CRITICAL MINERALSMaking the Most of Australia’s Endowment of Critical Minerals
The geostrategic scramble to reduce supply-chain dependencies for critical minerals has overshadowed opportunities for Australia to use its resources to provide major benefits for the nation.
The geostrategic scramble to reduce supply-chain dependencies for critical minerals has overshadowed opportunities for Australia to use its resources to provide major benefits for the nation. There are clear and achievable pathways for downstream processing of critical minerals to contribute substantially to meeting Australia’s aspirations for net-zero emissions.
As it stands, Australia’s critical minerals sector is shaping as a primary exporter of insignificant scale. ‘Dig and ship’ remains the path of least resistance, and extracted volumes, actual and forecast, won’t make a meaningful imprint on the balance of payments. While some work is being done to change this, it’s mainly at the start of the value chain. The travails that Lynas Rare Earths is experiencing in relocating its processing capability from Malaysia illustrate the challenges Australia faces in developing downstream processing.
There’s no shortage of ambition, however. The Export Finance Agency’s $1.25 billion loan to Iluka Resources to construct a rare-earths refinery at Eneabba in Western Australia marked a renaissance of interventionist industry policy. The decision raised eyebrows in industry and project-finance circles: private capital markets were seen as capable of facilitating a well-established player and the government had until then been broadly averse to picking winners.
The Labor government’s October budget earmarked major initiatives, including significantly increased funding for the Northern Australia Infrastructure Facility and the creation of a ‘value-adding in resources fund’ as part of the $15 billion National Reconstruction Fund. The 2022 critical minerals strategy, developed by the previous government, established a $200 million accelerator initiative and provided $50 million over three years for a virtual research and development center.
A refresh of the minerals strategy is underway that aims to tie these efforts together. The discussion paper released last year by the Critical Minerals Office, while heavily informed by the strategic direction of the US, did a good job of identifying national priorities and outlining the challenges confronting the sector. Its central goal is to move Australia beyond its role as a feedstock for trusted partners that have become deeply dependent on China and Russia.
