The Queensland Resources Council (QRC) hosted its annual lunch and State of the Sector Forum on Thursday 9 November 2023 at the Brisbane Convention and Exhibition Centre. The Forum’s keynote topic was ‘Funding the Future – Should the finance and insurance sector be picking winners for Australia’s resources-rich future?’. Bridgend Capital Advisory’s Nick Rees joined the panel and provided an update on the challenges facing traditional bank lenders supporting the resources industry in a decarbonising world. Brad Russell from McCullough Robertson and Jessica Schade from Lockton unpacked the equivalent challenges in the insurance market, while HSBC’s Tony Scott outlined how HSBC is supporting critical minerals and other commodities essential for energy transition. 

Hosted by Nine Group journalist Wendy Kingston, with additional contribution and insight from outgoing QRC Chief Executive Ian Macfarlane, the Forum’s panel explored a number of significant challenges confronting the resources industry in Queensland from the financial sector’s ongoing and irreversible commitment to net zero policies which has seen a rapid contraction of available debt capital, insurance, and other critical financial markets support.

It was noted by the panel that in recent years, Australia has seen the major banks move away from new lending to coal projects in particular, and some companies have had difficulty accessing insurance. This is despite the continuing strong global demand for these commodities and the fact that the resources industry in Queensland alone generates more than A$100 billion in economic activity annually. The panel agreed this signalled a move by both banks and insurers into the field of public policy development, more typically the domain of Government.

Alongside these financial sector policy changes, the panel identified that Governments were also developing policy at a rapid rate in relation to the resources industry. It was acknowledged Queensland now has the world’s highest coal royalty rates, and State and Federal Governments had intervened in the domestic energy market with price caps for both coal and gas. Kingston additionally flagged that in recent weeks, the Australian Government had added another A$2 billion to its critical minerals loan facility, taking the total to A$4 billion, with Rees welcoming this support from Government but noting this was further evidence the traditional lending market lacks capacity to meet the challenge of developing Australia’s critical minerals sector in a timely manner. This has been exacerbated by the loss of important technical staff from within banks as resources lending has contracted.

Insurance specialist Russell pointed out in 2021 a Federal Parliamentary committee reported on its inquiry into the regulation of Australia’s export industries, including the resources industry. Among its recommendations was that the Australian Government work with the resources industry to create a self-funding insurance model, something existentially important to the coal sector, and likely over time to impact equivalently oil and gas, steel making, cement making, and other carbon intensive industrial activities. However, Russell noted the Government does not have the political conviction or perceived electoral mandate to commit resources to adopting this recommendation. This indicated the industry would need to resolve this issue alone, despite its much broader social and economic ramifications.

The panel discussed a range of similar topics around waning support from financial markets and governments for Australia’s number one export industry, and major employer, and what this meant to the current and future economic viability of the resources industry.

In particular, with the more carbon intensive projects and companies, the conclusion reached by the panel was there is little to no chance of government or the traditional banking and insurance providers retracing their policy changes. It would be up to the industry itself to structure and implement solutions to support ongoing commercial activity through the future zero carbon transition period. What this meant for the new critical minerals projects required for the transition, and where Queensland needed to focus efforts in order to replace the traditional more carbon intensive bulk export commodities, was less clear and still a work in progress by most key stakeholders.

Bridgend Capital Advisory remains at the forefront of these ongoing industry solution discussions, and would be pleased to engage further on any relevant enquiry.