Nice little article out of AFR yesterday, mentions the south west. Excuse the formatting...
Australia is in the race to develop alternative supplies to China’s dominance of the supply and processing of rare earths that are critical to the global economy and to national security. But the West is far behind. How quickly can this be done?
Rare earths aren’t actually that rare. Nor are the 17 rare earth elements in the periodic table worth much in isolation, with some of purely nominal value. Current estimates of the global market value for rare earths are somewhere between $US8 billion-$US10 billion ($12.4 billion-$15.5 billion).
Yet some of these rare earths are necessary for the production of everything from cell phones to advanced robots, electric vehicles to wind turbines, to a myriad of defence applications.
That’s why rare earths, though small in volume, are a key subset of the various critical minerals only belatedly being acknowledged as vital for both economic and national security reasons.
A truck drives through the Lynas Rare Earths processing plant in Kalgoorlie. Bloomberg
The problem is that China has spent the last few decades making itself the dominant global supplier of rare earths and the near monopoly supplier of the magnets and metals produced by processing rare earths.
Until recently, Western countries, including Australia, were content to let China master and then maintain control over the complex technology and advanced chemical operations and skills required for downstream processing of most critical minerals, including rare earths.
Now the global panic is on as Western governments finally realise how their own lack of policy and companies’ commercial priorities have left them vulnerable to China’s ability to wreak havoc by cutting off supply at will.
Increasingly, national security concerns are interwoven with economics in terms of processing capacity.
Former defence minister Kim Beazley is co-author of a recent paper pointing out China’s carefully guarded capacity in processing extends to the manufacturing of rare earth permanent magnets that enable technologies such as leading-edge missile guidance, satellites and aircraft.
“Some 3300 items of US military equipment depend on rare earths, which have few known or potential substitutes,” Beazley and co-author Ben Halton say. “They include almost every weapon being used by combatants in Ukraine as well as every fighter jet, navy vessel and nuclear weapon on earth.
“Nor is the commercial production of green energy and electric vehicles possible without them. Rare earths matter immensely.”
But even mining for rare earths has so far not been particularly attractive commercially, particularly given China’s ability to subsidise and increase and decrease production (now from Myanmar as well) to deter competition by manipulating market prices.
The only mine in the US has just reopened in California, but this still exports product to China for processing while it tries to develop its own capacity.
The result is there’s currently only one major rare earths producer that operates independently of China’s supply chain – Australia’s Lynas Rare Earths. Lynas is about to start production at a facility in Kalgoorlie to process rare earths concentrate from its Mount Weld mine. Having previously relied on Malaysia for further processing, it’s no coincidence Lynas now has a contract with the US Defence Department to establish a rare earths separation facility in Texas.
History only reinforces Australia’s significance in the desperate search for reliable new supply of rare earths and processing capabilities.
Yet even Lynas’ survival was only guaranteed by hundreds of millions of dollars from the Japanese government after China temporarily banned supply of crucial rare earth elements to Japan over a territorial dispute in 2010.
This history only reinforces Australia’s potential significance in the desperate search for reliable new supply of rare earths as well as processing capabilities. Australia’s high environmental standards make it a valuable partner for other developed economies like the US. But how quickly or effectively can this happen? At what scale?
The new US Australia Climate, Critical Minerals and Clean Energy Transformation Compact, for example, will inevitably involve the exchange of technology and investment in rare earths.
The Australian government prefers to publicly emphasise the importance of rare earths for renewables and electric vehicles, but defence applications will certainly form part of the private discussions when Resources Minister Madeleine King heads to the US this year.
Yet the extent of this interdependence – and just what rare earths mining and processing involves – is little understood outside the resources sector.
King told a conference in Perth this week Australia is very good at extraction but needs greater US engagement and investment to develop more processing facilities here.
“That’s really what the critical minerals story is about,” she said. “It’s not going to be pretty. There are going to be more refineries and there are going to be more processing plants.”
Not that Australia can match the massive subsidies available for renewable energy technologies under the US Inflation Reduction Act, even if it hopes co-operation made possible by AUKUS will encourage more American investment locally.
In its last days, the Morrison government provided a $1.25 billion loan to Iluka Resources to build a refinery at Eneabba in Western Australia to separate rare earth oxides out of tailings from its mineral sands operations. The refinery will open in 2025 and will also process concentrate from other miners, including Northern Minerals.
Yet the dearth of big names like Rio Tinto and BHP reflects the reality that relatively small volumes and profits involved in rare earths or other critical minerals aren’t enough to appeal to giant balance sheets. That’s why small Aussie explorers, miners and speculative investors are seeking to fill the space – and naturally wanting greater government support given the costs and infrastructure required.
Rare earths come from hard rock, mineral sands or ionic clay deposits. Some small clay deposit discoveries in South Australia and southern WA are attracting interest but these must compete with four recent large ionic clay rare earth discoveries in Brazil. This includes the Serra Verde mine due to start commercial production by Christmas.
That will make it only the third rare earths mine in production outside China and Myanmar – but in a country far less aligned with the US than Australia.
Prepare to hear a lot more about why rare earths matter.
(20min delay)