In a modestly noted announcement in Western Australia in early December, Prime Minister Anthony Albanese and Resources Minister Madeleine King announced the addition of $475 million in government loans to mining company Iluka, taking the total to $1.25 billion.

This is for processing heavy rare earths to refined oxides. I understand this was a decision heavily debated within the government. There will be more such debates in the future. The most significant rare earths here are neodymium, praesodimium, dysprosium and terbium.

Tom O’Leary, the chief executive of Iluka, pointed out that the refined oxides ‘will then be used in magnets for electric vehicles, for defence applications … renewable energy, robotics—the list goes on.’

Minister King was anxious to point to a broad Commonwealth commitment to other rare-earths enterprises: Lynas in Kalgoorlie, Arafura in the Northern Territory and Australian Strategic Materials in Dubbo. The net was cast wider to a range of further critical materials being mined and processed in Australia: a proposed graphite refinery in Townsville, vanadium projects in Western Australia and Townsville and further rare earths in South Australia.

Indeed, recently, China has focused on Australia's reserves of critical minerals as it strives to deprive the United States of gallium, germanium and antimony. These minerals are found in Australian deposits of bauxite, lead, zinc, gold and coal. Thirty out of 51 on the US’s list of critical minerals are present in Australia in substantial quantities. Fourteen more are present in more modest amounts.

Antimony, for example, is important in a range of armaments, notably bullets. Recent pricing has shown the consequences of Chinese bans on supplying the United States. Reuters reported that the price of antimony trioxide has increased by 228 percent this year in Rotterdam to US$39,000 per metric tonne.

What is happening at Iluka’s Eaneabba project is of immediate significance. The permanent magnets and hardening processes that depend on rare earths from the project are critical to the quality of missiles, their accuracy and speed. Light and heavy rare earths are in almost all US weapon systems.

To the argument that our actions might be market-distorting, Minister King points out, ‘The whole value chain of critical minerals and rare earth around the world is highly disrupted. It faces opaque international markets where pricing is almost impossible to establish in any normal fair market. So that is why government does have to participate in this particular emerging sector of our economy.’

She pointed out that we are not alone in this exercise. The US Export-Import Bank, South Korea and the credit agencies of Japan and Canada are engaged in projects. Britain, Germany and France, which direct financial resources for critical minerals, are also engaged.

The principal distorter of the market is China. The minister made that clear. The policy was about competing. ‘China … does dominate the rare earths refining processes of the world and Australia needs to compete.’

O’Leary has pointed out that if the refining process at Eaneabba is supported by the end of this decade, it could satisfy half the world’s need for permanent magnets.

In so far as Iluka is concerned, as The Financial Times has pointed out, the principal mechanism for China's distortion of the market is tying pricing to the Asian Metals Market. Adhering to pricing arrangements dominated by China cripples the profitability of any producer other than China. China can take profit at any point along the complex processing chain of rare earths, and it can cripple a competitor focused on any other point. As Iluka points out, long-term prices determined by the Asian Metals Market for neodymium and praseodymium are at $58 per kg. If that market were abandoned, prices would average between US$82 and US$148 per kg, O’Leary believes.

This could be achieved by negotiating bilaterally with buyers. They would pay for reliability and diversity of sources. The government loan provides an opportunity to try such an approach.

The Commonwealth has placed a tough test on the loan. To access it requires the successful conclusion of off-take agreements over the next two years. We should hope deadlines will be viewed leniently. China is well positioned to fight hard, wielding a near complete monopoly with which to defend the processing of the heavy rare earths. Helpful to Iluka and Australia are the materials that we would provide, and, indeed, China provides relatively small, but critical, manufacturing inputs. Buying from us is unlikely to seriously impede a manufacturer's ability to sell their completed system in any market.

The point about Australia is that we have substantial reserves, and exploration continues to surge.

Further, with the exception of the Colorado School of Mines undergraduate education, we have the five best mining-engineering schools outside China. We are superb miners, and the Australian Nuclear Science and Technology Organisation and Commonwealth Scientific and Industrial Research Organisation are helpfully knowledgeable about processing.

But putting the whole picture together requires a continual strategic commitment. Examining the recent Chinese bans, we can see that we can encourage a broad global effort. Given incoming president Donald Trump's intentions, he will need to take a deep interest in what we are doing. It is worth a major effort to indicate to him that we have the capacity to relieve what might be a substantial point of blackmail that cripples his strategic position. The Chinese have already demonstrated a willingness to move in this general area and have indicated a preparedness to take those bans further into the goods now covered by Iluka's production.