Similar to oil in the 21st century, rare earths have long been envisioned as game-changing materials for the global energy landscape. Mined for their magnetic properties, the 17 metals are used in everything from cell phones to electric vehicle engines and wind turbines, and are a mainstay of clean energy technologies.
Despite their name, the materials are commonly found, with deposits in China, the US, Australia, Chile and India, to name a few. However, they are often found in small deposits and the process of separating them is notoriously dirty – meaning that resource-rich countries have so far been reluctant to set up processing plants, typically shipping ore to Asian countries instead for the divorce process.
Over the years, China has cornered the market, but now Western governments are trying to shed this dependence and instead strengthen domestic supply chains. Australia is emerging as a major competitor to Chinese dominance, with recent government funding signaling the country’s focus on producing and processing more of its own rare earths.
Here we take a closer look at Australia’s rare earths sector, and whether it can compete with cheaper producers to strengthen the supply chain.
Rare earth investments in Australia
Australia has seen increasing interest in rare earths, with the government’s recently released budget stating it will invest A$556.1 million ($367.88 million) over the next decade to “progressively identify” Australia’s potential for critical minerals to bring”.
“Critical minerals are the oil barrels of the 21st century,” said Martina Raveni, associate earth sciences analyst at Global Data. “Access to rare earth elements (REEs) is key to economic prosperity and national security.”
As part of this initiative, the government announced an A$840 million investment in Arafura’s Nolans rare earths project in the Northern Territory in February. The money will be used to establish a rare earth mine and processing facility that could eventually provide a hub for all domestically produced rare earth ore.
With Australia currently sending much of its rare earths to Malaysia and South Korea for processing, setting up its own separation site could be a game changer in terms of positioning the country as a global supplier of clean energy technologies.
Speaking about the investment, the Minerals Council said the project could put Australia “at the forefront” of sustainable mining and processing of rare earths.
Building rare earth processing in Australia
“What the Australian mining sector normally does is take stuff out of the ground, send it overseas for processing and then buy it back at a huge profit,” said Peter Junk, professor of chemistry at James Cook University.
“We don’t really have a manufacturing industry that supports this development, but there is a new drive to set this up. This new investment of A$840 million may sound like a lot, but it will keep the manufacturing industry going for quite some time.”
It has never even been a question whether Australia has the resources to position itself on the global rare earths stage.
The A$840 million loan comes two years after another miner, Iluka, was awarded A$1.25 billion to build a rare earths refinery in Western Australia (WA). It also comes a year after Lynas, the world’s largest rare earths producer outside China, received A$20 million to develop a rare earths site at Mount Weld in Washington.
Carl Spandler, professor of earth sciences at the University of Adelaide, says Australia’s potential in the rare earths sector is “huge”.
“Australia is one of the few countries outside China with an active REE mining sector,” he adds. “The Mount Weld deposit alone accounts for approximately 5% of the world’s supply of REEs. Much of the continent is currently unexplored for REEs, in part because new ore deposit styles are only just being recognized.”
Competition with China
According to the Institute for Energy Economics and Financial Analysis, China currently accounts for 70% and 85% of global rare earth mining and processing capacity, respectively. However, the market has opened up recently as a drop in Chinese demand for the materials caused prices to fall, with Lynas reporting a 74% drop in half-year profit in February.
The recent crash has prompted Western governments to step up efforts to regain control of the market – a tempting opportunity given the widespread belief that the full potential of rare earths remains untapped.
Junk believes that, with the latest injection of government funding, the future of Australia’s rare earths sector “looks bright”.
“Australia has gained about 10 to 15% of the global market in the last five years,” says Junk. “That’s market share being taken from China because there are a lot of places in the world that would rather interact with countries like Australia. With this money injected by the Australian government, these separation sites will be operational in a year or two, and that has the potential to double production.”
What more can Australia do?
While Australia is not expected to ever be able to surpass China in terms of production, the country will ramp up production enough to gain independence over its rare earth supply chain and meet a significant portion of global demand.
“China has vast reserves, technical know-how, established processing into production chains and cheap labor, but Australia has the advantage of being a reliable and ‘ethically produced’ supplier (to Western countries),” says Spandler.
“The latter will become more important as the mining industry becomes increasingly responsible and responsible for sharing wealth and created opportunities with stakeholders. Instead of competing directly, Australia can somehow offer a slightly different product.”
Similarly, Raveni says Australia has “what it takes” to compete with China, even though the rare earths industry is less developed, but government funding, regulatory support and international cooperation are essential.
Simply having the right reserves is “insufficient” for Australia to position itself on the global critical minerals stage, she adds, with continued investment in downstream processing capabilities a cornerstone of establishing the country as a global supplier.
“While well positioned from a critical mineral reserves perspective, Australia’s strategy is lagging behind in becoming a supplier of choice for the downstream global market,” Raveni said. “More investments need to be made in processing and production capabilities.”
While Australia may never surpass China, the future for its rare earths sector looks bright. With recent investments set to lead to renewed progress in the national manufacturing sector, it will soon become clear whether the country’s capabilities can match its ambitions.
“Can Australia step up its rare earths game?” was originally created and published by Mining Technology, a brand owned by GlobalData.
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