WA’s Lucrative Dirt: How Rare Earth Metals are Transforming the State’s Fortunes

Rare Earth Metals: The Hidden Billion-Dollar Treasure in Western Australia

An Introduction to the Valuable Black Sand in WA

In the remote Western Australian desert, just three hours north of Perth, lies an unassuming pile of black sand. At first glance, this sand appears to be no different from any other, but its true value is anything but ordinary. Dan McGrath, the head of rare earths at Iluka Resources, proudly explains, “What sits here today is worth over a billion dollars.” This massive stockpile of sand is owned by Iluka, a mining company, and it holds within it tiny grains of the most powerful metals in the world – rare earths.

The Unparalleled Value of Rare Earths

Rare earths are metals with extraordinary properties that make them indispensable in the manufacturing of defense weapons. Kim Beazley, a prominent figure in Australia’s defense sector and an adviser to US arms manufacturer Lockheed Martin, highlights the widespread use of rare earths in weaponry. He states, “In the US military, 3400 weapon systems have rare earths in them. It’s not something unique about US weapons systems; every day, Russians and Ukrainians are throwing rare earths at each other.”

The significance of rare earths becomes clearer when considering the precarious nature of their global supply chain. China, recognizing their strategic value, gained a virtual monopoly over the processing of rare earth minerals. Consequently, the rest of the world became dependent on China for their supply. Beazley points out that China has already shown its power to manipulate this market. In 2010, as a form of retaliation, China refused to sell processed rare earth products to Japan. More recently, they passed powerful laws allowing the Communist government to control the tap of rare earth supply whenever they desire. Beazley warns, “They said they would not send rare earth products to anybody who was an adversary of China. So technically speaking, they’ve already legislated against the United States, and us for that matter.”

The Need for Diversification and Trust

The reliance on China as the sole supplier of rare earths raises significant concerns. Relying on a single source for such critical materials poses substantial economic and geopolitical risks. Beazley asserts, “You don’t have to be anti-Chinese or frightened of China to say having only one source of supply is dumb.” Australians, therefore, find themselves in a unique and enviable position. Blessed with an abundance of rare earths, Australia has the potential to become a major player in the global rare earth industry.

Australia’s Plan for Economic Transformation

Recognizing the opportunity at hand, Iluka is planning to build the first rare earths processing refinery outside of Asia. The company has secured a $1.25 billion loan from the federal government, allowing them to establish the refinery in Western Australia, right next to their existing stockpile. However, there is a condition: Iluka cannot sell any of its current stockpile to China. This condition ensures that the stockpile is processed through the refinery, thus promoting self-reliance and reducing dependence on Chinese supply.

The Australian government is also taking proactive steps to support the development of the rare earths industry. Prime Minister Anthony Albanese recently announced nearly $6 billion in government loans available to mining companies for the purpose of keeping and processing critical minerals in Australia. Resources Minister Madeleine King, responsible for decision-making regarding the allocation of these funds, emphasizes the need for Australia to catch up with China’s 20-year head start in the rare earths sector. She states, “We now need to compete and we need to catch up, and that’s why the government is pushing into this critical minerals and rare earths sector.”

A Stroke of Extraordinary Luck and a Promising Future

Iluka’s remarkable journey into the rare earths industry began with a stroke of extraordinary luck. Thirty years ago, when China first recognized the value of rare earths, an astute Iluka worker convinced the company to hold onto their stockpile, despite its seemingly negligible worth at the time. Today, Iluka finds itself in possession of a billion-dollar treasure trove. Although the identity of this perceptive worker remains a mystery, Dan McGrath expresses his admiration, saying, “Who was that? I don’t know, but it was a very clever choice. I’d like to buy him a beer, I think.”

With the construction of the refinery set to be completed by the end of 2025 and the production of processed rare earths projected for 2026, Iluka represents a beacon of hope for Australia’s economic transformation. By seizing the opportunity to process rare earths within their borders, Australia can foster greater self-reliance, enhance national security, and contribute to a more balanced global supply chain.

In the face of China’s dominance and the potential risks associated with monopolistic control over rare earths, Australia’s proactive steps pave the way for a promising future. By developing its rare earths sector, Australia can not only tap into a lucrative market but also emerge as a key player, diversifying the global supply chain and safeguarding the interests of nations around the world.