Floor price possible for Australian critical minerals reserve: resources minister

Australia is considering a floor price and national offtake agreements for rare earths and other raw materials as part of its planned strategic reserve of critical minerals to help alleviate strained ex-China supply chains.

In the lead-up to the May federal election in which his ruling Labor Party was re-elected, Australian Prime Minister Anthony Albanese pledged an A$1.2 billion strategic critical minerals reserve, operational in 2026, in response to US tariffs. Australia is the world's biggest lithium producer and one of the world's only producers of rare earths other than China.

Australia's government has appointed a taskforce to discuss with industry what the reserve will look like, Federal Resources Minister Madeleine King said Aug. 5 on the sidelines of the Diggers and Dealers Mining Forum in Kalgoorlie, Australia.

King welcomed the US Defense Department signing a public-private partnership with MP Materials Corp. in July to establish a domestic supply chain for rare earth magnets including a $150 million loan to expand the Mountain Pass operation in California. The US government also reportedly set a minimum price for rare earths products, starting with Mountain Pass, as part of wider efforts to curb China's market dominance.

A floor price is worth looking at, "especially after the Mountain Pass transaction," but is just "one means of how you establish a reserve. There are many tools that can go into that," King said.

"We've talked about offtake agreements, a stockpile arrangement... and stockpiles can take many forms," King said. While legislation has enabled a number of the government's special investment vehicles to take equity stakes, "it's a high bar to get over, [but] you certainly wouldn't rule it out."

"The industry has clearly been thinking about this in depth for some time... because of the challenges the critical minerals industry faces with an international market that's opaque, subject to manipulation, and therefore some of these projects are really challenging to get off the ground," the minister said.

"Nonetheless, the government has to step up. We have to take on our responsibility to lead on critical minerals and rare earths globally. Otherwise, we will have a supply chain that is simply one-way. That's not good for us as Australia, with a geology that is unique in the world. That can be put to work in the national interest."

King also told Platts on the forum sidelines that whatever mechanisms the reserve will utilize, it "could be a combination of various commodities. It's certainly not limited. And even when we announce what it is going to take at the start, it will probably change over time."

Capability amid competition

Australian Strategic Materials Ltd. has been in discussions with the government about opportunities for the latter to "give some pricing certainty," managing director and CEO Rowena Smith told the media Aug. 4 at the forum.

"The government has a role there. If you've got... a government offtake, but [it] is in a back-to-back supply arrangement with another country... then you've got [to have] some pricing system that ensures that you've got fair pricing," Smith said.

The government is therefore looking at policies that "potentially are a national offtake, but with the intention that it's then on-sold into other jurisdictions," Smith said.

Darryl Cuzzubbo, managing director and CEO of Arafura Rare Earths Ltd., told the forum Aug. 5 that the company is "advocating that any rare earth volumes associated with that strategic reserve should go on a functioning [neodymium-praseodymium] index, such as the [Benchmark Mineral Intelligence] index, as a way of fast-tracking the credibility of that index."

Benchmark added European and North American rare earth oxide prices to its monthly Benchmark Rare Earths Price Assessment on July 31. Cuzzubbo said this "is important because we want the price to reflect the underlying fundamentals of the rare earth sector, and the underlying fundamentals are particularly strong."

Breaking monopolies

King said she has been in talks with the US and other ex-China trade partners on rare earth extraction and processing, "because of the market domination right now of one supplier. This is about competition, about Australia competing in a field we haven't done so before, but which we're eminently capable of."

However, King cautioned that Mountain Pass is the US's only producing rare earths mine, and it only produces light rare earths, not heavy rare earths.

"Up until recently, China has controlled nearly 90% of light rare earths... and 98% to 99% of heavy rare earths," Cuzzubbo said.

Alex Logan, general manager of development at Lynas Rare Earths Ltd., told the forum Aug. 5 that the Australian company had broken China's "monopoly of heavy rare earth separation with a successful on-spec production of separated dysprosium and terbium oxide" in Malaysia this year. Lynas is now the only commercial-scale producer of separated heavy rare earths outside of China, Logan said.

Australia's Pilbara Minerals Ltd., the world's largest independent hard rock lithium producer, is not currently involved in strategic reserve talks but is keeping an eye on the situation. "We stand willing and ready to support those discussions," CEO and managing director Dale Henderson told media Aug. 5 at the forum.