Critical future for SA as rare earths are talk of the town
Rare earths and critical minerals are in the spotlight after the Prime Minister and United States President focused on their future in recent discussions. Credit Union SA Chair of Economics at UniSA Susan Stone digs into the opportunities for SA.
Anthony Albanese’s recent trip to Washington has introduced the term ‘critical minerals’, and more specifically, ‘rare earths’, to many Australians. When China threatened to curtail access to these minerals in its most recent move in the ongoing US trade war, Albanese knew he had a real chip to play in Washington – Australia’s rich deposits of these minerals including lithium, copper and cobalt.
What are critical minerals?
As the name implies, they are minerals that are critical to the production of many goods and services we use every day. Critical minerals are geologically distributed across the globe but reserves can be concentrated and difficult to access. Rare earths are a subset of critical minerals and have become vital elements in today’s markets. While not used in large amounts, they make the things we’ve come to rely on, work. They are used in everything from smartphones to medical equipment, wind turbines to guided missiles and drones.
The name, rare earths, ironically, doesn’t come from their geological scarcity but rather the cost of their production limiting the supply.
Australia is a key market in these minerals, and a major supplier of lithium and copper. And while South Australia has lithium deposits, the vast majority comes out of WA. Copper on the other hand, is a major commodity of South Australia, which we export at twice the rate as iron ore. South Australia’s copper exports increased almost 10 per cent in the past year.
Global production of rare earths, things like lanthanum, cerium, and thulium, was 350,000 t in 2023 with China producing over 70 per cent, followed by the US, Myanmar, Australia and Thailand. Production from Australia was primarily from Mt Weld in Western Australia whose concentrates are processed at a facility in Malaysia.
What was the deal?
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The US and Australia have agreed to invest almost AUD$5 billion dollars in critical mineral projects in the next six months, with the recoverable resources in the projects estimated to be worth over AUD$80 billion dollars. The US is issuing more than AUD$3.4 billion dollars in financing, which is expected to unlock up to AUD$8 billion dollars of total investment, to advance projects between the two countries.
The US has also pledged to invest in the construction of a 100 metric ton-per-year advanced gallium refinery in Western Australia. While no specific plans for South Australia have been announced, technological and processing advancements from this venture could be made available to projects here.
Finally, the two countries agreed to expanded defence cooperation which includes ‘enhanced burden sharing’ i.e. cost sharing and technological development all of which relies on critical minerals. This includes a joint space project to establish joint initiatives in AI, quantum, and other critical technologies.
What are the possibilities for South Australia?
While most known critical mineral deposits are in Western Australia, South Australia does have the potential to play a significant role. There are opportunities to establish a rare earth industry in South Australia, producing not only rare earth concentrates but value adding through further processing. At present, Australia produces rare earths from a single mine, Mt Weld in WA, with the Eneabba Rare Earths refinery first production expected in 2027. The Eneabba refinery is being designed to deal with heavy mineral sands, such as can be found in Jacinth-Ambrosia in South Australia.
In South Australia, rare earth deposits have traditionally been seen as secondary to mining of copper, gold and iron ore. Olympic Dam has one of the largest rare earths deposits globally, with an unofficial Mineral Resource estimate of 10,400 Mt. While the area has been identified as having great potential, there is still much to be known about the size, accessibility and quality of these deposits.
The economic viability of rare earth deposits in Australia is likely to be higher for deposits that are relatively easier to process. For this reason, the Murray and Eucla Basins in South Australia have good prospects related to their heavy mineral sand deposits. There are possible minable rare earth deposits in the eastern margin of the Gawler Craton and the Curnamona Province, including deposits in Olympic Dam, Carrapateena and Kalkaroo.
However, extraction of rare earths from these types of deposits is technologically challenging. The viability of these types of deposits may improve with future advances and experience gained from the discovery of large deposits with relatively simple mineralogy, such as at Nolans Bore in the Northern Territory.
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Finally, Clay-hosted rare earth deposits are the focus of many companies operating in South Australia. While it is difficult to predict where these might occur, the most prospective domains appear to be in areas such as Gawler Craton and Koppamurra. South Australia’s geography presents significant exploration opportunities and the potential for low-cost extraction and low environmental impact of this exploration. However, it requires the funding to undertake these endeavours.
So what’s the problem?
Mining and processing critical minerals, especially rare earths, is expensive, difficult, and can be environmentally catastrophic. Mining rare earths releases toxic chemicals into the environment, not to mention removing topsoil and creating a leaching pond. These ponds are full of toxic chemicals that may leak into groundwater when not properly secured.
The demand for many of these minerals is tied to the drive to reduce emissions and increase the use of renewable technologies that rely on them. However, if there is a change in policy (as we’ve seen in the US), will the demand be sustainable? The significant costs of exploration and extraction can only be justified when there is a reliable market.
There is also current market conditions. Two examples can be seen in copper and nickel.
The Chinese copper industry, in its attempt to dominate global markets, is running at a loss with the support of the Chinese government. Thus, competing with these firms, anywhere in the world, in building and running a smelter is very difficult. China recently cut copper production due to concerns about overcapacity and declining prices due to its policies, much the same as has been experienced in the aluminium and steel industries.
Another example is the collapse of the Australian nickel industry after the market was flooded by Indonesia, where it’s cheaper and easier to mine and refine the mineral, at a significant cost to the environment.
Chinese dominance across the critical minerals sector allows them to generate huge price fluctuations by controlling the supply. When companies, concerned about this concentration, began to undertake the significant investment needed to provide alternate supply, China would simply flood the market, lowering the price causing these investments to lose commercial viability. By the 1990s, China began to impose production and export controls on rare earths. When these controls were ruled unlawful at the WTO, China began to limit who could mine these minerals, shutting down dozens of small mining and refining operations, consolidating its control of the market. The producers left, largely state-owned, could now easily control the supply and demand.
By consolidating its control, China has also been able to invest in production technology such that its processes and equipment are now far more advanced than what can be found elsewhere. Indeed, there is concern that the wave of new, government-backed rare earths projects that are to come as a result of the Trump agreement will face higher construction costs because Chinese manufacturers will deliberately starve Australian and American projects of the equipment and inputs they need.
Where to from here?
The fact that current market conditions make private investment alone unviable implies the need for government intervention. And while the US and China have agreed to a temporary truce, the need to ensure a more diverse supply of critical minerals is essential to today’s economies that have come to reply on advanced technologies and who want to progress with a emission-reduction agenda.
In this sense, the agreement reached between Australia and the US is vital. And while, true-to-form for the Trump Administration the agreement is only a framework, it still provides enough backing for companies to undertake this investment, making the exploration and exploitation of the vast potential in South Australia economically viable. However, further support will be needed to ensure the deposits that are identified are mined and processed in a sustainable way.
Susan Stone is the Credit Union SA Chair of Economics at UniSA.
