Australia Advances Rare Earth Processing Capacity With Govt Backing

• Australia boosts rare earth processing to cut reliance on China
• Government funding backs refining, separation and strategic reserves
• Projects target EV, renewable and defence supply chains

Australia has taken a significant step toward strengthening its position in global rare earth supply chains, with expanded federal backing aimed at shifting the country beyond its long-standing role as a raw material exporter. The move reflects growing concern among Western governments over China’s dominance in rare earth processing and refining, particularly for materials used in electric vehicles, renewable energy systems and defence technologies.

In early 2026, the Albanese government confirmed that rare earth elements would be prioritised under a new A$1.2 billion Critical Minerals Strategic Reserve, alongside antimony and gallium. The reserve, expected to be operational by the end of 2026, is designed to support offtake agreements, forward contracts and supply guarantees for allied partners, including the United States, the European Union and Japan. Officials say the initiative is intended to provide greater certainty for investors and downstream manufacturers.

Central to Australia’s strategy is the expansion of domestic processing capacity. Construction is progressing on the country’s first open-access rare earth processing facility, led by the Australian Nuclear Science and Technology Organisation (ANSTO) in Sydney. The plant is scheduled for completion in early 2026 and will be capable of processing clay-hosted rare earth ores, a resource increasingly viewed as strategically valuable due to its lower processing intensity compared with hard-rock deposits.

Iluka gets A$1.65 billion non-recourse loan

In Western Australia, Iluka Resources is advancing development of a fully integrated rare earth refinery at Eneabba, one of the most ambitious processing projects outside China. Backed by a A$1.65 billion non-recourse loan from the federal government’s Critical Minerals Facility, the refinery is expected to produce separated rare earth oxides including neodymium, praseodymium, dysprosium and terbium. First production is targeted for 2027, positioning the plant as a key supplier of magnet-grade materials for global markets.

Australia currently ranks as the world’s fourth-largest rare earth producer, accounting for roughly 6% of global mine output, according to Geoscience Australia. However, most Australian-mined material has historically been shipped overseas for processing. Government officials argue that expanding onshore refining and separation capacity is critical to capturing more economic value while improving supply security for strategic partners.

Australian rare earth companies are also leveraging government-supported infrastructure to accelerate project development. Pilot-scale processing of ionic clay material from South Australia’s Koppamurra project has already begun at the ANSTO facility, reducing technical risk and shortening development timelines.

These domestic initiatives are reinforced by international cooperation. Under the United States–Australia Framework for Securing Supply in Critical Minerals and Rare Earths, both governments have committed to coordinated financing, streamlined permitting and closer market integration. Analysts say the framework reflects a broader geopolitical push to diversify supply chains away from China, which still controls about 70% of global rare earth mining and nearly 90% of processing capacity.

Taken together, Australia’s growing pipeline of processing projects and policy support signals a shift toward becoming a cornerstone supplier in non-Chinese rare earth supply chains, though officials acknowledge it will take years before new capacity meaningfully alters global market balances.

  Australia, critical minerals, government backing, rare earth policy, US-Australia Framework