Australian rare earths 'integral' to US-UK security deal – resources minister

Australian rare earths are key to a security agreement between Australia, the UK and US, a senior government official said as the government committed another A$5 million to Australian Strategic Materials Ltd.'s preproduction-stage Dubbo project in New South Wales.

Australian Strategic Materials plans to use the grant announced Oct. 15 under the government's International Partnerships in Critical Minerals program to fund up to 50% of a study on refining rare earths efficiently at its mine and processing plant.

The financing is part of broader efforts to diversify supply chains of critical minerals away from China. The country processes much of the global supply of battery metals and rare earths, which have strategic importance to the defense and clean energy sectors, among others.

Australia hopes to boost its production of rare earths to support a security partnership created in September 2021 among Australia, the UK and the US, known as AUKUS. Under the partnership, the US will sell Australia three Virginia-class nuclear attack submarines by the early 2030s, and two more if needed.

Madeleine King, Australia's resources minister. Source: Paydirt Media Pty. Ltd.

"There are 4 [metric tons] of rare earths in a Virginia-class submarine," Madeleine King, Australia's resources minister, told reporters at Australian Strategic Materials' Dubbo office Oct. 15. "And we know that's really important to the AUKUS program. These mineral deposits and metals and the oxides that we'll produce right here will be integral not only to our national security, [but] to that of our friends and partners."

Rowena Smith, CEO of Australian Strategic Materials, said rare earth permanent magnets are essential components in the F-35 Lightning II aircraft, Virginia- and Columbia-class submarines, and unmanned aerial vehicles, while also noting widespread use in technology such as electric vehicle motors and wind turbines.

"The development of projects like the Dubbo project is not only crucial to strengthening Australia's defense industry supply chain but also aligns with the strategic goals of allied nations, including the US and the UK, as set out under Pillar Two of the AUKUS agreement" that focuses on the development of advanced defense capabilities, Smith said in an Oct. 16 email to S&P Global Commodity Insights.

The Dubbo project has received substantial financial support from the US and Australian governments, including an A$6.5 million grant in May 2023 through the Australian government's Critical Minerals Development Program. Australian Strategic Materials said at the time that it would use the funds to progress engineering, procurement and construction work and plans for the Dubbo project.

The company also received a nonbinding letter of interest from the Export-Import Bank of the United States in March for up to US$600 million for Dubbo's construction and execution, and Export Finance Australia sent the company a letter of support in June 2021 for A$200 million in debt funding.

Smith said Dubbo will strengthen Australia's midstream processing capabilities by mining and processing rare earths into high-purity oxides that can be further processed into metals and alloys at Australian Strategic Materials' metallization facilities, the first of which opened in May 2022 in South Korea.

Key material for alliance

Rowena Smith, Australian Strategic Materials CEO. Source: Australian Strategic Materials Ltd.

About 3,400 US weapons systems use rare earth products that are vital for permanent magnets, which help determine accuracy and effectiveness, Kim Beazley, a former deputy prime minister and defense minister of Australia, said in a May analysis for the Australian Strategic Policy Institute.

One of Australian Strategic Materials' first alloy customers from its Korean metals plant was Texas-headquartered Noveon Magnetics Inc., which has established a rare earth magnet manufacturing facility in Texas with a US$28.8 million award from the US Department of Defense.

Mark Coulton, the local federal parliamentary member for the Parkes electorate where Dubbo is located, told 2DU Dubbo radio that China's domination of the rare earths market is the reason "why there's significant interest from other countries, including South Korea, who have already got significant interests out here at [the Australian town of] Toongi, to get a supply of these critical minerals that don't have to come through China."

Smith said Australian Strategic Materials is in discussions with other key manufacturers in the defense sector and is also pursuing potential US Department of Defense funding, enabled by Australia's designation as a domestic source under the US Defense Procurement Act.