Australian government promises road map for processing critical minerals — but challenge is enormous

In 1990, Australian Prime Minister Bob Hawke while campaigning for a third term, promised a huge boost to technology and manufacturing.

“No longer content to be just the lucky country, Australia must become the clever country,” he said in one election campaign address.

Now, 31 years later —that 1990 promise is still unfulfilled, and our manufacturing base is hollowed out.

However, this week current Australian Prime Minister Scott Morrison launched the Resources Technology and Critical Minerals Processing road map (billed as a value-adding processing powerhouse).

Also, applications opened this week for funds under $1.3 billion Modern Manufacturing Initiative, which would see federal money available to help manufacturers scale-up production, commercialise products and tap into global supply chains.

At the heart of this plan is Canberra’s target for manufacturers here to capitalise on the huge production of minerals and, in effect, develop downstream industries.

It is being reported that Australia’s abundant reserves of critical minerals give it the potential to be an international powerhouse for the supply of commodities and materials crucial to communications, renewable energy and defence industries.

Easier said than done.

Considering that during the Second World War, with the Japanese threatening the country, Australian factories were making munitions (by 1942 enough to equip six army divisions), bombers, naval vessels, tanks and other equipment – this country’s manufacturing base today is but a shadow of its former self.

Not only that, Australia is also losing its oil refining capability as installations close, which hardly seems conducive to any sort of energy independence.

Long and winding road to downstream processing

Building expertise and technology for minerals processing is a huge task.

It’s one thing to get the product out of the ground, but the downstream processing expertise is fairly thin on the ground outside China.

Both the European Union and the US are addressing this, but it is long-haul process taking years, and the EU and Washington have far deeper pockets than Australia’s (and a far more complex and diversified industrial system as well).

Take rare earths.

This correspondent began writing about Australia’s potential in the late 1990s – at that time largely focused on the Dubbo project which held rare earths (along with zirconium, hafnium and niobium).

It was then owned by Alkane Resources (ASX: ALK) but has since been spun out into Australian Strategic Materials (ASX: ASM).

Last year with its South Korean partner, ASM successfully produced high purity dysprosium at Zirconium Technology Corporation’s laboratory.

The lab generated 0.76kg of the heavy rare earth metal, which the Australian company said had confirmed its ability to produce the key permanent magnet metals (dysprosium, praseodymium and neodymium) and alloys from its planned Dubbo mine.

ASM’s pilot plant in South Korea had already successfully produced titanium and neodymium from Dubbo samples.

It took the company more than 20 years to reach that stage.

And the processing took place in South Korea, not Australia.

Lynas had to build expertise from scratch

Lynas Rare Earths (ASX: LYC) is held up as a shining example of success with its Mt Weld rare earths mine in Western Australia and is now a rare earths producer.

The company is about to build a metals plant in Texas, but it is also constructing a concentrate plant in Kalgoorlie, so that is a start.

Although a celebrated rare earths producer, Lynas’ path to this stage was very long and slow.

The then Lynas Gold NL picked up Mt Weld in 1999 (the junior changed its name the following year).

The company’s back-story is illustrative of the problems that the new Morrison plan faces.

China for years trained hundreds upon hundreds of rare earth specialists at their universities.

The West did almost nothing in this regard.

Lynas had to build its own in-house expertise chain from scratch.

Replicating that across a gamut of mineral companies is a wall to climb.

Miners have already begun the process

In the middle of 2020, there were signs that Australian mining companies were preparing to pick up the processing challenge.

Just to pick one month from last year (July), we had Pure Minerals — since renamed Queensland Pacific Metals (ASX: QPM) — reminding us of its plans to build a technology hub at Townsville.

This would involve importing what it described as “high-grade” nickel-cobalt laterites from New Caledonia, with supply agreements already signed with two miners.

“Re-energising North Queensland” was the company’s slogan, with plans to have its hub at the Townsville Industrial Park, 35km from the city’s port.

The company was developing processing technologies to produce nickel sulphate, cobalt sulphate and high purity alumina.

That same week we also heard from Renascor Resources (ASX: RNU) about its vertically integrated operation on South Australia’s Eyre Peninsula consisting of a mine and concentrator, located inland from Arno Bay on the Spencer Gulf coast, plus a downstream operation to produce purified spherical graphite.

Are we going to see a battery industry?

Australian Mines (ASX: AUZ) was also talking about its Sconi cobalt-nickel-scandium project at Greenvale, inland from Townsville.

The company’s plans were to own and operate the entire process, from mining the ore through to producing the final battery-grade cobalt and nickel precursor chemicals, all on one site in Australia.

That would form one pillar of a national battery industry.

Such a national battery industry, apart from generating wealth through employment, would ensure a local market for Australia’s battery metals instead of depending on an increasingly unpredictable China.

Moreover, unlike closing oil refineries, a battery industry would boost the country’s energy security.

Will the money be there?

The projects just mentioned would all seem to fit in with the federal government’s plans.

But there are a lot of potential mouths to feed out of that $1.3 billion.

The rare earths industry is already urging the government to help out with debt financing.

Are we going to go into making anodes and finished magnets?

Just one large rare earths mine would, by the time it gets into production, cost around $1 billion (at least) over all the years of development.

And you can’t be half-hearted about it.

The expansion of the global high-tech industries, and all the jobs they create, relies on the dependable supply of critical metals — and not in concentrates being shipped to China, Malaysia, Japan or elsewhere to go into downstream processing.

Having your own downstream processing translates into billions and billions of extra gross domestic product.

But it will take billions of spending to get there.

A TINA moment for critical metals supply

There is no alternative — aka TINA.

If Australia (and the US and EU, also) fails to ensure supply of critical elements then it means an even more powerful China.

China is using more and more of its mined supply as it expands the downstream processing sector. The “Made in China 2025” timetable — that is, building a world-dominating technology production chain —might have been thrown slightly off schedule by the coronavirus pandemic, but not for long.

Combine China’s increasing consumption of its own rare earths with expected exhaustion of some of its resource — particularly the high-value heavy rare earth elements — and you face a supply squeeze on top of any political motives for reducing exports.

On our side of the equation, the collapse of the 2010-11 rare earth price bubble killed off investor interest in the rare earth juniors listed on the ASX and delayed developments by years.

Lithium and graphite have gone through their sticky moments, the tin surge seems to have abated and the uranium issue remains unresolved so far as Australia is concerned.

The federal government’s new plan is welcome.

But is it too little, too late?