Energy transition: Australia’s first rare earths refinery could be just the start

Opinion

Taxpayers have loaned $1.25 billion for the facility at Eneabba in Western Australia. That’s a big step, but greater possibilities await.

As the energy transition intensifies, the rare earths needed for the electrification of the global economy are paramount and Australia is competing with other countries to build a domestic rare earths industry.

Electrification requires two key things – batteries and motors. A lot has been written about batteries and the lithium that goes into them. Rare earths, on the other hand, are the building blocks of electric motors.

They are used to create high strength magnets that convert electricity to motion.

The site of Iluka’s planned rare earth mineral refinery. Trevor Collens

These magnets are essential for electric vehicles, wind turbines, defence systems and other applications.

Compounded by geopolitical shifts and rising environmental standards, this presents an opportunity for Australia not just to “dig and ship” our resources but to build a new industry based on domestic value addition.

Delivering on this opportunity will require deliberate planning and action. Other countries are racing to attract investment and win their share of future green industries – the US, UK, EU, Japan, South Korea and Canada among them.

In rare earths, Australia is uniquely positioned by virtue of our mineral endowment, environmental stewardship and the sovereign refining capability that Iluka is building in partnership with the Australian government.

Modelling commissioned by the Commonwealth shows 115,000 jobs and a $71 billion contribution to our national wealth by 2040 could be generated in a scenario where the critical minerals sector’s current production rises in line with demand.

Further, that with the right policies, we can increase this to 262,000 jobs and $139 billion.

The Critical Minerals Strategy is the Australian government’s blueprint to realise this opportunity. It acknowledges that while Australia’s mineral wealth provides us a “foot in the door”, significant work lies ahead if we are to achieve the multi-generational benefits of downstream value addition.

Iluka is at the forefront of delivering on the potential of an Australian rare earths industry.

This potential extends beyond being a quarry for other nations. Indeed, achieving it would make our country a vital supplier of modern manufactured componentry, such as magnets.

At Eneabba in Western Australia, Iluka is building Australia’s first rare earths refinery. This facility will progress us to the important midstream of the value chain, producing separated rare earth oxides.

Our initial feedstock for the refinery is the stockpile of rare earth minerals Iluka has built since the early 1990s. Valued last year at $1.3 billion, this stockpile contains enough rare earths to produce about 60,000 tonnes of magnets to drive 30 million electric vehicles.

Beyond the stockpile, the refinery will be fed by rare earths from across Iluka’s Australian operations. It will also be capable of refining feedstocks purchased from third parties.

This is catalysing a national industry by supporting deposits of rare earths to become producing mines, with Iluka as the refining customer, and the value addition occurring domestically.

One example is Northern Minerals, which once had plans for its deposit in the Kimberley to be processed overseas, but now has an offtake agreement with Iluka.

Similarly, construction is under way at Iluka’s new mining development at Balranald in NSW; and our Wimmera development in Victoria has beengated to definitive feasibility study.

While the Eneabba refinery is an enormous step forward for Australia, greater possibilities await.

Metallising and eventually magnetising rare earths are achievable objectives.

Metallisation is the next step in the value chain, converting rare earth oxides to metals and alloys. Its strategic significance is twofold: enabling Australia to meet the requirements of a broader range of customers; and providing the essential gateway to further value addition in the form of magnets.

The Critical Minerals Strategy identifies the production of magnets as a technology priority.

To build a sustainable rare earths industry, we need to ensure our financing, foreign investment, domestic manufacturing and national security policy frameworks are aligned towards Australia developing integrated sovereign capability that is resilient for the long term.

That means focusing not only on the products we produce as a nation, but equally on how those products are marketed and priced to strengthen the security of supply chains.

China currently dominates all stages of rare earth production, including 80 per cent to 90 per cent of oxides and 98 per cent of metals.

It is imperative that China continues electrifying its own economy and hence it will increasingly require the rare earths it produces for that purpose. This means that, today, countries can only decarbonise with China’s permission.

Iluka is working to build new markets that diminish the risks attached to absolute dependence on single supply source.

That is the right commercial approach and one that respects the contribution taxpayers are making at Eneabba via Iluka’s partnership with the Commonwealth.

Other approaches that reinforce the status quo and work against the core objective of the Critical Minerals Strategy – supply chain resilience and diversity – would deny Australia the “green premium” that is central to our comparative advantage.

Surely, one of the lessons of recent times is that sovereign capability is not a luxury, especially where energy and national security are concerned.

As Iluka’s history and the early 1990s decision to stockpile rare earths at Eneabba demonstrate, choices made today will have a long tail of option creation and consequences.

With the right policy settings, Australia’s aspirations for economic diversification and industrial advancement as the world decarbonises can be realised.

Tom O’Leary is CEO of Iluka Resources.

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