Critical Minerals Royalty Deferral Scheme

The Critical Minerals Royalty Deferral Scheme has been introduced by the NSW Government to support new critical minerals projects in NSW reach production. It allows eligible mining projects to defer royalty payments for up to five years upon commencement.

Why introduce a Royalty Deferral Scheme

Critical minerals projects often face higher upfront capital costs compared to traditional mining operations, making it difficult to secure financing or equity partners. In addition, junior and mid-tier mining companies - which lead the development of the critical minerals sector in NSW - have limited access to capital and face heightened investment risks.

Providing financial relief via a targeted royalty deferral scheme to new critical minerals projects during the early stages of operation will help to improve cash flow during critical early year of production and enhance investment feasibility.

Why is the scheme focused on the Commonwealth’s Critical Minerals List?

Aligning with the Commonwealth’s Critical Minerals List ensures consistency with national priorities and international market signals. The list is regularly updated to reflect emerging technologies and market trends. This approach avoids duplication and ensures alignment with broader economic and strategic goals across Australia.

NSW is uniquely positioned with significant reserves of 21 of the 31 minerals on the Commonwealth’s Critical Minerals List, which have been formally recognised in the Mining Act 1992 and the Mining Regulation 2016. The scheme will be targeting the specific minerals listed in the legislation for royalty deferrals.

The below table shows a comparison between the Commonwealth Critical Minerals List and the critical minerals found in NSW and listed in the Mining Act 1992 and Mining Regulation 2016:

 

Eligible projects can apply to defer royalty payments for up to five years upon commencement of production. Deferred payments are then repaid in quarterly instalments over five years after the deferral period has ended. Repayments not made on time are subject to penalties under the Taxation Administration Act 1996, in line with standard royalty regulations.

Will the deferred royalties be subject to interest?   

Deferred royalties will accrue interest quarterly, to preserve their value over time to the State.

The Scheme helps to address some of the financial challenges faced by the critical minerals industry in NSW in attracting finance while ensuring the people of NSW continue to benefit from the extraction and sale of mineral resources.

Interest will be applied quarterly on all deferred royalty payments based on the 3-month average of the monthly yield of 10-year Australian Government bonds as published by Reserve Bank of Australia for the relevant quarter. 

More details on can be found on the Reserve Bank of Australia website, on the statistics page: https://www.rba.gov.au/statistics/tables/, Capital Market Yields – Government Bonds – Monthly – F2.1 for specific rates.

How will the scheme be implemented?

The Scheme will be implemented via a Ministerial Determination under the Mining Act 1992, Section 291(1)(b). The Mining Act 1992 has been amended to allow for the application of interest to deferred royalties.

What are the eligibility criteria for the scheme?   

Eligible projects must meet the following criteria: 

• be a NSW mining lease holder
• demonstrate that an eligible mineral or minerals will be recovered under the nominated mining lease/s
• demonstrate that the mining lease holder and any related party of the mining lease holder, has market capitalisation, or market valuation of less than $5 billion
• indicate that the same mineral/s have not been previously mined under the nominated mining lease/s, or any mining lease in effect over the same land immediately before the grant of the lease/s that is the subject of the application
• demonstrate that an eligible mineral is the primary commodity of the project.

In addition, it is a condition of approval that minerals will commence recovery between 1 July 2025 and 30 June 2030. 

Refer to the Guidelines on resources.nsw.gov.au/critical-minerals-royalty-deferral for further information on eligibility.

Do I still need to apply for a mining lease?

Yes, standard mining lease application processes, approvals and compliance remain in place. Applicants may only apply for a royalty deferral once a mining lease been granted.

Why is the scheme limited to critical minerals?

Critical minerals are essential for emerging technologies but face higher investment risks compared to traditional mining. Limiting the scheme to these minerals ensures targeted support where it is most needed.

Why is the scheme capped at five years of royalty deferrals per project?

The five-year deferral period is designed to cover the initial ramp-up phase when projects face the greatest financial pressures and risks. After this period, projects typically establish stable production and are better positioned to meet their financial obligations. Five years is considered sufficient to de-risk the early operating phase while ensuring the State collects its revenue in a reasonable timeframe. This duration aligns with practices in other jurisdictions offering support for critical minerals projects.

Why does commencement period end on 30 June 2030?

The scheme is intended to encourage near-term investment decisions and expedite the development of NSW’s critical minerals sector. There will be a review of the Scheme in 2028-29 to evaluate its effectiveness.

Can I get a deferral on production after 30 June 2030?

Yes, if you have commenced production on a critical mineral project anytime between 1 July 2025 and 30 June 2030, you can apply for a deferral from the date of production commencement. 

For example, if production commenced Quarter 1 2030, you would receive a deferral on all royalties for that project for five years (e.g. until Quarter 1 2035).

However, you are required to submit your application before the application closing date of 30 June 2030.

Any new critical mineral projects commencing production after 30 June 2030 will not be eligible for this Scheme.

Does the scheme include a cap?

Yes, a $250 million cap on total deferred royalties across NSW ensures the state’s financial exposure remains manageable. This will be determined in order of application. 

How does the scheme benefit mining companies? 

The deferral improves cash flow during the high-cost early production phase, allowing companies to allocate funds to ramp up operations and meet other debt obligations during the initial five years.

Why is eligibility restricted to companies with a market capitalisation or market valuation under $5 billion?

The scheme targets junior- and mid-tier companies, which are more likely to face financing challenges during the early stages of production. Larger, well-capitalised companies generally have better access to funding and can absorb start-up costs more easily. This targeted approach ensures public support is directed where it is most impactful, helping to diversify the mineral resources sector and support newer entrants.

Can I apply for a deferral against multiple mining leases?

Yes, if you have multiple mining leases associated with the one critical mineral project, you can list all relevant leases in the application form.

What if my critical minerals mining project has already commenced production?

The Critical Minerals Royalty Deferral Scheme is targeting new projects who are intending to commence production between 1 July 2025 and 30 June 2030. If your critical minerals project has commenced production prior to 1 July 2025, it will not be eligible for a royalty deferral. 

What happens if the application is successful?

Successful applicants will receive a Ministerial Determination from the Minister of Natural Resources. NSW Resources and Revenue NSW will work together with the applicant to implement the royalty deferral on a quarterly basis. Following the five-year deferral, Revenue NSW will begin collecting payment of royalties on the new specified payment dates. 

Please note all deferred royalties will accrue interest at the rate of the monthly average yield of 10-year Australian Government bonds, as published by the Reserve Bank of Australia to ensure the time value of monies deferred remains. 

What if production commences after what is approved in the Ministerial Determination?

You may apply for a new approval if the actual commencement of production is later than what is outlined in the terms of the Ministerial Determination.

Paying royalties after the 5-year deferral has ended

Royalties deferred each quarter will be scheduled for payment five years after the original due date. When deferred royalties are due, your organisation must also pay any new royalties accrued from that same quarter.

For example, royalties deferred for production in Quarter 4 of 2025, must be paid in Quarter 4 2030, alongside the new royalties owed for production in Quarter 4 2030.

It is the responsibility of the organisation to manage finances appropriately to ensure all future royalty payments can be met.

Will this scheme benefit regional communities?

Yes, the scheme will drive investment in regional areas, creating jobs, infrastructure, and economic opportunities. The Scheme could help unlock new critical minerals mining projects which are already in the NSW planning system pipeline worth $2.3 billion in capital investment across NSW, creating 1,300 construction jobs, 600 ongoing jobs and return royalty contributions to the NSW Government of $873 million over project lifespans.

How does the scheme enhance NSW’s global competitiveness?   

By reducing financial risks for new projects, NSW becomes a more attractive destination for investment, especially in a competitive global market for critical minerals.

How does this Scheme compare to other states in Australia?   

Other jurisdictions, such as Western Australia and Queensland, offer similar support through royalty relief or rebate programs, emphasising their commitment to critical minerals. 

NSW’s scheme is tailored to its unique market needs while maintaining government fiscal responsibility.

When will I be notified of the outcome of my application?

The timing between submission of application and notifying applicants of an outcome can take up to 12 weeks. This may be extended depending on your application complexity and other internal assessment requirements.