Australia has always had the resources, but capturing the real value of rare earth elements will depend on whether we can engineer solutions to what happens after the ore leaves the ground.
Only a fraction of a percentage of materials removed from the ground contain rare earth elements. And yet, according to the International Energy Agency (IEA), global demand for such critical elements is set to continue to grow rapidly.
From today to 2040, the IEA said, lithium needs will grow fivefold, cobalt and rare earth elements demand will grow 50 to 60 per cent and copper by 30 per cent.
“Rare earth elements appear to be sufficiently supplied in 2035 based on the project pipeline,” the IEA’s Global Critical Minerals Outlook 2025 report said. “However, supply concentration for rare earths … remains a key vulnerability.”
With much of the processing of rare earths concentrated in China, there is a growing call for the development of localised refining capability in Australia, to take advantage of the various downstream opportunities it will offer.
“We have a choice to make. If we don’t do it, it doesn’t spell disaster, but it is an enormous missed opportunity,” according to Jan Kwak, Director of Climate Change at Hatch.
Kwak ran Hatch’s global mining business before leading the Australasian business as Managing Director.
“It just means much less sovereign control of supply chains, much less foreign direct investment, much less foreign income, and a missed opportunity for greater economic development and national independence.”
He said it may also affect the availability of critical ingredients required for future technologies, including EVs, defence systems and renewable energy infrastructure.
What is the technical challenge in refining rare earths?
From an engineering perspective, constructing a rare earths refinery is not the biggest technical bottleneck. In Australia, we’ve got plenty of similar infrastructure across the mining sector, Kwak said.
More of a problem is the process itself, including the by-products and the economics underpinning the sector’s potential.
The refining process, which involves dissolving ores then meticulously separating similar elements from each other through multiple steps, produces outputs in addition to the rare earth material that was intended.
“There tends to be phosphorus minerals, which end up as phosphoric acid,” Kwak said. “There also tends to be radioactive elements. That creates all kinds of challenges for waste disposal and for shipment.”
As a result, rare earth refining involves “very long flow sheets with multiple steps, where losses can accumulate at each stage”.
This affects yield and decreases certainty around recovery rates and overall project viability, meaning that in the Australian environment the deeper issue is structural.
“In a command economy like China, they build and operate these plants and don’t mind taking a bit of a loss at one end of the supply chain, because of the gains they’ll make at the other end with electric cars and advanced manufacturing.
“But the way we operate in the western world, every segment of the supply chain has to be profitable in its own right. There’s an opportunity here for us to improve our structural sovereignty.”
Why should Australia pursue rare earths refining?
The challenges may be significant, but the potential rewards are great and the strategic case for domestic refining is growing by the day, and the world is very much recognising that, Kwak said.
Refining offers Australia a pathway beyond raw material exports and to higher-value activity, while strengthening sovereign capability.
However, Kwak believes this transition will not occur through engineering alone. “The short term is about policy.”
Certain mechanisms, including government-backed floor pricing and production incentives, are already being discussed, redistributing value from downstream economic activity back into upstream refining.
“What we’d really be doing is using the revenue from an improved economy and putting it back into some of the infrastructure that enables that economy – we need to invest in the long-term supply chain activities that will be so important tomorrow,” Kwak said.
This only works if downstream industries are also developed domestically.
“If we’re just making this and shipping it offshore, that doesn’t work.”
What is the engineer’s role?
Engineering has a powerful role to play in the success of this economy-driving sector, particularly in improving refining process efficiencies and unlocking various new value streams.
This could include the ability to monetise what is currently treated as waste. The Arafura Nolans Rare Earths Project in the Northern Territory, for example, utilises the by-product phosphoric acid to produce a fertiliser, creating a new revenue stream from what was previously a problematic waste product.
“The more of these by-products we can make into something valuable, the more we’re co-subsidising the rare earths production.”
Digital tools are also contributing. Advanced process control systems, including AI-assisted platforms (called AIPC, or AI-process control), can reduce variability and improve recovery rates.
These gains are incremental at first glance, but they could be significant in marginal-gains environments such as mining, Kwak said.
“This is the kind of thinking Australia needs. It needs to look inwards at where it can make adjustments in our marginal gains. It needs to use that new capital smartly and invest in the longer term strategy.”
If policy, investment and industry alignment are achieved, a domestic refining industry could be a reality within a decade, or sooner, he said.
Engineering that viability would shift Australia from exporter to producer in one of the future’s most critical supply chains.
READ: The $15 billion mission to get Australia making things again
