Regional Australia has opportunities to grasp as supply chain reality sinks in

Forget market forces. After the disruption of COVID-19 and global financial meltdowns, resilience is the new catch cry, sending investors, geologists, engineers and scientists back into regional Australia.

It was all about efficiency, but it turns out that efficiency might be the enemy of resilience.

All it takes is one spanner in the works for the whole finely-tuned just-in-time supply chain to come crashing down.

COVID19 shuttered industry, mines, ports and retail. The invasion of Ukraine has seen food and fuel prices explode. And unprecedented heat waves and floods have swept Europe, Asia, the United States and Australia.

It turns out that efficiency might be the enemy of resilience.

Climate change needs to be addressed – fast – but the suppliers of many of the key ingredients behind “green” technology have proven unreliable.

“The key strategic message here for Australia, Japan, the US and other like-minded countries is that market forces alone aren’t going to fix this problem,” says Australian Strategic Policy Institute analyst Dr John Coyne.

“Creating global supply-chain alternatives that promote healthy competition and resilience will require ‘minilateral’ efforts. Australia must engage with industry 4.0 technology and move further along the value chain so that it is more than just a miner.”

And we’re just beginning to see the first steps in a process that may result in regional Australia becoming a major player in the struggle against climate change and economic coercion.

Supplies chained

“Australia has the potential to become a major global supplier of critical minerals and rare earths, which will be essential to help Australia and the world transition to low-emissions technology and achieve net zero emissions by 2050,” Minister for Resources and Northern Australia Madeleine King said while announcing $50 million in startup grants late last month.

Retooling economies for renewable electricity and green hydrogen is a massive task.

And lithium-ion batteries, solar panels and wind turbine generators are on a whole new technical level above the simplicity of coal-fired boilers and petrol-ignition-driven cylinders.

We’re just beginning to see the first steps in a process that may result in regional Australia becoming a major player in the struggle against climate change and economic coercion.

High conductivity. Long-life. Powerful magnetism. Lightweight strength.

Minerals with these properties will replace fossil fuels as the basis of our energy supply.

“Securing the upfront financing required to build a mine in a location that will tolerate the substantial environmental impacts of rare-earth processing is no easy task,” says Coyne.

Six minerals projects are recipients of the grants. And they are expected to generate an extra 500 regional jobs across Northern Australia.

Iron-fisted politics

Rare earths aren’t all that rare. It’s just that they aren’t often found in concentrations dense enough to make extracting them commercially viable.

They’re absolutely vital for a modern electricity and battery-based economy, but supply is dominated by China.

“The problem here isn’t just that the Chinese Communist Party has monopolistic control of the global rare earth element supply chains, but that it is willing to use this power to coerce and control others,” says Coyne. “The issue is not a hypothetical one. Realising that controlling the global market makes for a useful economic lever, the CCP has used this power to coerce trading partners on more than one occasion.”

High conductivity. Long-life. Powerful magnetism. Lightweight strength: minerals with these properties will replace fossil fuels.

Exports to Japan were blocked by China in 2010 over a territorial dispute. The fallout on the global battery manufacturing industry worldwide is still being felt. More recently, Beijing has threatened rare earth and critical mineral supplies in retaliation for ongoing western support for Taiwan.

China also dominates lithium supply, which is why lithium’s been the primary beneficiary of a series of recent federal and state government mining industry stimulus projects. Now the focus has turned to similarly strategic resources.

Russia’s invasion of Ukraine and its willingness to use its market power in natural gas, wheat and fertilisers as tools of coercion have exposed the clear and present danger posed by the world’s “efficiency-first” supply lines.

Rare earths aren’t all that rare. It’s just that they aren’t often found in concentrations dense enough to make extracting them commercially viable.

Other risks are less obvious.

Diesel additives and fertilisers are in the news due to severe shortages. That’s because their core ingredient is suddenly scarce.

Urea – CO(NH₂)₂ – is an organic compound used in everything from manufacturing fertilisers to cosmetics, explosives, soap, animal feed and beer. It’s made from refining natural gas.

But US factories were forced to close because of Hurricane Ida in 2021. That’s left China the dominant player in an under-supplied market. And it has restricted exports to ensure its own needs are met.

Economics of scale

Australia has long known it has reserves of minerals like alumina, cobalt, tungsten and magnesium, but government and industry have, for the past 200 years, had eyes only for the enormous quantities of iron, copper, gold and coal. These were relatively easy pickings. And the economics of scale made them commercially attractive in a competitive global market.

Likewise, a competitive market made the high costs of extracting relatively small amounts of critical minerals and rare earths unattractive. Not to mention the often polluting and intensive methods needed to refine them.

“Whether it’s battery chemicals or the high-grade silicon used in solar PV, China dominates the market, and having so much depend on one country, this weakens the resilience of a supply chain that is already under pressure from high global demand,” says former lead of CSIRO’s Critical Energy Metals Mission Dr Jerad Ford.

Iron, copper, gold and coal were relatively easy pickings.

The Mission’s goal is to connect Australia’s mining and manufacturing sectors to recognise and cooperate over new opportunities as they emerge.

“Australia has traditionally been good at producing the raw materials that the world needs, but we also need the end-product goods ourselves,” he says. “There’s real opportunity for us to add value to mining before we export; for batteries, we can make better chemicals that are much higher value and even vertically integrate and grow our local battery industry here.”

The European Union is proposing to mandate a percentage of recycled materials in all new batteries, for example.

“Much of the hydrometallurgy and other techniques and capabilities we use to produce the chemicals for battery and other energy technologies, can also be deployed at the other end of the process, to extract these important minerals out of products at their end of life,” Ford says.

Diverse beneficiaries

Like other recent critical minerals and rare earth “kickstarter” grants, most of the $50 million will flow directly into Australia’s regional mining centres.

The grants are intended to accelerate early and mid-stage projects, driving new investment in processing and manufacturing. “After all, there is no point in creating supply-chain resilience for (rare and critical) ores if miners must still send them to China for processing,” Coyne notes.

Alpha HPA near Gladstone in Queensland is to get $15.5 million to expand its ultra-pure aluminium chemical plant. This high-quality product is needed for lithium-ion batteries and scratch-resistant synthetic sapphire glass.

Cobalt Blue Holdings is to receive $15 million to fast-track its feasibility study for a new project at Broken Hill. It has the potential to supply cobalt for Australian battery manufacturers and sulphate for fertiliser production.

“There is no point in creating supply-chain resilience for (rare and critical) ores if miners must still send them to China for processing.”

EQ Resources will sift through the tailings of an old open pit mine at Mount Carbine in Queensland for tungsten. Its $6m grant is aimed at securing supplies of the temperature-resilient metal for the defence and transport industries. 

Global Advanced Metals is to receive $4 million to recover tantalum and tin from the Greenbushes lithium mine in Western Australia. Tantalum – a shiny, corrosion-resistant metal – is used in phones, computers and laboratory equipment.

Lava Blue will receive $5.25 million to reprocess vanadium mining waste. Alumina, magnesium and other critical metals are often affiliated – but ignored – with vanadium mining. But as it’s already been dug out of the ground, Redlands Research Park in Brisbane’s southeast is developing reprocessing technology to sift out the desirable minerals.

Minerals Commodities at Munglinup in WA is to get $3.94 million to develop a graphite production process to turn raw ore into battery anodes. It’s just another step in the federal government’s drive to locally source 100 per cent of the materials and components necessary for an Australian lithium-ion battery industry.