Demand for critical minerals to soar as Australia embarks on $368 billion nuclear submarine program

Demand for critical minerals is poised to soar further as Australia embarks on a nuclear submarine program that will cost up to $368 billion over the next 3 decades.

Today (14 March) Prime Minister Anthony Albanese, UK Prime Minister Rishi Sunak, and US President Joe Biden announced an arrangement for Australia to acquire a conventionally armed, nuclear-powered submarine (SSN) capability through the Australia-United Kingdom-United States (AUKUS) enhanced security partnership.

Critical minerals such as rare earth elements (REE) are critical to defence. They are generally found in lasers, precision-guided weapons, fuel cells, magnets for motors and other devices. For example, in Australia’s move to acquire Virginia-class submarines in the 2030s  as part of the deal, it will require critical minerals to enable capacity for long-range strikes with vertically launched Tomahawk-land attack cruise missiles.

Hamelin Gold encounters ‘significant’ heavy rare earth mineralisation at West Tanami

The AUKUS deal means over the coming 30 years, Australia, the UK, and US will need to secure a growing supply chain of minerals and metals, meaning more mine would need to come online in the near-term.

PM Albanese today said today’s significant AUKUS announcement about Australia’s acquisition of nuclear-powered submarines is the single biggest investment in the country’s defence capability in its history and represents a transformational moment for the nation, Defence Force, and domestic economy.

The agreement will, among others, create record investments in defence, skills, jobs, and infrastructure; as well as strengthen Australia’s national security and contribute to regional stability in response to unprecedented strategic challenges.

We expect the phased approach will result in $6 billion invested in Australia’s industrial capability and workforce over the next 4 years, creating around 20,000 direct jobs over the next 30 years”

PM Albanese says in a statement: “We expect the phased approach will result in $6 billion invested in Australia’s industrial capability and workforce over the next 4 years, creating around 20,000 direct jobs over the next 30 years.

This whole of nation effort also presents a whole of nation opportunity; for new jobs, new industries, and new expertise in science, technology, and cyber. Businesses right across the country in every state and territory will have the opportunity to contribute to and benefit from these opportunities over decades.

Over the next four years, this will see $2 billion in expected investment into South Australia, and a further $1 billion in Western Australia.”

In November 2022, former defence minister Kim Beazley called for critical minerals to be included in some form as part of the AUKUS agreement to break the dependence on China, which currently dominates the rare earths supply chain. Beazley said there needed to be a strategic decision by the Australian government to develop a domestic rare earths processing capability.

For context, by 2030 electric vehicles (EVs) are expected to make up a large portion of demand for battery and critical minerals and nearly half of global light vehicle sales. As such significant investment is planned for charging infrastructure. However, demand for critical minerals is now expected to surge as Australia begins its large-scale acquisition program of nuclear-powered submarines with other countries likely to assess expanding their defence capabilities.

China has already started posturing that it too will invest heavily in expanding its capabilities, meaning there is likely to be a growing gap between supply and demand as countries seek the minerals outside of the country.

The International Energy Agency (IEA) has forecasted a doubling of renewable energy capacity under its STEPs scenario by 2030 and a 291% increase by 2050. The IEA’s Sustainable Development Scenario predicts renewable capacity is also expected to increase by almost 6 times by 2050, adding further demand pressures for these minerals and metals.

An EY report published in April 2022 says there is therefore a significant challenge to the mining and metals sector in terms of resource availability, access to capital, and efficient supply chains.

EY reports that miners will need to commission a large number of new projects and operations to support the expected demand. For example, lithium production would need to quadruple from 490,000 tonnes in 2021 to 2Mt in 2030. In absence of further mine development, the lithium market deficit is projected to reach 700,000t by 2030, while the copper market is expected to be in a nearly 4.7Mt deficit by 2030 on current projections of supply.

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Written By Adam Orlando Editor-in-Chief Adam Orlando has more than 20 years’ experience in the media having held senior roles at various publications, including as Asia-Pacific Sector Head (Mining) at global newswire Acuris (formerly Mergermarket). Orlando has worked in newsrooms around the world including Hong Kong, Singapore, London, and Sydney.