30 June How foreign investment changes may impact the mining and energy sector June 30, 2020 By AMPLA Admin Industry, Resources and Energy FIRB, Mining, Energy 0 In early June 2020, the government announced a review of the foreign investment rules, expanding them to apply to all foreign investors in anything deemed a ‘sensitive national security business’. The changes are scheduled to come into effect on 1 January 2021. There are concerns that this will impact foreign investment in the mining and energy sectors, and in particular the critical minerals space. Changes to foreign investment rules Thresholds The Foreign Investment Review Board (FIRB) reviews foreign investment proposals and provides guidance to the Treasurer on whether they are in the national interest. Notification to FIRB has historically been required if the proposed investment exceeds certain thresholds. On 29 March 2020, the government imposed a temporary $0 threshold for all proposed foreign investment as part of its COVID-19 response. The threshold will revert to the pre-March levels on 1 January 2021. However, the planned new rules mean that thresholds for anything deemed a "sensitive national security business” will remain at zero. That could apply to businesses in communications, technology, energy and resources. ‘Call in’ and ‘last resort’ powers The Treasurer may ‘call-in’ an investment after an acquisition even if it was not notified under existing national interest laws. Investments can be reviewed on a case by case basis if they are deemed to be a national security concern. The ‘last resort’ power allows the Treasurer to order a divestment if a national security risk emerges after approval has been granted. Given these expanded powers of review, investors in mining or energy companies are well advised to voluntarily notify FIRB of their intentions. Doing so prior to acquisition avoids the possibility that they will be called in for review after the fact on national security grounds. Special watch on the critical minerals space Foreign investment is particularly important for critical minerals. As critical minerals are used in high-tech applications like mobile phones, battery energy storage, electric cars and aerospace, Australia’s domestic demand for them is very low. Accordingly, the critical minerals industry is heavily reliant on relationships with foreign investors, primarily in China and India. Critical minerals are sold in very small quantities, for specific needs and for very high prices. This means that successful sales depend on having a particular supplier relationship before you mine the minerals. Is the government supportive of foreign investment? Several recent government announcements would seem to indicate that it is. Expert Finance Australia announced in November 2019 that it would finance projects to express and process critical mineral supplies. This includes Alkane Resources’ Dubbo Mine, which extracts zirconium, hafnium and other rare earth elements. In January 2020, the government established the Critical Minerals Facilitation Office, which advocates for Australia’s critical minerals sector. Advocacy efforts have included co-operation agreements between government bodies and private sector interests in the United States and Canada. Together with Geoscience Australia, the Office is developing a web portal to assess and update Australia’s critical minerals potential. Minister for Resources, Water and Northern Australia Keith Pitt has signed a Memorandum of Understanding with India on the potential for investment in Australia. The COAG Critical Minerals Work Plan, endorsed on 16 April 2020, also identifies that investment into Australia’s critical minerals sector is a vital part of our economic recovery from the COVID-19 pandemic. However, despite this clear signalling from the government that it welcomes foreign investment, two recent rejections indicate otherwise. On 20 April, the Treasurer rejected Baogang’s proposed $20 million (11.1%) investment in Northern Minerals. On 24 April, Chinese lithium investor Yin Tianyi withdrew a proposed $14.1 million (12%) subscription in AVZ Minerals after receiving information that the Treasurer intended to reject that as well. Both rejections happened before the tightening of the foreign investment rules, giving rise to fears that attracting foreign investors will only become more difficult. What can mining and energy companies do? For companies intending to attract foreign investment, early engagement with FIRB is critical. The two April rejections each took around five months to decide — well outside the two-month timeframe given. Since the new rules extend the time frame to six months, investors and companies seeking investment can expect it to take at least this long for a decision, if not longer. Early engagement and sensitivity to potential issues will give all parties the best chance possible for a successful business relationship. The Foreign Investment Review Board (FIRB) amendment bill will go out for industry consultation in July 2020 and is expected to take effect on 1 January 2021. Interested parties are encouraged to make a submission. ► Check out the AMPLA On-Demand Webinar on the Temporary Changes to Australia's Foreign Investment Review Framework (MEMBER ACCESS ONLY) Related Articles COMMUNITY LEGAL RIGHTS IN MINE CLOSURE PLANNING; A COMPARATIVE ANALYSIS OF THREE AUSTRALIAN STATES Professor Alex Gardner, University of Western Australia Law School, and Laura Hamblin, formerly research associate at the UWA Law School, 2021 Why does the Mining Act 1978 (WA) not provide secure legal rights for community consultation in relation to mining lease proposals and mine closure plans? Addressing this question presents an important theme for this comparative review of some core features of the regulatory frameworks for mine closure in three Australian States. It also raises important questions for future legal research. Western Australia, Queensland and Victoria have prominent but vastly different, and thus uniquely significant, mining industries. Western Australia’s mining industry has a long history of large and smaller scale mining of a diverse range of minerals by various methods that pose significant mine rehabilitation challenges.[i] Queensland’s mining industry is similarly large and diverse, dominated by export coal production, and planning future minerals development in a decarbonising world.[ii] Victoria has a smaller mining industry with a large historical legacy dominated by a coal mining industry for domestic electricity generation in the Latrobe Valley, which is closing as the State actively transitions to renewable power sources.[iii] These States also have significant differences in the regulation of their mining industries. What all three States do have in common is the significance of their mining industries to both the State economy and the communities who depend on or live near mining operations. Importantly, all three States are confronting large legal and regulatory challenges in managing mine rehabilitation and closure. The key to addressing these challenges is effective mine closure planning: the closure of a mine site has ripple effects that are not merely environmental and economic, but social and cultural too. The initial approval of a mine closure plan occurs before any mining has begun and, with the life cycle of a mine often spanning decades, regulatory bodies are approving hypothetical closure scenarios, potentially subject to vast changes. Regulatory bodies may then seek to enforce closure requirements enshrined in a plan that may wane in relevance as mining operations progress, the updating of which may depend on the miner. Yet remedying the regulatory system so that it creates adaptable but consistently effective mine closure outcomes for affected communities still begins at planning. Although that planning is an iterative process across the life of the mine, it is very important at the initial stage of approval. Recent legislative reforms in all three States are adding to the regulatory rigour and adaptability of mine closure planning, though there are very different legal requirements for community consultation. This article aims to explain and assess the regulatory reforms by undertaking a comparative analysis of mine closure planning across Western Australia, Queensland and Victoria, with a focus on the initial approval stage and how stakeholders and communities are brought into that process. The facilitation of continuous and comprehensive community engagement is critical to ensuring that mine closure planning accounts for environmental, economic, social, cultural and safety outcomes after mine closure, but it has not been possible to consider here the process of ongoing mine closure planning, especially for amending mine closure plans and determining satisfaction of mine closure plans leading to resource tenure relinquishment.[iv] The article begins by considering core concepts of mine closure planning and the regulatory goals that inform it. It then provides a comparative overview of each State’s mine closure planning requirements under the mineral resources, environmental and land use planning laws and draws out some of the different regulatory structures and processes for mine closure within each State. The third step in our analysis compares the ways in which those laws provide for local communities’ participation in mine closure planning, with specific attention to whether the regulatory provisions create legally enforceable rights for effective community engagement. The article concludes with a summary of the key points from the discussion of three themes in our analysis: (i) the importance of clear definitions of core concepts and key goals, (ii) mine closure planning as an essential part of a mining proposal, and (iii) the legal definition of community engagement and consultation rights. Mine closure planning and implementation is necessarily influenced by many other spheres of law including taxation law, investment law, water law, and the rights of traditional owners, to name a few. A potentially directly relevant Commonwealth law is the Environment Protection and Biodiversity Conservation Act 1999 (Cth), which may require environmental impact assessment of a mining proposal and closure plan and lead to approval conditions supplementing State requirements.[v] Whilst acknowledging the importance of these adjacent spheres of the regulatory frameworks for effective mine closure planning, this article does not attempt to address their impact. In particular, the rights of Traditional Custodians are a crucial part of mine closure planning that are only briefly noted here and that would benefit from future research. WA Department of Mines, Industry Regulation and Safety, Major Commodities Review 2022-23”. Qld Government, Department of Resources, Queensland Resources Industry Development Plan, June 022. Vic Government, Department of Jobs, Precincts and Regions, Latrobe Valley Regional Rehabilitation Strategy. See L Hamblin, A Gardner, Y Haigh, Mapping the Regulatory Framework of Mine Closure, May 2022, CRC TiME, for a broader exploration of the full life cycle of mine closure regulation. In Buzzacott v Minister for Sustainability, Environment, Water, Population and Communities  FCAFC 111; (2013) 214 FCR 301, , -, referring to the range of approval conditions, which included mine closure. In setting conditions under the EPBC Act, the Commonwealth Minister must consider any relevant conditions under State or Territory law: at  citing Lansen v Minister for Environment and Heritage (2008) 174 FCR 14. What the FIRB? An update on Australia’s foreign investment rules for energy and resources Digital transformation in mining and energy As the global shift to remote work gathers pace, it is more important than ever that the mining and energy sector embraces technology. But a digital transformation offers more than flexible working arrangements. It has the potential to drastically cut down on industrial accidents, optimise operational processes and slash costs. The states boost the energy and resources sector This year will be remembered for the many challenges that it brought to both individuals and industry. As Australia starts to return to some normality, many states are looking to boost industry, increase jobs and innovate for the future. In this article, we look at various state initiatives designed to boost the energy and resources sector. Changes to the Fair Work Act may benefit the energy and resources sector The energy and resources sector is a significant contributor to the economy, and its impact is estimated to continue to grow over the next decade. The Australian Resources and Energy Group (AMMA) estimates that the sector will add over 24,000 new workers by 2026 to support 98 new and expansion projects worth over $83 billion. The roles available could double depending not the construction and flow-on work required. Western Australia and Queensland are expected to benefit the most from these initiatives. The impact of Russia/Ukraine conflict on the sector The impact of the Russia/Ukraine conflict on the sector On February 24, Russia invaded Ukraine. Alongside the destruction and terror that’s been inflicted on the Ukrainian people, the conflict has also created great uncertainty in the global economy with flow on effects expected to be felt for years to come. Most western countries have imposed significant sanctions on trade with Russia, which includes a US ban on importing Russian oil. In addition, many Russian banks have been removed from the SWIFT global payment system which will impact the ability to make financial payments both within and out of Russia. This has a significant impact on the resources sector that is likely to continue in the short to medium term. Showing 0 Comment Comments are closed.