Australia’s critical mineral industry holds immense potential for supporting emerging industries, but we desperately need a strategic approach that fosters innovation and long-term growth. What Australia needs most is value-added manufacturing based in Australia.
It’s important for the government to recognise that when Australian companies are competing globally, the support they provide also has to compete globally. It’s not always a level playing field.
With more than twenty years’ experience bringing new technologies to market and ten years of experience in the rare earths sector, I’ve observed multiple challenges involved in the development of critical minerals commercialisation in Australia. The obstacles encountered and the diverse approaches employed by foreign governments provide an opportunity to learn from previous mistakes.
Despite being essential to our primary industries and facing supply risks, critical minerals have only recently gained attention thanks to the global interest in decarbonising energy production, electric vehicles, wind turbines and battery storage with specific interest in lithium.
China’s strategy to secure access to and capitalise on critical minerals has been deliberate and effective. More than 30 years ago, China’s Paramount Leader, Deng Xiaoping, recognised the importance of rare earths, stating “there is oil in the Middle East, there is rare earth in China”.
The Chinese government has invested in rare earth processing, built an end-to-end supply chain, and nurtured a skilled workforce, all while limiting foreign access and participation. This has positioned China as the dominant player in the global critical minerals market.
In contrast, Australia’s approach has been less strategic – and very disappointing. Previous governments have viewed the mining industry as self-sufficient, encouraging miners to seek foreign investment.
There was a popular belief that it wasn’t the government’s role to select or invest in particular projects; it was up to the market whether projects were successful or not – missing the opportunity to nurture new high value industries being established in Australia.
Lack of understanding of the complexity of rare earth industry, limited financing options and conservative investment terms have drastically hindered the growth of our critical mineral projects.
The first question many overseas investors ask is, “How much is the Australian government investing in the project?”. When the response is “none, until you invest”, overseas investors see this as a lack of confidence in the success of the project or company, and the opportunity to invest quickly disappears. It is a very frustrating “Catch-22” cycle.
Here’s a major problem: when people think of mining companies, they assume money is not an issue. Surely, all mining companies are rolling in cash? This couldn’t be further from the truth.
Startups in critical minerals are in exactly the same boat as any other startup in Australia, except they have the extra layer of difficulty – the stigma of being a mining company.
Years ago, I started lobbying the previous government to get the message across – we need to access export finance credit funding. The government has been told for many years, “we need Australian investment in critical minerals”. But the response has been painfully slow.
In 2017, the previous government eventually allowed the mining industry access to financing from the Export Credit Agency. But with a fund of $600 million, there was not enough to provide the adequate capital required towards $1 billion-plus rare earth projects.
Four years later, the previous government announced a $2 billion loan facility for Australian critical minerals companies seeking to develop projects across the country.
But this is too little, too late for some of the critical minerals industry that are now primarily or wholly foreign-owned. This means value added processing, job creation and the downstream emerging industries from them are taken off-shore.
Critical minerals are essential for the decarbonisation of our planet. The Albanese government seeks to generate real industry transformation for Australia and transition to net-zero. The introduction of the National Reconstruction Fund (NRF) provides the opportunity to seize the day and invest in our future industries.
A few key lessons as the NRF is put into place to get the policy settings right:
- A “one size fits all” mentality doesn’t work. Instead, the government needs to recognise the importance of its role in supporting emerging industries if it wants to benefit from them and be globally competitive
- The assumption that all mining companies (including small explorers and producers) have vast sums of money to get first-of-its-kind plants off the ground without support – is wrong. It is like comparing a small medical startup with Pfizer
- Past governments have greatly contributed to the problems faced by the industry by not putting policies and investment in place, 10 years ago, to move projects through
- Australia needs to be strategic. The government must look decades ahead if it wants to create long-term opportunities. Be consistent with government support and policies that create industry and eco-systems rather than one-off grant programs
- Consider the whole supply chain: the government should look at the complete, end-to-end supply chain and what is required in terms of investment, infrastructure, knowledge/IP, people, STEM education, training and research
- Invest locally and invest properly. While foreign investment is often seen as an ideal, simple solution, I urge the government to consider what the trade-offs might be long-term. What are you gaining and what are you losing? The more Australia invests in its own projects, the more it will see in returns
- We need smart decision-making about supporting emerging industries. Government should engage renowned national and international industry experts with technical and commercial backgrounds to advise and then take their advice
- We need the government to not only provide the funding but to be pro-active in helping obtain overseas customers
Remember –Cochlear, Atlassian and Canva were all once Australian startups…
Natalie Chapman is the co-founder and managing director at deep tech commercialisation agency Gemaker
Do you know more? Contact James Riley via Email.