Australia’s mineral wealth should become a formal pillar of the AUKUS alliance, says Kim Beazley

Australia’s resources industry should be a spearhead of the nation’s alliance with the US and the UK, says the former federal defence minister.

Australia’s mineral endowment should make the resources industry one of the “spearheads” of the nation’s alliance with the US and the UK, according to former federal defence minister Kim Beazley.

Mr Beazley, the Hawke Labor government’s defence minister, argues in a new paper that funding for critical minerals mines should become a key plank of the AUKUS alliance.

The paper authored by Mr Beazley and former defence adviser Ben Halton, to be released by the Australian Strategic Policy Institute on Thursday, says Australia’s deposits of critical minerals should become a key pillar of the AUKUS alliance in order to avoid the risks posed by China’s domination of the processing and refining of rare earths and other strategic commodities.

The paper says that would require sizeable government investment in backing Australian mines and refineries as part of broader moves to “hedge” against China’s military build-up and increasingly assertive role on the global stage.

While the current investment boom in minerals, such as lithium, rare earths, graphite and other commodities, has been seen by investors as a play towards the vast demand likely to be created by moves to decarbonise global electricity grids and transport networks, Mr Beazley says defence considerations should also play a significant role in the development of a future Australian mining and processing industry.

“Viewing critical minerals as enablers of lucrative civil sectors may inadvertently obscure other important national-security dimensions,” the paper says.

“Lithium isn’t just for batteries, even though batteries account for 74 per cent of its global end-use market.

“It’s also essential for armour, airframes, jet engines and nuclear reactors too. And tin isn’t just for roofing; it’s also critical for alloys and semiconductors for ‘dual-use’ (military and civilian) applications.”

The paper, titled “AUKUS and critical minerals: Hedging Beijing’s pervasive, clever and co-ordinated statecraft” says AUKUS members should directly co-invest in Australian mines, help bankroll their development through offtake agreements and use strategic stockpiles to help ensure they stay in business in the face of Chinese competition.

“AUKUS capabilities, and the rules-based order that they uphold, depend heavily on critical minerals,” the paper says.

“China eclipses not only AUKUS for processing those minerals into usable forms, but the rest of the world combined.

“Without critical minerals, states are open to economic coercion in various technological industries, and defence manufacturing is particularly exposed to unnecessary supply-chain challenges.

“The solution is for AUKUS and its partners to engage Australia as the spearhead of mineral diversification.”

The paper praises the strong support shown to Lynas Rare Earths by Japan’s state-backed lenders, which effectively kept the company – the only major non-Chinese source of rare earth oxides – in business when China cut prices a decade ago.

It says AUKUS partners need to take similar steps to open up other parts of the global supply chain.

Mr Beazley says in the paper that the three governments should make breaking China’s dominance of a sector a key priority, and “agree on co-investments with allied partners to scale up mineral projects”.

“Each might need to fund project milestones totalling in the order of $US5bn spread over five to 10 years,” the paper says.

“AUKUS will never realise secure critical-mineral supply without sizeable government investment and strategic intervention from it and potentially other partners.

“That’s because profit is the underlying basis for private-sector investment.

“Private investors have negligible interest in managing geopolitical risk, bar for wealth creation.”

Originally published as Australia’s mineral wealth should become a formal pillar of the AUKUS alliance, says Kim Beazley