Rare earths refiner Iluka says PM’s plan a crucial link in Western critical minerals supply chain

Tom O’Leary says onshore processing is crucial to plans to counter China with a critical minerals reserve. But which projects, and what minerals will be included, remains unclear.

Iluka Resources' rare earths tailings project at Eneabba in WA.

Iluka Resources boss Tom O’Leary says China’s near monopoly in rare earths poses a clear threat to Western nations as his company readies to play a key role in creating an Australian critical minerals strategic reserve.

Iluka’s part-built rare earths refinery at Eneabba in Western Australia has taken on greater strategic importance since China’s move to weaponise rare earths in response to tariffs wielded by the Trump administration.

Mr O’Leary highlighted China’s control and manipulation of rare earths supply as he welcomed moves to create a strategic reserve on home soil. Labor has said it will create the facility and pump an additional $1bn into the Critical Minerals Facility set up by the Morrison government if it is returned to office on May 3. This will happen even if it runs the risk of antagonising China.

“We look forward to participating in the policy design process as there’s quite a bit of detail to be worked through, including how minerals will be priced and the value addition threshold that will apply,” Mr O’Leary said.

“From a rare earths perspective, it’s imperative that the reserve, and other government policies, are aligned to foster an Australian rare earths refining industry, as distinct from promoting the export of concentrates and other unrefined intermediates, with the refining being done overseas.”

Prime Minister Anthony Albanese in Perth on Thursday. Picture: Getty Images

Mr O’Leary warned allowing the export of part-processed rare earths would empower China and tighten its stranglehold on supply.

Iluka has received $1.65bn in taxpayer funding to build Australia’s first fully integrated rare earths refinery with the initial funding signed off in the dying days of the Morrison government and an additional $400m loan shelled out under Labor.

Prime minister Anthony Albanese and resources minister Madeleine King made specific references to light and heavy rare earths in talking up the plan for a strategic reserve aimed safeguarding Australia’s sovereign interest and those of its allies.

China produces around 90 per cent of all rare earths and, of the key heavy rare earths, including dysprosium and terbium, effectively 100 per cent. These materials are essential for defence systems, robotics, electric and hybrid vehicles and renewable energy technologies.

Mr O’Leary said that Iluka would provide a secure source of refined rare earth oxides through its existing partnership with the Australian government.

“We’re an established minerals processor that will be mining, processing and refining rare earth oxides in Australia. This is the security of supply of refined products that will be the foundation of an independent Western supply chain that is clearly required,” he said.

“China’s monopoly is the result of a deliberate approach over several decades, while the West focused on price only and ignored security of supply.”

He described how China has placed export controls on medium and heavy rare earths and consolidated its industry into three national champions.

Iluka Resources' rare earths tailings project at Eneabba in WA.

The Iluka refinery would produce light and heavy rare earth oxides, including dysprosium and terbium which are used in missile guidance systems.

Labor’s plan for a major intervention in the critical minerals sector means it will help underwrite the development of some projects, but which ones, and what minerals will be included, remains unclear.

Under the proposal, the government would sign voluntary offtake agreements with producers of select critical minerals, and in some cases stockpile materials considered important to national security.

 

Chamber of Minerals and Energy WA chief executive officer Rebecca Tomkinson said voluntary offtake agreements that allowed producers to lock-in stable and predictable revenue may assist bringing projects to market by enhancing their attractiveness to investors.

“However, it is critical the offtake agreements offer a fair price reflective of Australia’s high ESG standards,” she said.

The Australian government could opt to use any strategic reserve as a bargaining chip in trade and tariff negotiations with the US.

“The refinery will be commissioned in 2027 and, at that point, it will be the only material Western world producer of refined heavy rare earth oxides,” Mr O’Leary said.

“The threat posed to Western and like-minded manufacturing by China’s monopoly has been self-evident for some time. Importantly, we will not be linking the price of our rare earths to the Asian Metals Index, which is one additional means through which China exercises its market control.

“Instead, we’re working with customers to develop a pricing approach that values secure, sustainable supply.”

 

Iluka plans to process stockpiles of tailings rich in rare earths it has leftover from mineral sands mining, but also has a supply agreement with Northern Minerals for heavy rare earths from its Browns Range project in WA.

The government has ordered investors with China links to divest shares in Northern Minerals.

Northern Minerals chief executive Shane Hartwig said Labor’s move was another clear signal that Australia was committed to its resources producers and fostering non-China supply chains.

“There is growing recognition around the world of the importance of heavy rare earths and the need for a diversification of global supply chains,” he said.

“With the right policy settings and government support, Australia has a unique opportunity to establish a reliable and responsible supply of rare earths, including the key heavy rare earths of dysprosium and terbium from Browns Range, which will strengthen domestic capability and help diversify global supply.”

Arafura Rare Earths, which is developing the Nolans project near Alice Springs with backing from Gina Rinehart and taxpayer support, was also enthusiastic.

Arafura boss Darryl Cuzzubbo said the reserve would give Australia a significant strategic advantage as global trade rules and patterns were rapidly rewritten.

He said it was abundantly clear that China’s control of supply provided an “outsized level of influence in defence, electronics, EVs, wind turbines, robotics and other consequential sectors”.

Lynas Rare Earths declined to comment.

Originally published as Rare earths refiner Iluka says PM’s plan a crucial link in Western critical minerals supply chain