Feds finalize rule for critical mineral extraction tax credit, benefitting Sibanye-Stillwater

The federal government last week finalized rules for a manufacturing tax credit aimed at boosting U.S. clean energy and critical mineral production, which should benefit the Sibanye-Stillwater mine near Columbus, which is expected to lay off about 700 workers in the next two weeks in part because of a market flooded with Russian palladium.

The Department of Treasury and Internal Revenue Service last Thursday announced the final rules for the Advanced Manufacturing Production Credit, a component of the Inflation Reduction Act, which will allow companies that mine critical minerals, like the palladium and platinum Sibanye-Stillwater mines in Montana, to access a 10% tax credit.

The original proposed amendment had included the credit for critical mineral production, but later guidance issued last December that said only the refiner of the minerals would receive the bulk of the tax credit.

Sibanye-Stillwater said the change last December left little benefit from companies extracting the minerals, and it asked for amendments and lobbied members of Congress, including U.S. Sen. Jon Tester, D-Montana, to push for a fix.

The company said last Friday that the final rules appear to include the amendments the company had sought, including allowing extraction costs to count toward the tax credit. The South Africa-based company said the amendments seem “very favourable” and are likely to help the company’s operations in Montana.

“By providing essential financial support for our U.S. (Platinum Group Metals) operations as we focus on reducing costs and increasing productivity to stabilize our US PGM operations we will be able to secure the long-term viability of these strategic assets,” Sibanye-Stillwater CEO Neal Froneman said in a statement.

The company announced in September it planned to lay off about 700 employees in Montana by Nov. 12 after losing $350 million in the state because of a sharp dive in palladium prices during the past two years, from about $2,300 to about $1,155 per ounce as of Wednesday. Palladium was trading at just more than $1,000 per ounce when the company announced the layoffs.

The company said in September it believed Russia was inundating the global palladium market to tank prices. In response, Tester and U.S. Sen. Steve Daines, R-Montana, introduced similar bills seeking to ban the import of Russian palladium.

Tester had in February written to Treasury Secretary Janet Yellen citing concerns that the tax credit would largely not apply to Stillwater-Sibanye’s Montana operations despite its minerals meeting the purity threshold the proposal required. He said he disagreed with the new interpretation from December and said it would incentivize refiners to seek out cheap foreign minerals instead of buying domestically.

“I respectfully request that you update the current proposed rule to address the shortcomings on critical mineral development before the IRS finalizes the tax credit,” Tester wrote in the letter. “I stand ready to work with you on Advanced Manufacturing Production Credit issues and to take on China and Russia.”

He called Deputy Treasury Secretary Wally Adeyemo the day the layoffs were announced, then sent Yellen another letter the next day urging the department to consider the request to include critical mineral production under the tax credit, directly implicating Russia as the cause of the impending layoffs.

“This is a heartbreaking scenario that is terrible for hardworking Montanans, the communities surround the mine, and our national security. The Administration must do more to support the manufacturing or critical minerals here at home and prevent the world from becoming dependent on Russia for palladium,” Tester wrote.

Daines wrote Yellen a letter the same day, saying the proposal excluding mineral extraction was “shortsighted at best and at worst an attack on our country’s hard-working miners.”

Tester met with people in the Columbus area affected by the layoffs earlier this month and sent a letter backing the Montana Department of Labor and Industry’s forthcoming application for worker assistance grants for people who will be laid off.

When a week later the Department of Treasury and IRS announced the tax credit was amended so it could be better utilized by Sibanye-Stillwater, Tester said the federal government had made changes because of the requests from Montana.

“Bolstering domestic mining will not only boost our economy – it will strengthen our supply chains and our national security,” he said in a statement. “I’m glad to see the administration is listening to our calls to ensure American mines like the one in Stillwater receive additional support and keep more Montanans in their jobs.”

Daines, who voted against the Inflation Reduction Act, called the finalization of the rules to benefit companies like Sibanye-Stillwater a “positive step” but also said the move “has every appearance of a cynical and desperate political attempt to get votes right before the election.”

The company said it believed the changes would support “continued operations and long-term sustainability” in Montana. Heather McDowell, the vice president of legal and external affairs for the company’s Americas arm, said the company was “thrilled” with the changes made by the Treasury Department and IRS, especially as the largest-scale U.S. palladium and platinum producer.

“We know that continuing to produce U.S. commodities in a global market will require recognition that doing it the right way has a cost, but that cost is worth it to get things right for our people and our environment,” McDowell said in a statement.

She also thanked Tester for his pressing the Treasury Department on the matter.

“We are especially grateful to Montana’s Senator Jon Tester for his perseverance in ensuring this rule is right for Montana and for the U.S.,” she said. “The global palladium market has hit us hard over the last 18 months. Being able to claim a tax credit on our mining and recycling costs is an important step in stabilizing our operations so that we can continue to invest in sustainable critical minerals production for the U.S. market.”

Blair Miller is a Helena-based reporter for the Daily Montanan.