The recent $4.6 billion deal between Australia and the US on critical minerals and rare earths will pave the way for an avalanche of investment; however, we are coming from a low base.

Firstly, we must understand the distinction between critical minerals and rare earths. Geoscience Australia lists 17 rare earth materials that are essential to the development of defence and renewable technologies. Critical minerals include lithium, graphite, nickel, cobalt and copper.

These minerals are critical for defence, battery technology, renewable technologies, manufacturing, aeronautics and medical technology.

This has come about because of China’s stranglehold on the extraction, processing, and distribution of rare earths. Over 90% of the world’s production emanates from China. Early in October, China announced it would curb the export of rare earths used in the production of smartphones, jet engines, and renewable energy.

Australia is now being positioned as a circuit breaker in this high-stakes game. The deal envisages each nation investing $1.5 billion initially into selected Australian and US projects. The deal provides a floor on pricing to make it attractive to private investment, given that previous attempts to get this industry up have been met with price-cutting by Chinese companies. Additionally, the deal will block asset sales to unfriendly regimes on security grounds.

So, while the Australian Government will make direct equity investments in Australian processing facilities, the USA will become the primary buyer of the output. Australia will provide quarries and initial processing, while providing a supply line to US factories to add value.

However, there is significant uncertainty involved in a project of this size. Currently, this industry only accounts for 5% of our exports. It takes 10 years to develop a mine from exploration to production, and the pace of development will depend on the rollout of renewable energy, the continued take-up of electric vehicles, and the competitiveness of domestic production.

At this stage, there are more questions than answers, but it’s a start, and the Government is to be commended for getting this deal across the line.

Source: RBA Bulletin, October 2025, The Global Energy Transition and Critical Minerals, Geoscience Australia website.

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