Production tax credit policy a ‘shot in the arm’ for Australian mining

The Association of Mining and Exploration Companies (AMEC) has taken the opportunity to push its proposed production tax credit (PTC) following a speech from Prime Minister Anthony Albanese yesterday.

A PTC is a refundable tax credit in which a qualifying recipient receives a direct reduction in their tax bill or cash. 

AMEC CEO Warren Pearce says the PTC would provide a 10% tax credit for downstream materials producers.

For example, a producer that has $1 million eligible costs would generate a tax credit of $100,000. If at the end of the year the company had a tax bill, it would be reduced by $100,000 or the company would receive a refund of $100,000 in cash.  

In a speech at the Queensland Media Club in Brisbane, Albanese said Australia needs ‘sharper elbows’ when it comes to marking out its national interest in a bid to build ‘a future made in Australia’.

Albanese highlighted Queensland’s status as a resources state, whose coal, gas, and other resources have helped power the national economy and will contribute to making Australia a renewable energy superpower. 

“We need to take a fresh look at how government can support small business and start-ups and service industries to diversify our economy and our trade,” he said.

“Not just playing to our traditional strengths with our traditional partners, but offering new products and services to new markets.”

In line with the prime minister’s plans, AMEC says this is exactly the type of action Australia needs if it wants to be a global player in the critical minerals supply chain. 

Australia’s critical minerals are central to the global energy transition. The minerals in question include lithium, nickel, vanadium, and rare earths.

AMEC — which represents over 450 member mineral exploration and mining industry companies — says it has been in ongoing discussions with the government over the past year to demonstrate how its proposed PTC will aid the down-streaming of critical minerals projects. 

The projects AMEC refers to are being spearheaded by some of Australia’s top resources companies. 

The companies include Ardea Resources (ASX:ARL), Australian Vanadium (ASX:AVL), Mineral Resources (ASX:MIN), Liontown Resources (ASX:LTR), Pilbara Minerals (ASX:PLS), and IGO (ASX:IGO), among others.

Already, AMEC has begun working closely with a range of industry participants to understand Australia’s cost disadvantage and design Australia’s very own response similar to that of the US Inflation Reduction Act. 

Pearce says the PTC will reward those willing to take a risk in establishing new and costly industries, which could in turn provide the government with investment returns.

“A PTC would reduce the production cost disadvantage faced by Australian downstream projects compared to other countries like the US, who have the Inflation Reduction Act (IRA).”

Pearce adds Albanese’s ‘Made in Australia’ economy is “a shot in the arm the mining industry needs to invest in.”

“The prime minister is right. We cannot afford to sit on the sidelines while other countries put measures in place to secure their future. Doing nothing is simply not an option.”

According to AMEC’s ‘Production Tax Credit for value-add processing of Australia’s critical minerals’ presentation, global competition has put Australia at a cost disadvantage in the downstream processing of critical minerals.

However, if the government was to implement a targeted policy, the response could add $2.4 billion to the economy and support 4,220 ongoing jobs by 2035. 

AMEC’s members are explorers, emerging miners, producers, and a wide range of businesses and service providers working in and for the mining industry. 

Its main goal is to reduce the cost of doing business, reduce regulatory obstacles, and support an increase in exploration, discovery, and mining opportunities in Australia. 

Write to Adam Drought at Mining.com.au

Images: AMEC & Shutterstock/Christoph Schaarschmidt
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Written By Adam Drought
Born and raised in the UK, Adam is a sports fanatic with an interest in Rugby League and UFC/MMA. When not training in Muay Thai and Brazilian Jiu Jitsu, Adam attends Griffith University where he is completing his final year of a Communication & Journalism degree.