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What is the Value Adding in Resources Fund?
The Value-Adding in Resources Fund is an initiative to support mining science technology capability and increase the share of raw materials processed domestically.
Australia’s resource and energy export earnings are expected to reach a record $425 billion in 2021-22. Currently, most of these resources are processed overseas – meaning Australia misses out on jobs and economic opportunities.
Rather than just pulling resources out of the ground and selling them overseas, the Value Adding in Resources Fund will help us process them in Australia, capturing more value for our economy and creating jobs here.
Australia’s rare earth and critical minerals present an unmissable opportunity to develop a bigger resources industry, on top of our existing base, and expand our mining science technology capabilities.
Exports of Australian lithium are projected to triple by 2026-27, but we do not have the value-add capability to match the coming production increase.
Australia has the potential to support the development of local critical-mineral processing and specialty battery manufacture here.
Up to $1 billion in investment through loans, equity and guarantees for businesses in resources value-adding and mining science. This has the potential to unlock more investment through partnerships with institutional investors.
The Value-Adding in Resources Fund is part of the $15 billion National Reconstruction Fund. Details of the funding are yet to be confirmed, but this is what Buletpoint expects it could look like.
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The $1 billion Value-Adding in Resources Fund will support long term growth opportunities for businesses and boost employment and economic development across the Country.
Established by the Australian Government, the Value-Adding in Resources Fund will operate for 10 years and will help to address barriers faced by the resource and energy sectors that are ready to grow their business but can’t access the funds or find the right partner they need to take the next step.
Providing support to businesses with strong long-term growth prospects that are having difficulty accessing capital is even more critical as a measure to help drive economic recovery and growth in the wake of the impacts of the coronavirus pandemic.
The Value-Adding in Resources Fund will back permanent, high-skilled jobs in priority areas of the economy; jobs that improve workforce diversity, jobs for people that have been unemployed or have a harder time gaining employment and jobs for people trying to reskill and for apprentices.
A fund manager will be engaged to manage the Value-Adding in Resources Fund. The Value-Adding in Resources Fund will be operated out of a new Department office, ensuring local knowledge is leveraged to support the success of the Value-Adding in Resources Fund.
How it works
The fund manager was selected as the independent fund manager to operate the Value-Adding in Resources Fund.
All investment decisions will be made by the fund manager based on a commercial assessment of the potential growth and return profile for the business, governed by an investment mandate agreed by the Australian Government.
The Australian Government will have no involvement in investment decisions.
The Value-Adding in Resources Fund will invest in businesses on commercial terms and take either equity or debt stake in businesses, rather than providing a grant. The fund manager will be targeting a commercial return on its investment and will also provide strategic insights, expertise and commercial experience to accelerate growth outcomes for Value-Adding in Resources Fund investments.
The fund manager will deal fairly and transparently with existing business owners as the terms of the Value-Adding in Resources Fund’s investment in businesses is negotiated, in line with the terms of the Value-Adding in Resources Fund as agreed by the Australian Government and the fund manager.
The fund manager will share with existing shareholders information on the implications on the governance arrangements as a consequence of receiving an investment from the Value-Adding in Resources Fund to ensure they are informed before entering the transaction.
While the Australian Government will not be involved in direct investment decisions, the Government has worked alongside the fund manager in determining the eligibility criteria for the Value-Adding in Resources Fund to ensure that they benefit Australia.
The Value-Adding in Resources Fund will consider businesses that:
- present a compelling growth opportunity to Australia, meaning that it is expected to lead to growth in resource and energy business, fund growth of a business expanding, lead to meaningful job or add meaningful capital investment;
- have annual revenue of between $5 million and $100 million;
- have no more than $250 million in assets; and
- have positive cash flow, or cash flow is expected to be positive during the investment.