Australia is investing A$1.65 billion ($1.1 billion USD) to build a rare earth processing refinery in Western Australia, aiming to break China’s near-monopoly on these critical minerals. The government-backed loan to mining company Iluka Resources seeks to establish an independent supply chain for minerals essential to electric vehicles, wind turbines, and defense technologies.
Rare earths – 17 elements including dysprosium and terbium – are crucial for modern technologies despite not being geologically scarce. China currently controls over 50% of global mining and nearly 90% of processing, giving it significant geopolitical leverage. This dominance was highlighted when Beijing restricted exports during recent US-China trade tensions, causing production halts at companies like Ford.
The project centers on Iluka’s stockpile in Eneabba, Western Australia – a million-tonne reserve of mineral sands byproducts accumulated over decades. While mining these sands is established, refining rare earths presents technical and environmental challenges. The complex separation process generates radioactive waste, requiring stringent safety protocols Australia claims to enforce through robust regulations.
Timing is critical, with the refinery expected to become operational in two years (2027). This aligns with projected 50-170% growth in rare earth demand by 2030, driven by green energy transitions. Australia positions itself as a cleaner alternative to China, where lax environmental controls have caused severe pollution from rare earth processing.
Geopolitical motivations underpin the investment. Resources Minister Madeleine King called China’s dominance a ‘quasi-monopoly’ weaponized for political leverage, noting that ‘the open international market doesn’t exist.’ The EU (98% reliant on China) and US (80% reliant) view diversified supply as a strategic imperative, especially for defense applications.
Iluka anticipates supplying ‘a significant proportion of Western demand’ by 2030, with automakers already expressing interest. However, economic viability remains challenging without government subsidies due to China’s economies of scale. Environmental management of radioactive byproducts will also face ongoing scrutiny.
The refinery represents Australia’s first major step in a coordinated Western response to critical mineral vulnerabilities. Future developments include potential expansion to other mineral projects and deeper integration with G7 supply chain diversification initiatives. Success could redefine global resource geopolitics while accelerating the green energy transition.