Australia has a huge amount to gain from taking advantage of its natural abundance of critical minerals and positioning itself as a world leader in their production. But the federal government hasn’t yet landed on the right formula for providing support to ensure that as many of these projects get off the ground as possible.

Critical minerals, as defined by Geoscience Australia ^[1], are ‘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’.

They include rare-earth elements such as the neodymium and praseodymium that Arafura Resources will produce from its Nolans project ^[2] in the Northern Territory and a long list of other minerals that you might not have heard of.

Since the onset of Covid-19, the imperative for governments to shore up supplies of these minerals has only increased. Recent shortages of semiconductors have highlighted that China’s control of a large proportion of the global supply of rare earths and other critical minerals leaves the rest of the world vulnerable.

But there is no silver-bullet solution.

The markets for many of these minerals are far from transparent, projects typically carry high upfront capital costs, and the companies progressing them usually have small market capitalisations. This combination means commercial banks are reluctant to provide debt funding, while funding projects entirely with equity is usually out of the question as it is excessively dilutive for shareholders.

That’s where government support is so crucial. Arafura is lucky here, because after an extensive time working with the government’s Export Finance Australia (EFA) and with the Northern Australia Infrastructure Facility (NAIF), we have non-binding letters of support proposing senior debt facilities of up to $200 million from EFA and $100 million from NAIF.

Other companies may simply not have the resources or time needed to go through such processes. And that’s probably not something that the EFA and NAIF can just change themselves.

Political leadership needs to empower them to move faster and engage with more risk, all with taxpayers’ money. Doing this can deliver all the benefits that flow from Australian companies being able to tell other investors and financiers that they are backed by these government agencies.  That’s a more powerful message than almost any other in the world of finance and investment, and its absence is a problem that can be hard to overcome.

Rather than being lenders of last resort for critical minerals projects, EFA and NAIF must operate as enablers and facilitators.

This is a real opportunity for forming a new industry for Australia and showing that we’re more than just the world’s quarry.

At Nolans, we’re not just digging up the ore and shipping it out. We’ve put a lot of work into refining the flowsheet, making the most of Australia’s competitive advantage in advanced mineral processing, to produce a value-added NdPr oxide.

For customers, we expect this to be a big plus. Given the rising importance of environmentally and socially responsible operations, being able to source materials from a fully traceable, sustainable supply chain in a low-risk jurisdiction such as Australia is highly attractive.

Then there’s the economic development that the project will bring to central Australia, a part of the country where there’s precious little.

Arafura understands that the federal government can’t be seen to be picking winners or playing favourites. That’s not what we’re asking for.

If Australia is to offer itself up to the rest of the world as part of the solution on critical minerals, it must at least ensure that the channels through which project proponents can access support are open and working efficiently.