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Government commits $240 million to critical minerals projects in mission to end Australia's reliance on China

By John Coyne

Dr John Coyne speaks to ABC's Henry Belot. 

The Australian outback has become the stage for a renewed push to safeguard the future of western industries and break a near complete reliance on critical minerals from China.

China produces and supplies almost all the minerals used in the production of renewable energy products, mobile phones, electric vehicles and even the batteries used in the US joint-strike fighter.

The federal government will today announce $240 million to develop a rare earth minerals industry in Australia with senior ministers openly listing China as one reason to do so.

"China currently dominates around 70 to 80 per cent of global critical minerals production and continues to consolidate its hold over these supply chains," Energy and Industry Minister Angus Taylor said in a statement.

"This initiative is designed to address that dominance."

Australia has enormous volumes of rare earth minerals but until now no domestic production capacity has been built, partly because China has refined the minerals cheaply, despite environmental criticisms.

 

Strategic concerns about China's market dominance have increased since Moscow's invasion of Ukraine, which exposed Europe's reliance on Russia for energy.

"We know that Russia provides very large amounts of thermal coal and gas into Europe and that is now a strategic challenge for them — we want to make sure Australia is never in that position," Resources Minister Keith Pitt said.

"We do need to ensure that no matter what we do, we make sure that these concentrated supply chains in some areas that we currently have do get broken up into the future."

The funding announced today includes $30 million for a rare earth minerals separation plant run by Arafura Resources in Central Australia.

Arafura managing director Gavin Lockyer said its Nolan's Project near Aileron would harness one of the world's biggest stockpiles of neodymium-praseodymium, which is used to make incredibly strong magnets used in wind turbines and solar farms.

"[Nolan's] will be Australia's first vertically integrated project of its kind and world's second biggest non-China source of rare earths, processing on site to meet more than 5 per cent of global demand," Mr Lockyer said.

Australian miner Lynas, which produces rare earths for electric cars and Tomahawk cruise missiles, was recently given final approval to construct a rare earth refinery in Kalgoorlie.

Lynas has moved some of its operations outside its production base in Malaysia, where it has faced sustained criticism from environment groups.

Given the strategic risk posed by China's market dominance, the United States military has taken a financial interest in Lynas, providing initial funding for a processing plant in Texas.

'We've definitely been asleep'

In 2019, China threatened to ban exports of rare earth minerals to the United States during a protracted trade war with Washington.

The threat would have hit the production of military equipment along with a booming renewable energy industry.

Rare earths are an essential ingredient for technologies including wind turbines.(Supplied: Michael Abrahams)

Dr John Coyne, an analyst at the partially Defence funded Australian Strategic Policy Institute, said other strategic allies had been targeted too.

"Ten years ago, China reduced the availability of rare earth to Japan in punishment over issues to deal with the South China Sea," Mr Coyne said.

Mr Coyne said western nations were increasingly abandoning free market thinking to address the strategic risk.

"I think this is one of those cases where if we don't want to be exposed and have vulnerable supply chains then there is a need for the government to intervene in the economy and promote national resilience," Mr Coyne said.

"[China has] done a great job at being able to supply everything the western world needed — whether it be metals or magnets — and they supply them a lot cheaper than what the western world would be able to produce."

The head of one rare earth minerals company, Northern Minerals, told the ABC the strategic vulnerability was significant.

"China could stop any time in the next three to five years exporting anything to do with heavy rare earths (…) and only supply internal to Chinese industries," chief executive Mark Tory said.

"We've definitely been asleep but the reason we've been asleep is because [China] has done a great job at being able to supply everything the western world needed."