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Few areas of the investment landscape sit at the crossroads of geopolitics, advanced technology and long‑term growth quite like rare earth elements (REEs).
For Australian investors, the sector has moved firmly into focus following a recent agreement with the United States to support up to US$8.5 billion in new rare earth and critical minerals projects. The deal underscores Australia’s growing strategic importance in global supply chains and highlights why rare earths are drawing increased attention.
Rare earth elements are a group of 17 metallic elements. Despite their name, they’re relatively abundant in the Earth’s crust. The challenge lies in extracting and refining them a process that is technically complex, capital intensive and environmentally demanding.
These elements possess unique magnetic and conductive properties, making them indispensable in modern technology. They are a core component in powerful permanent magnets used in everyday electronics such as headphones, speakers and computers, as well as in wind turbines, electric vehicles and advanced medical equipment like MRI scanners.
Rare earths are also critical for LED lighting, smartphone and television displays, and a wide range of defence and aerospace applications.
Australia plays an important role in global mineral production. In 2023, it ranked among the world’s top five producers of 14 different mineral commodities, including rare earths, alongside more familiar exports such as iron ore, lithium, gold and uranium.
Even so, Australia remains a relatively minor participant in the global rare earths market.
China dominates by a significant margin, holding almost half of known global reserves. Its estimated resources far exceed those of Australia and the United States, with Brazil also emerging as a major holder of untapped reserves.
While exploration continues to uncover new deposits around the world, reserves alone don’t drive investment returns. Production capacity and processing capability are what ultimately determine market power.
China leads decisively on both fronts. In 2024, it mined and processed approximately 270,000 tonnes of rare earths. The United States followed with about 45,000 tonnes, while Myanmar, Australia, Nigeria and Thailand trailed at much lower levels of output.
This imbalance has sharpened the focus on supply chain resilience particularly for countries reliant on rare earths for defence, clean energy and high‑tech manufacturing.
A major step in addressing these vulnerabilities came with the signing of the US‑Australia Framework for Securing Supply of Critical Minerals and Rare Earths in Washington.
Under the agreement, both countries committed to investing at least US$1 billion each within six months to accelerate mining, processing and supply chain development.
Two projects were confirmed following Prime Minister Albanese’s recent meeting with US President Trump.
The first is the Alcoa–Sojitz Gallium Recovery Project at Wagerup in Western Australia. The Australian Government has committed up to US$200 million in concessional equity funding, alongside equity contributions from the US Government. Japan has already funded around half of the project’s costs.
Once operational, the facility is expected to account for up to 10 per cent of global gallium supply a material critical for semiconductors and defence technologies.
The second is Arafura Rare Earths’ Nolans Project in the Northern Territory. The Australian Government is investing US$100 million in equity, and when production begins, the project is forecast to supply around 5 per cent of global rare earth demand by 2029.
More recently, a third initiative was announced: Astron Corporation’s Donald Rare Earth and Mineral Sands Project in western Victoria. Structured as a joint venture with US‑based Energy Fuels, the project is expected to rank as the fourth‑largest rare earth mine outside China.
Collectively, these initiatives represent a coordinated response to China’s dominance in the sector and its recent export restrictions, which have raised concerns about supply security for defence and advanced manufacturing.
The broader goal is to diversify global supply chains by speeding up project approvals, expanding domestic processing and encouraging private-sector investment through public funding support.
From an investment perspective, rare earths appeal to those with a long‑term horizon. The International Energy Agency has suggested global demand could double by 2040, driven by clean energy, electrification and digital technologies.
Investors can gain exposure in several ways:
That said, risks should not be underestimated. Geopolitical uncertainty sits at the top of the list—shifting global alliances or policy changes, including a reversal of US commitments, could materially affect the sector.
Environmental challenges also loom large. Rare earth extraction and processing are resource‑intensive, requiring significant amounts of water and energy, which can invite regulatory scrutiny and delay projects.
Market dynamics add another layer of complexity. China retains the ability to influence prices by adjusting production or export restrictions, which can inject volatility into the market.
Timing is also critical. Developing a mine from discovery to production can take up to seven years, meaning patience is essential.
Rare earths remain an emerging and evolving sector, but their importance to defence, clean energy, electronics and medical technology makes them strategically vital. While demand is expected to rise steadily over the coming decade, share prices are highly sensitive to global headlines, policy decisions and geopolitical shifts.
Volatility should therefore be expected—especially in today’s environment.
As with any complex investment theme, there are many factors to weigh. We’re always available to discuss how rare earths might—or might not—fit within your broader investment strategy.
A look at global rare earths mine production in metric tonnes in 2024, as per data from US Geological Survey.
ABC News Graphics
i Historic critical minerals framework| Prime Minister of Australia
ii What Are Rare Earth Minerals Used For? | The Institute for Environmental Research and Education
iv, v Mapping rare earth supplies | ABC News
vi Historic critical minerals framework| Prime Minister of Australia
vii Donald rare earth mine given major project status | ABC News
viii Outlook for key minerals | IEA
ix Many details remain buried in Australia-US rare earths deal | Crikey
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