Strategic minerals are the next mining super cycle

The mining industry is on the cusp of catching the big wave of the next super cycle to produce the rare earths and minerals needed to power a lower-emissions world. The rush to find and mine new reserves of strategic minerals is a frontline in the rising geo-strategic competition between the world’s great powers. Diversifying supply lines for the commodities needed for hi-tech products away from China has become an urgent priority for the US. With our deep experience in mining, stable governance and open trading, Australia is ideally placed to enter a new era of strategic partnership akin to the development of the big coal, iron ore and LNG export industries to supply Japan that transformed the mining industry and domestic economy in earlier decades. In a world that says it wants to be less reliant on coal, the minerals needed to store energy and build alternative power systems provide a road map for the nation’s mining future. The lack of clarity about where the vast quantities of these minerals will come from needs an urgent answer.

Newly appointed US ambassador Caroline Kennedy told The Australian’s Critical Minerals Summit on Friday that Australia had the potential to become a global leader in the mining of critical minerals, lithium, rare earths and nickel. “To meet increasing global demand and reach our net-zero emissions, we need industry and government to partner and invest in research and development, workforce development, extraction, processing and manufacturing,” she said.

Jim Chalmers told the conference that developing a rare earths and minerals industry represented the “opportunity of the century”. And Resources Minister Madeleine King said a renewed focus on the extraction and refining of critical minerals needed to become a “national mission”.

It is wrong to see the opportunity, as NSW Treasurer Matt Kean did, through the prism of Australia’s own renewable energy transition. Insisting on a properly planned transition for energy, rather than a chaotic one, is not unreasonable. But Mr Kean is correct to say “you don’t need to believe (in) climate change to believe in capitalism”.

The big mining companies know the market opportunity for rare earths and minerals is not domestic. In executive order 13953 in September 2020, Donald Trump said critical minerals were needed to make aeroplanes, computers, cell phones, electricity generation and transmission systems, and advanced electronics. For 31 of the 35 critical minerals, the US imports more than half its annual consumption. It has no domestic production for 14 critical minerals and is completely dependent on imports. It now imports 80 per cent of its rare earth elements directly from China, with portions of the remainder indirectly sourced from China through other countries. In the 1980s, the US produced more of these elements than any other country, but China used aggressive economic practices to strategically flood the global market for rare earth elements and displace its competitors. Mr Trump said since gaining this advantage, China had exploited its position in the rare earth elements market by coercing industries that rely on these elements to locate their facilities, intellectual property and technology in China.

In an executive order in February, Joe Biden said the US needed resilient, diverse, secure supply chains to ensure prosperity and national security. His government’s Inflation Reduction Act mandates escalating levels of critical minerals to be sourced from the US or a country with a free-trade agreement with the US for carmakers to qualify for tax incentives. The opportunity this presents for Australia is clear and must be seized. Success can never be guaranteed. The existing market has been distorted for strategic ends and the environmental impact will need careful management. The government should not attempt to pick winners but must encourage private enterprise and ingenuity to thrive.