains almost twice as many minerals as the Australian list.

The disparity in critical minerals lists, even among close defence allies such as Australia, the US and Japan, prompted Mr Henry to suggest a new definition.

“Let’s just say it is the metals and minerals that are going to be needed for the energy transition and ongoing global economic growth,” he said.