Prime Minister Anthony Albanese and US President Donald Trump have signed an $US8.5 billion ($13 billion) critical minerals and rare earths agreement in a move to break China's stranglehold on the market.
The US–Australia Critical Minerals Framework puts rare earths squarely at the forefront of the Australian-US relationship, with Albanese saying there is a "pipeline that we have ready to go".
The deal will kick off with both countries paying $US1 billion over the next six months for new projects.
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Trump was delighted in securing the agreement with Australia. China earlier this month ramped up restrictions on its rare earth exports. That didn't sit well with the US president, who threatened to call off an upcoming meeting with his Chinese counterpart, Xi Jinping.
"We work together very much on rare earths, critical minerals and lots of other things, and we've had a very good relationship," Trump said as he sat beside Albanese at the White House.
"We've been working on that for quite a while.
"In about a year from now, we'll have so much critical mineral and rare earths, and you won't know what to do with them."
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What are rare earths?
Rare earths include 17 metallic elements in the periodic table made up of scandium, yttrium and the lanthanides.
The name "rare earths" is a bit of a misnomer, because the materials are found throughout the Earth's crust.
They are more abundant than gold, but they are difficult and costly to extract and process and are also environmentally damaging.
The minerals are used to make everyday technologies, from smartphones to wind turbines to LED lights and flat-screen TVs.
They're crucial for batteries in electric vehicles, as well as MRI scanners and cancer treatments.
Rare earths are also essential for the arms industry and the US armed forces, the world's biggest.
They're used in F-35 fighter jets, submarines, lasers, satellites, Tomahawk missiles and more, according to the Centre for Strategic and International Studies (CSIS), a US think tank.
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Why is Australia so crucial?
The US sees Australia, a long-standing ally, as an alternative source for rare earths as the critical minerals shape up to become a major hurdle in Washington-Beijing relations.
China is the world's largest producer of rare earth elements, with 61 per cent of mined rare earth production, according to the International Energy Agency, and 92 per cent of the global output in the processing stage.
Trump hopes the Australia deal will help break that monopoly.
Australia offers three major attractions: it has some of the world's biggest geological reserves: a share market with a record of successfully investing in mining; and a skilled labour force.
Are there any hurdles ahead?
Economic geographer Lian Sinclair, of the University of Sydney, says vast sums of money are pouring into the Australian rare earths industry: $3.2 billion by Australian government agencies; $2.9 billion from foreign allied governments, including the US, Japan, South Korea and Canada.
"This is a large amount for an industry with a total global trade of less than US$4 billion ($6 billion) every year," he said.
It means without investment in refineries and magnet production in allied countries, Australian miners will continue to either sell into or be outcompeted by Chinese domestic industry.
Sinclair says apart from Australian rare-earths mining company Lynas, which sells into the Japanese market, miners are struggling to find potential international buyers.
To wean themselves off Chinese rare earths for wind turbines and electric vehicles, the US, Europe and South Korea need to heavily invest in magnet and advanced metal processing industries.
Sinclair also points to the environmental cost of Australia becoming a big player in rare earths, with more work needed to be done in planning for managing radioactive waste and building partnerships with First Nations people.
– With CNN
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