CRITICAL MINERALSAn American View on U.S. Investment in Critical-Mineral Mining in Australia
In May, the United States and Australia signed a compact which, among other things, aims to coordinate policies and investments to support the expansion and diversification of critical minerals supply chains. In this case, diversification basically equates to reducing dependence on China, in which various links in the critical-mineral supply chain are heavily concentrated.
In May, the United States and Australia signed a climate, critical minerals and clean energy transformation compact that establishes a framework for collaboration on climate issues, clean-energy technology and critical-mineral supply chains. It mainly discusses critical minerals in the context of their necessity in manufacturing clean-energy technologies.
The intent of the framework is to ‘coordinate policies and investments to support the expansion and diversification of responsible clean energy and critical minerals supply chains’. In this case, diversification basically equates to reducing dependence on China, in which various links in the critical-mineral supply chain are heavily concentrated. While the compact establishes a new ministerial dialogue, the Forum on Clean Energy Industrial Transformation, and an Australia–US taskforce on critical minerals, the most vital component of strengthening critical-mineral supply chains is investment in critical-mineral projects.
The critical minerals industry often cites a lack of capital as a barrier to stronger and more diverse supply chains. Mines are capital-intensive projects that can cost tens of billions of dollars. Therefore, any compact that seeks ‘an unprecedented expansion’ in critical mineral supplies must provide capital for mines. The need for government capital is further heightened given the lack of private-sector funding for mining.
The compact commits to using ‘domestic financial instruments and incentives to foster greater integration of responsible clean energy supply chains’, which includes critical-mineral supply chains. It also says the US and Australia will seek industry input on financial incentives, and it lists the US Export–Import Bank as a possible financing agency. Notably, in a joint statement with Australian Prime Minister Anthony Albanese, US President Joe Biden said that he would ask Congress to add Australia as a ‘domestic source’ under Title III of the Defense Production Act, enabling Australian projects to access significant US government funds.
Beyond those measures, the compact doesn’t offer funding specifics—but that was always going to come next, with industry input. To ensure the compact’s success, the US should consider a range of policies for funding mines in Australia.
