Critical minerals such as rare earths are driving faster and more powerful technologies and Australia is an ideal place to source and develop these new materials. Rare earths, including those transformed into high-performance metals, are essential to advances in computing, manufacturing, energy and transport.

Over the past decade, the main investment in the Northern Territory’s rare-earths industry has come from China. Although that tide is now ebbing, government intervention is required before investment from other international investors can be expected to flow.

China has a strong grip on the global supply of rare-earth elements, prompting fears that access to these minerals could get caught up in a trade war between the US and China. Even if the political risks to supply are overcome in the short-term, a long-term vision and a willingness to intervene in the market are required to ensure that the global availability of rare-earth elements is not beholden to a near-monopoly supplier.

That is where Australia—and the Northern Territory in particular—can play a role.

But while there are clear signals from our national and Territory leaders in support of mining and processing rare earths, the local market has been slow to take up the call.

In the Territory, we’ve found that Chinese investors have a long-term view and are prepared to take risks to secure their supply and develop technologies. It’s this approach that has contributed to China being by far the most advanced processor of rare earths, controlling 80%-plus of the international market.

US defence manufacturers are a major user of rare-earth elements, which are essential to missile and weapon guidance systems, armoured vehicles, GPS, lasers and night-vision goggles. In everyday life, they are present in rechargeable car batteries, smartphones, computers, lighting, catalytic converters, magnets, alloys, PET scanners and wind turbines.

Japan is anxious to find alternative rare-earth sources and the United Kingdom and Europe are significant users at the manufacturing stage.

Australia has a limited demand for rare earths in manufacturing. But what we do have is abundant rare-earth deposits of exceptional quality.

The federal government has gradually woken up to this fact. Trade Minister Simon Birmingham, Minister for Resources and Northern Australia Matt Canavan, and Defence Minister Linda Reynolds have all expressed interest in promoting the production of rare earths and critical minerals in Australia.

They see broadening the availability of rare earths as an economic opportunity, which will also assist Australia’s allies while reducing the overwhelming reliance on a single supplier.

On this point, the US has been slow to progress rare-earth production. It has only one productive mine in California. A more prosaic explanation may be that the world has been caught napping, allowing China to dominate the market.

Early last year, President Donald Trump and former prime minister Malcolm Turnbull agreed ‘to work together on strategic minerals exploration, extraction, processing and research, and development of rare earths and high performance metals to sustain the jobs of today and develop the jobs of tomorrow’.

It has been reported that a single F-35 fighter jet (which Australia is acquiring 72 of) requires ‘417 kilograms of various REEs [rare-earth elements] to support information transfer, energy storage, computational devices and in some cases stealth coatings’.

With China so well advanced in rare-earth research and extraction, its ability to dictate prices makes some people nervous. The US will step up the pace from now on, and also wants Australia to join it in order to return some balance to the global rare-earth market. That provides the Northern Territory with an economic and strategic opportunity.

Arafura Resources’ Nolans rare-earth project in central Australia has the potential to produce rare earths needed for key military programs and is well suited to supply the global market. The project can supply the rare-earth elements neodymium and praseodymium, which are used in the manufacture of the iron boron magnets that are increasingly required for electric vehicles, wind turbines and defence applications.

The challenge for Australia is not identifying rare-earth deposits. We have a number of undeveloped resources and, according to Geoscience Australia, we rank sixth globally in rare-earth resources.

The problem lies in finding private money to back rare-earth projects and improving cost efficiencies in extracting rare earths once they’re dug from (typically) open pits. These elements don’t hang together in easily accessible clusters. Rather, they are spread throughout the beds where they lie and require complex and expensive extraction processes to render them into their pure form.

Arafura Resources has now received all environmental approvals for its Nolans mine site, but still awaits a final investment decision. Yet there remains a bottleneck.

From an investor perspective, rare earths are heavily hyped and subject to extreme stock market fluctuations. There are long lead times to actual production and genuine concerns about the high costs and environmental impacts of rare-earths mining. These are key challenges which the market alone is unlikely to resolve.

The federal government’s planned package of measures to support the critical minerals industry will advance Australia’s position. Considering tax breaks for miners, using the Northern Australia Infrastructure Facility to encourage start-ups, and backing research and development in the field of rare-earths extraction are all steps in the right direction.

Such research should focus on improving efficient and environmentally robust extraction methods in order to satisfy both investors and the general public that the process is safe.

The CSIRO has been investigating ways to use less heat and acid to separate rare earths from their ore. Chris Vernon, the research head of the CSIRO’s extractive metallurgy program, has urged Australia not to think of itself as simply a raw-ore exporter. Instead, he argues, we should maximise the strategic benefit by processing rare earths at home.

Most importantly, the smaller companies that are typically most interested in rare-earth extraction need sales agreements with rare-earth users. Government might even need to be willing to take a role in the aggregation of offtake agreements to give projects the demand certainty they require to attract financing.

The federal government is well placed to take positive steps towards encouraging investors to see the value of rare earths, and to make the case that rare earths are intrinsic to the development and manufacture of many climate-abating technologies.

It can also assist rare-earth producers to make the necessary connections to the giants of US defence manufacturing and their commercial suppliers, together with prospective customers in Japan and Europe. If we start seeing the first investors holding their nerve and committing to projects, the hype could become reality.