Australian government steps up to support new rare earth minerals ventures…here’s why it matters.
For those not following the politics of the land down under, the current Australian federal government is actually trying to do something about climate change. That’s a real shift from the previous, climate denying, coal-and-gas-loving conservative government defeated in 2022 after 10 years by the current Labor government along with seven “Teals,” independents outside of the major political parties.
But winning an election is one thing. Driving effective climate policy is quite another, as Australian Prime Minister Anthony Albanese – or Albo as he is known at home – knows. Progress often means pacts with the devil.
Recently Albanese committed up to A$840 million (US$551 million) for the nation’s first rare earth combined mine and refinery in Australia’s far north — the Northern Territory – managed and operated by Arafura Rare Earths. At the launch, Albo talked up how the project will bolster new exports and provide local jobs in the remote area.
The planned mine will extract elements including neodymium and praseodymium, chemical elements needed for manufacturing cars, wind turbines and fighter jets by companies like Hyundai, Siemens Gamesa Renewable Energy and GE Aerospace.
This is good news for Australia and Arafura. Since the government announcement, the company’s value has soared by 75%.
About the same time, Albanese also announced a A$550 million loan for lithium developer Liontown Resources for a mine in Western Australia through the government-owned Clean Energy Finance Corporation.
This is more good news for public stakeholders, private shareholders and the climate.
Subsidizing the world’s eighth richest woman
Here is where it gets a bit trickier. These government investments effectively subsidize the world’s eighth richest woman.
Outside of Australia, you may not have heard of mining magnate Gina Rinehart. The heiress and executive chair of Hancock Prospecting, a company built by her father Lang Hancock, is reported to be worth $30.7 billion. Rinehart now has a 10% stake in Arafura Rare Earths and almost 20% of Liontown Resources.
You’d be forgiven for asking why Arafura and Liontown need government funding at all with Rinehart on board.
Here is why:
For countries like Australia where coal and gas have historically dominated the economy — generating profits of about A$100 billion a year (US$68 billion) — it’s critical to convince powerful and profit-driven CEOs and investors that decarbonizing is indeed the next big thing.
For countries like Australia where coal and gas have historically dominated the economy, it’s critical to convince powerful and profit-driven CEOs and investors that decarbonizing is indeed the next big thing.
Most of us know that making the move from polluting fossil fuels to renewable energy not only makes great climate sense but also economic sense. Renewables and battery storage are now, by far, the cheapest way to produce energy everywhere in the world.
Sadly, pro-fossil ideology is still getting in the way of the walk-through stuff off renewable energy economics.
Powerful forces who have profited from coal and gas their entire careers are unconvinced and uncommitted — like Rinehart. Globally they are a dangerous drag on the world’s ability to move fast enough and this is a real problem given the damage they do.
A few Australian examples…
In 2010, then Labor Prime Minister Keven Rudd proposed a 30% tax on iron ore and coal profits over A$75 million, called the Super Profits Tax. Rinehart and her powerful Australian mining cronies (including now renewable energy-believer Andrew “Twiggy” Forrest) fought an aggressive campaign to stop the tax with a big lobbying effort, national ad campaign and anti tax rallies. Not long after, Rudd, now the Australian Ambassador to the U.S., caved, dropped the tax and then in a dramatic turn of events, lost the big PM job.
In recent years, Rinehart has also been quietly funneling millions into a right-wing “think” tank that has worked to promote coal to the public and governments at all levels well past its use-by date. In 2019, Australia’s Saturday Paper exposed Rinehart as a major funder to the Institute of Public Affairs, which more recently has worked to derail efforts to give Aboriginal Australians a voice in government — no surprise as many mine sites are located on First Nations land. The Institute also relentlessly pushes for fossil fuels while questioning climate science in a strategy right out of the Big Tobacco’s playbook.
Add to this a Rinehart court case for defrauding her own children, telling Australian workers they should “work harder and socialize and drink less” and her buying into one of Australia’s last remaining non-Murdoch media outlets – no doubt with editorial influence in mind – and you get an idea of this mining magnate’s MO.
Changing spots
This is why it makes sense to at least try to get this leopard to change her spots. It’s more important to have her on our side than the other side blocking the transition and taking down prime ministers.
In the wake of the U.S. Inflation Reduction Act (IRA) — Biden’s massive spend on climate projects – Albo’s economic support for two rare earth minerals ventures is what we Aussies call “small bikkies.” But it’s important for a country that has been cautious about investing taxpayer money in decarbonising and not coal and gas companies (quite understandable given the mining sector’s disproportionate might).
If the country gets it right, Australia could go beyond digging and shipping to refining onshore and building whole new sectors that would add value for the nation’s post-fossil fuels economy.
The reality is, Australia has the potential to be one of the world’s emerging renewable superpowers and our own form of an IRA could be a mighty engine for growth and jobs. Our efforts could also make it possible for our biggest trading partners – China, Japan and Korea – to achieve otherwise impossible net zero targets if we can, for instance, transition to producing and selling green iron ore.
Australia’s rare earth production 2023
Source: Statista
But there is an even more important reason. For generations Australia has been a “dig and ship” economy relying on exports of raw materials to Asia — commodities with no added value. In 2022, Australia was the third-biggest producer of rare earths globally, producing 5% of world output, while China has near complete control over refining these minerals. Big players like BHP and Bluescope Steel seem to get the enormous potential here but Australia can’t get there without government economic reform and stimulus to encourage and de-risk the rapid shift by private equity into renewable energy, rare earth minerals for batteries and everything else that is needed to decarbonise the sector.
Simply exporting raw materials is not smart economic policy. And it’s not good business. It’s critical to get the CEOs of Hancock, BHP, Rio Tinto, Santos and South32, to see the once-in-a-generation opportunity of this transition and get moving. If the country gets it right, Australia could go beyond digging and shipping to refining onshore and building whole new sectors that would add value for the nation’s post-fossil fuels economy.
Offering a carrot to Rinehart to see the money-making potential of this shift is worth trying if it means bringing her, and others, along for this transformative ride. Given the very short window we have to address climate change and make the energy transition globally, it’s time to cultivate frenemies, not enemies.
Featured photo: Gina Rinehart. Source: Mumbrella
