Rare Earths, Real Moves: Australia’s Rare Earths Independence Strategy

Australian government investing in rare earths

Looking at the Australian government's rare earths financing efforts, Benchmark Source points to the National Reconstruction Fund's (NRFC) January commitment of AU$200 million for the development of Arafura Rare Earths' (ASX:ARU,OTC Pink:ARAFF) Nolans rare earths project, located in the Northern Territory.

“The NRFC’s cornerstone commitment is part of Arafura’s broader capital raise and will help catalyse the raising of the remaining funds required to commence project development,” the NRFC said at the time.

Nolans is set to be Australia’s first ore-to-oxide rare earths processing operation. Arafura said it is expected to account for around 4 percent of the world’s neodymium and praseodymium (NdPr) demand from 2032.

Benchmark Source also notes that Iluka Resources (ASX:ILU,OTC Pink:ILKAF) received AU$400 million of additional funding from the Australian government in December, granted for the Enneaba rare earths refinery.

According to Iluka, the refinery will establish Western Australia as a strategic hub for the downstream processing of rare earths. It is expected to produce neodymium, praseodymium, dysprosium, terbium and more starting in 2027.

In addition, this past November, Lynas Rare Earths (ASX:LYC,OTC Pink:LYSCF) opened its Kalgoorlie rare earths processing facility in Western Australia. It is the country’s first rare earth processing facility and the largest facility outside China. Kalgoorlie received AU$20 million from the Australian government in 2023.

“As the only significant ex-China producer of separated rare earths, Lynas plays an important role in the global rare earths supply chain,” Lynas CEO and Managing Director Amanda Lacaze said at the time.

For its part, Australian Strategic Materials (ASX:ASM,OTC Pink:ASMMF) received AU$5 million for its Dubbo rare earths project under the Australian government’s International Partnerships in Critical Minerals Program last October.

The US also made a financing commitment to Dubbo, with the US Export-Import Bank signing a US$600 million non-binding letter of interest with Australian Strategic Materials to help progress the project.

Pursuing partnerships outside Australia

In May 2024, Australia and the EU signed a memorandum of understanding regarding a bilateral partnership to cooperate on the supply of sustainable critical and strategic minerals.

A release notes that Australian products, which have high ESG standards, are ideal to supply the EU market.

In September of last year, Australian company ABX Group (ASX:ABX) made a deal with Ucore Rare Metals (TSXV:UCU,OTCQX:UURAF) to establish a binding offtake agreement for the supply of mixed rare earth carbonates from Australia to the US through enhanced collaboration.

In previous years, Australia has made other significant deals with the US on critical minerals.

In 2019, Geoscience Australia CEO James Johnson and US Geological Survey Director Jim Reilly formed a partnership aimed at helping to develop both nations’ critical mineral assets.

According to a press release, they agreed to take certain steps in strengthening an existing memorandum of understanding by collaborating on research and increasing critical minerals capacity for both countries.

What else is Australia doing to support critical minerals?

Data from the US Geological Survey shows about 390,000 tonnes of rare earths were produced globally in 2024.

China remains the major producer at 270,000 tonnes, accounting for almost 70 percent of the global production rate. Australia produced 13,000 tonnes, which is 3,000 tonnes lower than its production in 2023.

In a 2023 report, Dr. John Coyne, director of national security programs at the Australian Strategic Policy Institute, underlines that effective coordination between Australia’s state, territory and federal governments, as well as mining and industry, and international partners “will be pivotal to developing” the country’s critical minerals.

Industry experts have warned how additional environmental and Indigenous consultation requirements could cause uncertainty and duplicative processes. The Minerals Council of Australia and the Association for Mining and Exploration Companies highlight the need for precise guidelines to safeguard the development of the critical minerals industry.

On February 12, Australia passed the Critical Minerals Production Tax Incentive, which will provide a refundable tax credit on 10 percent of eligible costs associated with the production of critical minerals and rare earths.

“The incentives are valued at AU$7 billion over the decade,” said Federal Resources Minister Madeleine King.

“The passing of this legislation is a historic moment for the resources industry and a big deal for resource states like Western Australia and Queensland,” she added. “By processing more of these minerals here in Australia we will create jobs and diversify global supply chains.”