Trump Makes Rare Earths Deal with Australia

Bloomberg

Watch Trump Makes Rare Earths Deal with Australia - Bloomberg on Dailymotion

Transcript

00:00So let's unpack first what is seen as a pretty positive outcome, to say the least,

00:07for Prime Minister Anthony Albanese. But what are you expecting, Nix, in terms of follow-through

00:13from here on out? Well, what I liked about this deal was that it set a six-month timeline. So it

00:21shows that both the US and Australia are serious about getting after this problem in the short

00:26term. It also reflects how there were supply chain shortages this year in the United States.

00:32For example, Ford Motor Company said that after China had put on rare earth restrictions,

00:38they had to slow their manufacturing down. So we can see that there are real short-term supply chain

00:43gaps that need to be filled. And it's pleasing to see that both the US and Australia are going to

00:48co-invest. Some of the projects will be domestic, but importantly, some of them will be joint ventures.

00:55And in particular, we see the US investing in gallium in Australia. That's because the US is 100%

01:02reliant on gallium from China. So of course, these investments, co-investments that you outline as

01:08well are going to be helpful. But to what extent is that going to actually be able to, you know,

01:15in terms of the timeline, help the US wean off the Chinese supply chain?

01:19Well, I was actually thinking about this in relation to the COVID vaccine. You know,

01:25when the US sets its mind to something, it can create a vaccine in a short amount of time and

01:30really truncate that. Now, that is what our countries need to do for the processing of critical

01:35minerals and rare earths. This processing technology has been developed over literally

01:40decades by China. It has been refining its methods. Some of the methods can be environmentally

01:46damaging. We're talking about acid leaching, including straight into the ground. And there

01:52have been real problems around the Chinese mining sites. China is trying to get better with its

01:57processing and it can be done in a more clean way. And that is what Western producers will need to do,

02:03is to do it in a much more environmentally friendly way.

02:06Not always outsource it to other countries, although Malaysia, Vietnam and India are key

02:13countries looking at doing the processing. But for a change, there's a gallium refinery in Western

02:20Australia that is going to be propped up by this deal with both US and Australian investment.

02:25And that shows that Australia is trying to move down the value chain and value add to this strategic

02:30resource.

02:31Hayley, I know the hindsight is 20-20, but I wonder why we're still talking about rare earth

02:40minerals and the dominance of China. Because I remember this issue came up, what, 15 to 20 years

02:46ago. So how long will it take to finally the world be weaned off the dependence on Chinese minerals?

02:55Look, it's a valid criticism to say our governments have been asleep at the wheel. However,

03:00there is just no commercial reason to do the processing. That's why countries like the United States

03:06and others have outsourced the processing to China. It's very, you only need tiny amounts of critical

03:14minerals that go into your mobile phone or your computer, your car or defence applications.

03:21But if you don't have that tiny little bit, your application won't work. And so there's no commercial

03:28quantity of scale that is actually going to force the private sector to do this on their

03:33own. Anyone that knows the mining sector knows that miners like to extract as much value as

03:40possible from their mines. And there's a lot of these critical minerals and rare earths in the

03:44mine waste, the tailings that could be extracted. But miners simply don't do it because it's not

03:49commercially viable. That's why you need the US government, Australian government to actually

03:55work with these miners and start to value add by including some pilot processing facilities on

04:02existing mines. And that will help actually use the entire part of the supply chain.

04:09So Albanese is now saying that the deal is about $8.5 billion pipeline. Are the public and private

04:18partnerships from what we can see so far with still the lack of details, sort of a good setup in order to

04:24get the government incentivising these projects?

04:29Yes. Anyone that's been following this space this year might remember that the US Department of War

04:34invested half a billion dollars in the US's main rare earths miner, MP Materials, which has a mine in

04:41California. After the US government invested that amount of money, that's when we saw companies like

04:47Apple decide to come in. And that really crowded in that private sector investment. This deal between the

04:53US and Australia is hoped that it will do something similar. It will be a signal to industry that

04:58government is taking equity stakes. Now, this is a step change for Australia. It doesn't usually like

05:04to take equity stakes. Part of its industrial policy has included tax credits for the production of

05:11minerals, but not so much the equity stakes. Now we see Australia taking equity stakes in Arafura

05:17and in the Alcoa-Sojitz deal. So this is a really strong signal from government to the private sector.

05:25And Australia has a lot of large wealth holders, superannuation companies, for instance,

05:31Australian banks that could be investing in this now, now that they have confidence from government.

05:38What are the considerations on the side of the firms from governments taking equity stakes in them?

05:45Well, like any investor, they want to make sure that their risk is offset. And the biggest risk right

05:52now is that the processing technology does not exist. So for instance, there's only one Australian

05:59company, Linus Rare Earths, that has cracked the code of heavy rare earths refining, which it does in

06:06Malaysia. Now, there are fast-tracked efforts between many countries to gain this knowledge back,

06:12particularly in Japan. They're actually getting elderly people 80 years plus out of retirement to

06:19teach people how they did the refining back in their day. But this is knowledge and know-how that's

06:24been lost and it needs to be gained back. But also there can be innovation so that some of this

06:30processing is done in a cleaner, greener way. And that will be really important. I think the last

06:36thing to note about that too is how those costs are passed on to the consumer, because all of that

06:41higher quality processing costs extra money. And so if those costs can be passed on to consumers,

06:47some of these companies can recoup those costs.

Category

Transcript

Be the first to comment

Recommended