For several years, Openmarkets Group has co-hosted a monthly “Mining Mates” lunch with Rawson Lewis, bringing together fund managers, geologists, and mining executives who have their fingers on the pulse of the commodity market. From these sessions, two themes have consistently emerged: gold and rare earths. Rare earths have always been the more controversial of the two subjects, with sentiment swinging from enthusiasm about new processing hubs to a resigned realism about costs and China’s dominance. But one thing is clear: rare earths have moved from a speculative play to a structural element of the economy. This shift was underscored by the recent agreement between Canberra and Washington to secure the supply of critical minerals and rare earths, signalling to investors that this sector is here to stay.
At our lunches, someone always points out that rare earths aren’t actually that rare. The challenge lies in extracting and separating them efficiently. China, never one to worry about environmental controls and property rights where geopolitics are concerned, seized this opportunity and now controls about 85% of global refining capacity.[1] That impact was felt when Beijing restricted exports of gallium and germanium in 2024, disrupting supply chains for semiconductors, EVs, and wind turbines.[2] Demand is only increasing, with each EV needing about a kilo of rare-earth magnets and each offshore turbine requiring up to two tonnes, even if the wind doesn’t always blow. The International Energy Agency predicts consumption will triple by 2035, meaning shortages and price spikes will continue without new refining capacity outside China.
Australia is sitting on some of the world’s richest deposits, like Iluka’s Eneabba sands and Arafura’s Nolans field. But for too long, we’ve simply exported concentrates, letting others capture the value. That was good for the Japanese and Koreans, but now that’s going to change. Lynas’s Kalgoorlie refinery is commissioning, Iluka is building a separation plant, and Arafura has secured offtake agreements. Australia is finally building a mid-stream sector, adding value instead of just digging and shipping.
This bilateral framework between Australia and the US formalizes the strategic and economic importance of critical minerals supply. Each government will invest at least US $1 billion in projects. More than just money, it legitimizes the investment, signalling that rare earths are a long-term industrial priority. This agreement reflects a new reality: Australia is being drawn deeper into the industrial-defence complex. The US and UK want Australia not just as a base, but as a participant and supplier in the supply chain. This ambition predates the current US administration, with both the Trump and Biden governments focusing on securing rare earths and battery minerals for national security and clean energy.[3] For Washington, it’s about supply continuity; for Canberra, it’s about relevance. This rare-earths agreement is like the industrial version of the AUKUS submarine deal, showing Australia’s contribution to shared economic security, even if certain members of the Australian body politic had to say so through gritted teeth.
According to the Australian Critical Minerals Prospectus (2025), projects like Iluka’s A$1.7 billion Eneabba Refinery, Arafura’s Nolans Project, and Hastings’ Yangibana Mine are establishing a domestic refining chain capable of producing nearly 30 kilotons per annum of high‑purity rare‑earth oxides.[4] Australia and the UK are now considered “domestic sources” under the U.S. Defense Production Act,[5] giving them access to US funding and guarantees. This integrates Australian production into the AUKUS ecosystem, supporting hypersonics, quantum computing, and autonomous systems. In short, Australia’s ore is becoming alliance infrastructure.
No one holds back at the Mining Mates lunches and things can get a bit spicy at times. Some are optimistic about a major rebuild, while others remember past “future metals” bubbles. Everyone has a war story. After China’s 2010 export restrictions, prices soared, only to collapse when Beijing reopened exports.[6] A similar pattern occurred in lithium: spot prices for lithium carbonate surged from under US $10,000 a tonne in 2020 to over US $80,000 at the peak of the 2022 EV boom, then tumbled by more than two‑thirds through 2024, forcing mines such as Finniss and Broken Hill to be mothballed.[7] These cycles can severely damage investors, leaving them curled up in the foetal position begging for help. They’ve seen how quickly enthusiasm and policy can inflate valuations. Rare-earth development is capital-intensive and technologically demanding, and returns won’t be immediate.
Processing plants create jobs, infrastructure, and downstream manufacturing. The blend of government support and global demand make this compulsory viewing for fundies. We’re seeing increased client interest, with institutional investors now viewing rare-earth ventures as long-term industrial assets. Family offices are exploring exposure through ETFs and structured hybrids.[8] The conversation has shifted from curiosity to conviction.
Looking back at my Mining Mates notes, the tone has changed like a sine wave but lately has been moving from “never again” to strategic imperative. The focus is now on balance sheets, infrastructure, and national capacity. However, markets move faster than policy. The initial surge in rare-earth shares has already pushed valuations to the “challenging” zone. The real value may lie in the equipment and technology that enable processing, such as chemical-separation systems, high-temperature kilns, and automation platforms. At Openmarkets we’re happy to back the tool makers over the diggers if it helps mitigate some of the risks involved.
Still, even the best technology can’t save an industry built on government support alone. Any sector reliant on subsidies is vulnerable to political shifts. As Warren Buffett cautioned, “Never invest in a business you cannot understand — especially one whose profits are decided by government policy”.[9] This is both a warning and an opportunity. The rare-earths story is now about industrial execution and policy durability. If Australia can build a viable processing base without subsidies, the returns will last. If not, it could be another boom gone bust; the new Poseidon.
The Australia–U.S. framework is more than just a hedge against supply risk; it’s a blueprint for a new kind of alliance economics, where defence access, industrial policy, and investment capital are traded equally. It’s the new transactional diplomacy that’s all the vogue in Washington now. For investors, this creates both promise and peril. The challenge for governments and markets is to ensure Australia’s rare-earth awakening lasts, and that the smart money is in the structure that makes it work.”
By Michael Fagan, Head of Market Strategy, Openmarkets Group
[1] Resource realism: The geopolitics of critical mineral supply chains. Jared Cohen, President of Global Affairs and co-head of the Goldman Sachs Global Institute. September 13, 2023.
[2] GLOBSEC on China export ban.
[3] White House, Fact Sheet: Securing a Made-in-America Supply Chain for Critical Minerals, 31 March 2022; U.S. Department of Defense, Defense Production Act Title III Determination on Critical Minerals, April 2022.
[4] Australian Critical Minerals Prospectus, Australian Trade and Investment Commission, April 2025 — sections on Iluka Eneabba Refinery (WA), Arafura Nolans Project (NT), and Hastings Yangibana Project (WA) pp. 31–35
[5] The Strategic Imperative of Critical Minerals in AUKUS, Australian Institute of International Affairs, 2025, pp. 5–6
[6] Data on the 2010–2012 rare earths price spike and collapse: U.S. Geological Survey, Mineral Commodity Summaries: Rare Earths, 2014; see also Bloomberg, “Rare Earth Prices Slump as China Lifts Export Controls,” April 2012.
[7] Australian Critical Minerals Prospectus, April 2025, pp. 56–60 — references to price-driven mine suspensions at Core Lithium’s Finniss and the Broken Hill Cobalt Project
[8] Rare Earth ETFs and Mutual Funds: Complete Investment Guide for 2025. January 18, 2025
[9] Warren Buffett, Berkshire Hathaway Annual Shareholders’ Meeting, 2013: ‘Never invest in a business you cannot understand — especially one whose profits are decided by government policy.’