Speaker 1: I'm Daniel James, and you're listening to seven AM. When
Speaker 1: Anthony Alberinezi met with Donald Trump. This week, the two
Speaker 1: leaders cut a deal on critical minerals worth thirteen billion
Speaker 1: Australian dollars. Australia has them and the US needs them.
Speaker 1: And as we're settle into a new phase of a
Speaker 1: relationship with our most important ally, this is our crucial
Speaker 1: bargamanship as the US tries to break China's grip and
Speaker 1: the supply chain of critical minerals. China's global domination has
Speaker 1: been in the works for decades, a grand plan that
Speaker 1: gives China ready access to materials essential for everything from
Speaker 1: fighter jets to wind turbines. It also gives Beijing extraordinarilyverage
Speaker 1: over Western economies and defense forces. Today, columnists for Australian
Speaker 1: Foreign Affairs Ian Verenda on China's long game on critical
Speaker 1: minerals domination and the old pile of mining waste in
Speaker 1: Western Australia which could upend it. It's Sunday, October twenty sixth.
Speaker 1: This episode was originally published in July, and we keep
Speaker 1: hearing about China's stranglehold over the critical mineral supply globally.
Speaker 1: How did that happen? Can you take me back to
Speaker 1: where this story began for them?
Speaker 2: Look, it began way back, more than thirty years ago, really,
Speaker 2: And I guess the first inkling that we had that
Speaker 2: this was about to take place was a speech that
Speaker 2: Deann Jhaping gave in around nineteen ninety two on a
Speaker 2: tour of China.
Speaker 3: At this crucial point in China's reform and opening up,
Speaker 3: Dong Chaoping once again demonstrated that he possessed the political
Speaker 3: courage and wisdom needed to guide China along the right path.
Speaker 2: He was never the president, but he was really the
Speaker 2: leader of China at the time, and he made this
Speaker 2: announcement at at a gathering where he said, the Middle
Speaker 2: East has oil, China has rare earths.
Speaker 3: His comments were a declaration that projected China's reform and
Speaker 3: opening up into a new era and once again placed
Speaker 3: China onto the fast track of development.
Speaker 2: And from that point on, China went down this path
Speaker 2: of exploiting the rare earths that it had, which was
Speaker 2: a fairly fast sighted kind of vision for den because
Speaker 2: you know, rare earths aren't really all and rare. They're scattered, right,
Speaker 2: across the Earth's crust, but they're not usually a needing
Speaker 2: form of concentrated way to extract easily. So you know,
Speaker 2: mining becomes economic when you've got large quantities enriched like gold,
Speaker 2: oars or something like that, whereas rare earths are just
Speaker 2: scattered in very very minute quantities across a broad range,
Speaker 2: so they're very difficult to mine economically, and then when
Speaker 2: it comes to the processing of it, it becomes a
Speaker 2: really dirty, difficult task. They often run alongside things like
Speaker 2: uranium and thorium, which are really quite toxic things to
Speaker 2: mine with. So it was an incredible, I guess, vision
Speaker 2: to be able to see this and to take advantage
Speaker 2: of it to the extent that they've really become absolutely
Speaker 2: vital to the modern economy. So the Deng saw that
Speaker 2: China had an advantage with rare earths in China, but
Speaker 2: what he did was he then insisted that they not
Speaker 2: just extract, but they refine and manufactured using those goods
Speaker 2: as well.
Speaker 1: So they not only have the minerals, they also have
Speaker 1: recognized the power in dominating the processing of those minerals.
Speaker 1: So how did they go about monopolizing that.
Speaker 2: The state has not held back in ensuring that it
Speaker 2: retains its dominant position. And they've dominated by really quite
Speaker 2: overt use of strategies where they really tend to manipulate
Speaker 2: market prices, put all kinds of stress and strains on competitors,
Speaker 2: usually through market forces, and also by running propaganda campaigns
Speaker 2: as well. There's a good example. And America really only
Speaker 2: had one rare Earth's mind. It shut down I think
Speaker 2: round about in the eighties nine. As it was reopened
Speaker 2: round about twenty ten, a company called Molly Corp decided
Speaker 2: to reopen it. Rare earth prices at that stage were
Speaker 2: really very strong.
Speaker 1: Let's find out what's ahead for Maleycorp and the rare
Speaker 1: earth metals market. We have Mark Smith.
Speaker 2: He is Maleykorp's chief executive.
Speaker 1: Mark, thanks so much for coming in. Good to see you.
Speaker 2: Finally, by twenty fourteen, Molycorp had gone broke and was
Speaker 2: forced to shut down. Do you believe that prices are
Speaker 2: being manipulated by Chinese producers? The market was suddenly flooded
Speaker 2: with all kinds of rare earths, and so Molecorp just
Speaker 2: could not compet against this.
Speaker 4: Chinese producers have been very clear about two things. They
Speaker 4: are going to continue to restrict the export of these
Speaker 4: materials to the rest of the world, and we can
Speaker 4: expect an irreversible trend, as they call it, for higher prices.
Speaker 2: The mine has since reopened, by the way, but it
Speaker 2: just goes to show that the extent of the power
Speaker 2: that China was exerting. Then a few Australian companies have
Speaker 2: come under pressure as well. An Australian company called Linus
Speaker 2: opened an operation in Malaysia. Suddenly there was a propaganda
Speaker 2: campaign running right through that area of Malaysia talking about
Speaker 2: the environmental impacts of the refining process, and it turns
Speaker 2: out that it was being run by a Chinese group
Speaker 2: called Dragon Bridge. This whole propaganda campaign, which incidentally has
Speaker 2: been running another propaganda campaign against Linus with its proposed
Speaker 2: refining operation in America at the moment. But it just
Speaker 2: goes to show that the pressure that China exerts is
Speaker 2: firstly against any competitors, and then they'll take retaliatory action
Speaker 2: against any country or any company that threatens its future
Speaker 2: well being. You've seen it in lithium. Lithium prices have
Speaker 2: collapsed in the past eighteen months. You've seen it in
Speaker 2: nickel nickel prices have crashed. China has basically exercised its
Speaker 2: power with nickel by pouring vast amounts of money into Indonesia.
Speaker 2: Indonesia ten years ago provided around about six percent of
Speaker 2: the world's refined nickel and now provides around six percent.
Speaker 2: So that's just in a decade. And as a result,
Speaker 2: Australia's nickel operations have shut down. I mean, Andrew Forrest,
Speaker 2: who you know, the person behind Fortescue, who's one of
Speaker 2: Australia's biggest iron ore miners, spent around three quarters of
Speaker 2: a billion dollars just two and a half three years
Speaker 2: ago to buy up a whole lot of nickel operations
Speaker 2: in the West and was forced to close them within
Speaker 2: a year.
Speaker 1: So as it stands in China succeeded in fulfilling Deng
Speaker 1: Jiaoping's vision beyond probably beyond what he could have even imagined.
Speaker 1: So how would you describe China's position when it comes
Speaker 1: to critical minerals right now?
Speaker 2: Look, it's absolutely dominant in the space of critical minerals,
Speaker 2: and the domination depends on what part of the rare
Speaker 2: earth spectrum you're talking about. I think it's anything from
Speaker 2: about seventy percent from the lower end of the rare
Speaker 2: earth spectrum up to total domination one hundred percent when
Speaker 2: you get what's known as heavy rare earths. So it's
Speaker 2: a what's known as a monopsony. It's the big player,
Speaker 2: it's the elephant in the room when it comes to
Speaker 2: this industry.
Speaker 1: Coming up after the break, how a pile of mining
Speaker 1: waste in Western Australia could hold the key to upbending
Speaker 1: China's stranglehold of the rare earth industry. And why does
Speaker 1: it matter if China dominates the rare earth supply chain?
Speaker 1: How does that affect us?
Speaker 2: Well, I mean it'll be not just to Australia's advantage,
Speaker 2: but to the world's advantage if there is an alternative source,
Speaker 2: you know. I mean, at the moment, we're seeing all
Speaker 2: these negotiations take place between America and China over trade
Speaker 2: and over a range of other areas. What people don't
Speaker 2: realize is that America's defense, and particularly it's aerial defense,
Speaker 2: the flagship of the defense fleet, the FA thirty fives,
Speaker 2: require huge amounts of these magnets that China manufactures out
Speaker 2: of rare earths that only it produces, you know, refined
Speaker 2: rare earths. So America's defense is largely dependent upon getting
Speaker 2: these components from China. So if there was ever any
Speaker 2: kind of conflict between America and China, China really does
Speaker 2: send to hold the Whipan.
Speaker 1: And you've been reporting on how Australia is trying to
Speaker 1: shore up its own supply chains. Can you tell me
Speaker 1: about what's been happening in our back western Australia.
Speaker 2: Yeah, look about about thirty years ago, there is a
Speaker 2: company called Aluka. It actually had a different and name
Speaker 2: back then, but it was a sand miner essentially, and
Speaker 2: it was basically getting you know, mineral sands, refining them.
Speaker 2: And one of the byproducts was a think called monozite,
Speaker 2: which contains rare earths, and there was a market for
Speaker 2: it back then and it was being used I think
Speaker 2: for fluorescent lights. Suddenly that market collapsed and nobody knows
Speaker 2: that I look at these days who was responsible for it.
Speaker 2: But someone with a lot of foresight decided that rather
Speaker 2: than just dump all this stuff, they would store it.
Speaker 2: So they did this huge pit and started storing all
Speaker 2: this monocite. And what's happening there now is that it's
Speaker 2: building a refinery that will be capable of refining not
Speaker 2: just ordinary rear earths, but what's known as heavy rare earths,
Speaker 2: which are very difficult to obtain, elements that are required
Speaker 2: for super high end uses in wind turbines, in aviation,
Speaker 2: and particularly in defense purposes as well. And so we
Speaker 2: we have this Australian company which is now going to
Speaker 2: have a refinery which will be the only refinery outside
Speaker 2: of China that can produce this kind of stuff. In
Speaker 2: the past few weeks, in fact, Linus, the other Australian company,
Speaker 2: has announced that it is also trying to upgrade its
Speaker 2: refining processes. Possibly they've got a couple of little operations
Speaker 2: in West Australia and the big one in Malaysia as well,
Speaker 2: so it looks like they're going to try and be beat.
Speaker 2: I look it to the punch to seeing who can
Speaker 2: be the first refiner outside of China to be able
Speaker 2: to compete with the Chinese. Will provide the Western world
Speaker 2: with an alternative source. So we would be providing for
Speaker 2: the world for the first time a competitive source and
Speaker 2: an alternative source of these really valuable minerals.
Speaker 1: So there's clearly advantages to Australia being a bigger player
Speaker 1: in the critical mineral space. We know that both Morrison
Speaker 1: and Albanezi governments has spent billions backing the Luke and Mine.
Speaker 1: So what does it say about how our governments thinking
Speaker 1: about this industry.
Speaker 5: We can't just sit back and allow ourselves to be
Speaker 5: at the end of global supply chains. We need to
Speaker 5: put it simply. We need to make more stuff here.
Speaker 5: That simple.
Speaker 2: So the other and easy government in recent times has
Speaker 2: suggested a kind of reserve of these minerals that the
Speaker 2: government would stand behind it the industry and buy up
Speaker 2: these reserves when the price was low.
Speaker 5: We have some of the world's largest reserves of critical
Speaker 5: minerals and the new strategy will set a vision for
Speaker 5: the sector.
Speaker 2: And there are some people in the industry who think
Speaker 2: that's a great idea. The chief executive of LINEUS she
Speaker 2: thought that it wasn't a terrific guide here at all
Speaker 2: because I think she considered that this might print profits
Speaker 2: at some stage, but the economic benefit is vast. Let's
Speaker 2: not kid ourselves there, and so there's an economic incentive
Speaker 2: to maintain that power. But the geopolitical advantage of having
Speaker 2: domination out of some of these things, there's just difficult
Speaker 2: to imagine just how significant that is, because if you
Speaker 2: have domination over the components that are required for defense situations, well,
Speaker 2: that puts you in an extraordinarily powerful political position as well,
Speaker 2: particularly when it comes to negotiating well anything from trade
Speaker 2: to defense packs to where you'd think you might be
Speaker 2: in the world pecking order.
Speaker 1: And fascinating stuff. Thank you so much for your time, pleasure.
Speaker 1: I'm Daniel James seven am will be back on Monday
Speaker 1: with an episode on the National Anti Corruption Commission. The
Speaker 1: NECK is over two hundred employees and then your budget
Speaker 1: of over sixty million dollars and has received over five
Speaker 1: thousand submissions, but as yet to land a single major finding.
Speaker 1: We look at how NAK is defending itself and whether
Speaker 1: there is any hope of regaining public trust. See you then,