Critical minerals and their potential economic opportunities: a quick guide

27 October 2021

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Ian Zhou
Economic Policy Section


Executive summary

Following a meeting of the Quadrilateral Security Dialogue at which critical mineral supply chains were discussed, the Australian Government announced a $2 billion loan facility to help finance critical minerals projects in Australia.

Access to critical minerals is vital to the development of renewable energy industries and other sectors. However, the production of some critical minerals is concentrated in a small number of countries outside Australia, making their supply vulnerable to trade disruption associated with potential geopolitical risks. At the same time, given its rich ore reserves in some critical minerals, Australia has the potential to become a leading producer and exporter of these critical minerals.

What are critical minerals?

Geoscience Australia defines critical minerals as:

metals and non-metals that are considered vital for the economic well-being of the world's major and emerging economies, yet whose supply may be at risk due to geological scarcity, geopolitical issues, trade policy or other factors.

The Geoscience Australia website provides a list of minerals considered to be critical minerals. These include rare-earth elements[1] magnesium, cobalt, lithium and gallium.

What are the uses of critical minerals?

Rare-earth elements are used to manufacture a wide array of products, ranging from wind turbines to satellites and some fighter jets. Other critical minerals such as cobalt and lithium are used in batteries—including for electric vehicles—while gallium is used in the production of smart phones.

Which countries are major suppliers of critical minerals?

According to data from the United States (US) Government’s Geological Survey, China is the world’s leading supplier of rare-earth elements and accounts for approximately 63% of global rare-earth production in 2019 (p. 133).[2] Other countries such as Brazil, Vietnam, Russia, India and Australia also possess large mineable reserves of rare-earth elements (p. 133).

The Democratic Republic of Congo holds around 70% of the world’s reserves of cobalt and is also the largest producer (p. 51). Australia is the world’s leading producer and exporter of lithium
(p. 99).

According to Geoscience Australia, Australia has ore reserves for many of these critical minerals (pp. 4–6). Figure 1 below shows major critical mineral projects in Australia.

Figure 1: major critical mineral operating and developing mines in Australia

map of Australia showing major critical mineral operating and developing mines in Australia

Source: Department of Industry, Science, Energy and Resources (DISER), Australia’s Critical Minerals Strategy, DISER, Canberra, March 2019, p. 5.

What are the potential economic opportunities for Australia’s critical minerals sector?

The Australian Government’s 2021 Outlook for Selected Critical Minerals report forecasts that the global rare-earth elements market is expected to grow to around US$12 billion by 2030 and that the broad market outlook for critical minerals is promising.

The Outlook concludes ‘Australia is well placed to provide raw materials, and potentially refined product to the world, given appropriate market conditions’. Similarly, the 2019 Australia’s Critical Minerals Strategy discusses Australia’s ability to become a key producer of critical minerals:

Australia also has world-leading expertise in resource extraction and processing, high-tech engineering and renewables research. Australia is a highly attractive destination for investment, with competitive advantages across the full spectrum of technical, capital allocation, and risk considerations, including political and economic stability, technology, training, research and development, environmental and labour standards, and legal and regulatory certainty.

The CSIRO notes that the increasing interest in renewable technologies will lead to the demand for critical minerals becoming greater than current supplies, ‘creating bottlenecks and straining increasingly fragile supply chains’.

In March 2020 Australia and the US agreed to progress a joint action plan ‘to improve the resilience and diversity of global critical minerals supply chains’. At the time, Trade Minister Simon Birmingham stated ‘Australia has a strong reputation as a reliable and stable supplier of resources to the world, and as our largest investor, we have a natural partnership of cooperation in critical minerals with the US’.

The Critical Minerals Mapping Initiative between Australia, Canada and the US is not only aiming to capture a greater share of a rapidly growing market but is also widely seen as a measure to ‘cut reliance’ on China for the supply of certain critical minerals.

Why is the Government announcing a $2 billion loan facility for the critical minerals sector?

The Australian Government’s announcement of a loan facility for the critical minerals sector is viewed by the industry as a boost[3] for Australia’s critical minerals sector. Australian companies that wish to invest in critical minerals projects may be eligible to receive loans or financing from the public sector in addition to the existing possibility of private sector financing (for example, loans from commercial banks).

Australia’s 2019 Critical Minerals Strategy emphasised that the Government is ‘consistently in favour of foreign investment where proposals are not contrary to the national interest’ (p. 7). The loan facility, along with the increased scrutiny by the Foreign Investment Review Board in the critical minerals sector, may signify a shift in the Government’s strategy from attracting foreign investment in critical minerals projects to promoting domestic investment.

How will the loan facility work?

The $2 billion loan facility will be managed by Export Finance Australia (EFA), the Australian Government’s primary export credit agency. EFA provides finance to support Australian exporting businesses and overseas infrastructure projects that are likely to result in an Australian benefit.

According to the Government, the loan facility will operate on the EFA’s National Interest Account for 10 years or until finance equivalent to $2 billion has been provided by EFA.

Australian businesses that wish to invest in critical minerals projects may be eligible to receive financing or loans from EFA, subject to a range of national interest criteria under Part 5 of the Export Finance and Insurance Corporation Act 1991.

Under EFA’s National Interest Account, EFA may be directed by the minister (currently the Minister for Trade, Tourism and Investment) to provide financing to businesses if the minister is satisfied that it is in Australia’s national interest to do so.

According to EFA’s mandate, the agency fills a ‘market gap’ by providing loans and services to businesses only when private sector financing is unavailable. In other words, businesses are eligible to receive loans or financing from EFA only if they cannot secure private sector financing.

The EFA periodically reports on the types and volumes of financial solutions it provides to businesses. Some stakeholders such as the Australian Greens have criticised the EFA for providing loans to what they perceive as environmentally polluting and commercially unviable projects.

Further information

[1] The name ‘rare-earth elements’ is a misnomer because the elements are fairly abundant in many mineable deposits throughout the world. However, when rare-earth elements were first discovered in the 18th century they were thought to be scarce and difficult to extract.

[2] China is the world’s largest producer of rare-earth elements and the country’s production typically accounts for between 60% and 90% of the global production, depending on the year.

[3] See also: the Sydney Morning Herald ‘BHP backs ‘future-facing’ minerals projects in regions as Nationals seek climate guarantees for bush’ and Investor Intel ‘Australian Government extends a $2 Billion loan facility for the critical materials industry


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