The importance of rare earths has prompted Western governments to intervene in the market in an effort to shore up alternative supply chains.
Ken Brinsden had a crystal ball moment at last year’s Diggers & Dealers when he raised the idea of a single-desk marketing strategy for rare earth elements.
The veteran mining engineer, former head of Pilbara Minerals and now chief executive of Patriot Battery Metals, told the press pack that strategically setting a price and then buying the material could facilitate upstream investment and shore up Western supply.
When asked his opinion of the political rhetoric around the then-proposed production tax credits amid the lithium and nickel price collapse, Mr Brinsden took a leftfield turn.
“Let me answer it this way: what would I do? I would establish the equivalent of the wheat desk,” Mr Brinsden said.
“I would set a price in the market that I thought represented a reasonable rate of return to the average rare earth company.
“If it’s truly strategic, you would set that price and you would buy that product to facilitate the investment that’s required upstream.
“In the absence of an intervention, there will be no Western supply response, because China doesn’t play by our rules.”
Australia’s single-desk marketing system for wheat was introduced in the late 1930s to stabilise prices and coordinate food exports amid the global uncertainty following the Great Depression.
Under the model, international exports were regulated, prices were averaged and returns pooled and redistributed to growers by the Australian Wheat Board.
The arrangement was privatised in 1999 by the board’s successor, AWB Limited, but the Iraq kickbacks scandal of the early 2000s led to the scheme’s abolition in 2008.
At the 2024 Diggers, Mr Brinsden explained his view with a reference to international market realities.
“I’ve come to the conclusion that the rules by which China plays the raw materials game actually can’t be beaten by the West,” Mr Brinsden said.
Similarly, former Western Australian governor and federal defence minister Kim Beazley used his Diggers keynote last year to stress the important of securing the nation’s supply of rare earths, pointing to the significance of their defence applications to Australia’s allies.
He told delegates the government should be the buyer of the processed materials and create stockpiles in order to make the rare earths dream a reality.
Landmark move
Twelve months, two elections, and a trade war later, Mr Brinsden and Mr Beazley’s words proved prophetic.
China – which has the monopoly on rare earths production and processing – imposed export restrictions on heavy rare earths terbium and dysprosium in response to US tariffs introduced in April.
The flow of rare earth products dried up and exposed the fragility of some supply chains, particularly apparent when car maker Ford was forced to temporarily halt production after struggling to get its hands on the end product, rare earth magnets.
In a move thought to be unprecedented since WWII, the Pentagon made a landmark equity investment in one of the only two rare earth producers outside of China.
The US Department of Defence (DoD) is investing $US400 million in MP Materials to secure its supply of rare earths, critical to advanced defence and renewable technologies.
It gives the Pentagon a 15 per cent stake in owner of the Mountain Pass rare earth elements mine in California, and the option to become the biggest shareholder.
The DoD is setting a price floor for the neodymium-praseodymium (NdPr) it’s planning to buy at $US110 per kilogram; almost double current prices between $US60-70/kg.
The investment is designed to back MP Materials to build a second US magnet manufacturing facility for defence and commercial customers.
But MP Materials still has a mountain to climb to bolster its production capacity and build a second facility.
Mr Brinsden’s prescience from 2024 was crystalised when Resources Minister Madeleine King flew in to the 34th Diggers & Dealers conference earlier this month.
Ms King was pressed for details on the $1.2 billion critical minerals stockpile pledge made in the hours after the US’s ‘reciprocal tariffs’ were introduced earlier this year.
In response, she didn’t rule out a move similar to that of the US.
The stockpile was pitched as a reserve of a priority sub-set of critical minerals built through national offtake agreements for the government to sell to international partners.
“It means Australia has the power to sell at the right time, to the right partners, for the right reasons,” Prime Minister Anthony Albanese said at the time.
Speaking at Diggers, Ms King said the government was considering a wide range of measures, including offtake agreements.
And she refused to rule out the government taking a stake in a local rare earths player, as the US DoD had done.
Notably, however, she did not confirm such a measure would proceed.
“I would say that governments are special investment vehicles. A number of them have been enabled through changes in legislation to take equity stakes for a number of years, but it’s a high bar to get over,” Ms King told press at Diggers.
“You certainly wouldn’t rule it out.
“We’re talking to people who have good ideas.
“The industry has clearly been thinking about this in depth for some time, and that’s because of the challenges the critical minerals industry faces with an international market that’s opaque, subject to manipulation, and therefore, some of these projects are really challenging to get off the ground.”
Ms King acknowledged the government had to step up.
“We have to take on our responsibility to lead on critical minerals and rare earths globally,” she said,
“Otherwise, we will have a supply chain that is simply one way.”
Her words galvanised the local rare earth developers at the conference in a year dominated by gold, as the spotlight on the critical mineral fuelled a share price rally (see graph left).
Darryl Cuzzubbo presenting at the Diggers & Dealers forum in Kalgoorlie.
Ultimate prize
Arafura Rare Earths is developing its Nolans rare earth project in the Northern Territory, which chief executive Darryl Cuzzubbo considers the nation’s next rare earth project.
Mr Cuzzubbo broadly welcomed government support that he sees as going a distance in dismantling China’s stronghold and shoring up a home soil industry.
But he describes himself as more of a free marketer.
“If we can have a functioning rare earth sector, which is means a functioning rare earth price, then it’s really up to business to work out how to thrive or survive,” Mr Cuzzubbo told Business News.
“I think the Australian government’s role is and has been to support us getting up, knowing we’ve had China controlling our NdPr prices.
“It’s a risk investors typically don’t have to deal with, right? With the Australian government support, they have helped to de-risk that.
“But the ultimate prize is having a functioning NdPr index. [T]he Australian government, through the strategic reserve, can actually bring that about.”
Referring to the US government’s deal, Mr Cuzzubbo said the White House setting a price floor effectively broke the mechanism by which China had controlled the rare earth sector.
He said the sector shifts were occurring sooner than he expected.
“I always believed there would be a functioning NdPr price index, but I saw that happening in two or three years’ time,” Mr Cuzzubbo said.
“I never imagined it would be happening now, and so quickly.
“This is wonderful news for us.
“I always expected it to happen when there was a structural supply deficit, where China could no longer meet the global demand. That’s two or three years away.
“We never expected the US to intervene so decisively.”
Nolans will take three years to build, and Arafura is closing in on its funding requirements for the $1.7 billion project.
It’s backed domestic and international export credit agencies and commercial lenders, including a combined $1 billion from Australian government coffers so far.
The developer also has Australia’s richest person on the share register.
Gina Rinehart’s rare earth portfolio includes locals Arafura and Lynas Rare Earths, along with a stake in MP Materials.
Lynas and MP were tied up in talks over a $10 billion merger of the two rare earth producers outside of China last year, but the deal came to nought after the companies failed to agree on terms.
Mrs Rinehart’s foray into rare earths, of which her portfolio is now valued in excess of $1 billion, is aligned with her public support of the Trump administration.
The most significant Australian government investment in rare earths to date has been the $1.65 billion of support for Iluka Resources’ Eneabba refinery.
Iluka is building the rare earth refinery north of Perth to be fed from its own stockpile and concentrate from third parties, including a deal with Arafura.
Iluka recently signed a supply deal for rare earth concentrate from Lindian Resources’ under-development project in Malawi, which would introduce international feed.
Iluka boss Tom O’Leary told the market the deal was an example of Iluka catalysing a new mine into production and came against a backdrop of growing emphasis on diversifying the supply of rare earths globally.
Slipstream
The federal government has launched a taskforce for its critical minerals stockpile, with Australian Strategic Materials chief executive Rowena Smith among those being consulted.
Its widely anticipated rare earth elements will be included in the stockpile, but the government is yet to declare which of the other 30 critical minerals will make the cut.
Some lithium producers are sceptical their volatile commodity will be included.
ASM owns the Dubbo rare earth project in NSW, where recent changes to its development plans are expected to significantly reduce its capital costs.
Its main game is its South Korean metals plant, from which it recently delivered its first batch of heavy rare earth metals to magnet maker Neo Performance Materials.
Next on ASM’s agenda is an expansion into the US; a plan Ms Smith said was in motion well before the current urgency but was orchestrated in anticipation of it.
“We understood there was a vulnerability in these supply chains and that the world needed diversity and it needed an alternative,” Ms Smith told Business News.
“We have always designed our strategy going from mine-to-metals in order to be part of that solution.
“For us, when the awareness of that vulnerability turned to urgency with the geopolitical issues that we’ve seen in recent months. That was great, because now people wanted something and they wanted it immediately.”
ASM executives have been scouting a location for a second metals plant, with Oklahoma, South Carolina, Louisiana, Georgia, Utah and Texas in the US all options under consideration.
The company is waiting on a call from the US DoD regarding financial support for construction of the metals plant.
In terms of the current uncertainty in the US flowing from the US administration’s mercurial economic interventions, Ms Smith managed to cherry pick some positive elements among all the noise.
“The volatility around all of that adds complexity, but I think rare earths is a bit of a slipstream in all of that volatility,” she said.
“There’s a very consistent, strong message from the administration about wanting manufacturing done in the US, and about wanting domestic supply chains, specifically for rare earths.
“We are not seeing any real shift in the availability of these materials. The export restrictions that are there for the heavy rare earths from China are still in force.”
Ms Smith said there were myriad factors driving the momentum in the sector, pointing to China’s annual quotas being kept under wraps this year.
Lynas Rare Earths has secured $US288 million from the US DoD for the development of its Texas heavy rare earths processing facility.
The Amanda Lacaze-led miner has been in discussions with the White House over additional capital to pursue a different path for the project, which has faced setbacks.
Ms Lacaze, who was among the notable absentees from this year’s Diggers & Dealers, has been critical of the Australian government’s stockpile proposal, having previously asserted it could prop-up uneconomical projects and undercut her business.
Her criticism was in stark contrast to the chorus of compliments from fledgling rare earths and critical minerals developers after the detailscarce stockpile plan was announced in April.
Upon the stockpile announcement, Victory Metals chief executive Brendan Clark said the strategic reserve would contribute to price stability and enhance competitiveness.
Victory, which counts former WA minister Alannah MacTiernan as an adviser, is developing the North Stanmore heavy rare earths asset north of Cue.
Fellow developer Northern Minerals’ boss, Shane Hartwig, said the DoD-MP deal signalled that Western governments were ready to wrest back control.
He said there was clear agreement from the US and Australian governments on the need for intervention to facilitate development and secure supply chains.
But it’s not just those allies pushing for Western supply, with the G7 nations backing a Critical Minerals Action Plan and other nations like South Korea and Japan ramping up efforts.
