Bridging the Gap: From Resource Wealth to Strategic Capability

Bridging the Gap: From Resource Wealth to Strategic Capability

Australia stands at a critical juncture, bottlenecked by a glaring mismatch between its vast geological potential and the limited capacity of its vertically integrated processing industry. The issue isn't in the ground—it’s above it. The infrastructure, planning, and political will to transform resources into refined, strategic materials are still lagging. When Andrew Forrest warned that the Pilbara could become a "wasteland," he wasn’t speaking in hyperbole. He was highlighting the urgency for Australia to act—to build processing facilities and value-adding infrastructure capable of competing in an era that demands not just resources, but green metals and clean supply chains.

Economic Demonstrated Resources (EDR) in Australia have grown dramatically over the past two decades. Despite this, production—particularly in critical and strategic minerals—remains slow, and in some areas, stagnant. China has seized this opening, aggressively dominating global mineral refining capacity. While governments and companies across the West have largely been reactive rather than proactive, China's decade-long head start, paired with its mastery of economies of scale and reliance on cheap labour, has solidified its control over critical mineral supply chains.

Fortescue and BHP have long enjoyed strong margins, bolstered by high-quality assets and decades of efficient iron ore exports. Yet, the path forward must involve reinvestment of these windfalls into emerging sectors. Fortescue’s push toward green hydrogen and renewables, while ambitious, reveals a broader truth—this is no longer about just extracting ore. BHP, with its business simplification strategy and robust copper plays, is exceptionally well positioned for the energy transition. These companies, however, must now allocate capital not only to secure future supply but also to build the refining and processing capacity that has been ignored for too long.

The situation is pressing. In 2014, China imposed export barriers on rare earths—a stark warning about the geopolitical leverage it commands. A decade later, the world finds itself in a similar position. Despite clear signs and ringing alarm bells, little structural change has occurred. If the West is to prevent future shocks, there must be a concerted effort to develop domestic processing infrastructure and to bring inferred and measured mineral resources into production.

Australia’s endowment is not the problem. In fact, Olympic Dam alone accounts for roughly 60% of Australia’s copper (EDR), largely thanks to its status as a world-class IOCG (Iron Oxide-Copper-Gold) deposit. Yet production is not keeping up. According to Britt and Czarnota in the Australian Journal of Earth Sciences, the disparity between resource growth and production is evident across multiple commodities. While iron ore (Fe₂O₃, Fe₃O₄) has shown a steady match between EDR and output, ilmenite (FeTiO₃) has seen production fall while resources grow. Zircon (ZrSiO₄) production has remained flat despite an increase in EDR. Rutile (TiO₂) has held steady, but the broader message is clear: the capacity to convert resources into refined product is failing to evolve.

For rare earths, only two Australian projects currently offer vertically integrated capacity: Lynas Rare Earths in Kalgoorlie and Iluka Resources’ Eneabba development, which includes a $1 billion government-backed refinery. These are isolated examples. Government cooperation and private capital must come together more decisively to scale these efforts. Strategic elements like neodymium (Nd), praseodymium (Pr), dysprosium (Dy), terbium (Tb), and monazite[(Ce,La,Nd,Th)PO₄] are essential to green technologies, from EV motors to wind turbines. Yet Australia, with all its geological luck, is still missing its moment.

Globally, shortages loom large. The International Energy Agency (IEA) and multiple analysts project that the world will face a nickel (Ni) shortfall exceeding 50% of required volumes for Net Zero targets. For lithium (Li) and copper (Cu), the shortfall will exceed 10%. For cobalt (Co), nearly 40%. Despite recent price slumps due to oversupply—particularly from Indonesian operations like Raja Ampat and Bahodopi, where Chinese-backed refining capacity thrives—the long-term fundamentals remain strong. China's reforms since 2014 have led to lower-cost plants and environmental costs that would be untenable in Australia. A Financial Times report showed refining lithium in China is 58% cheaper than in the West. And yet, the consequence is growing dependency on a single player.

Australia needs to break this chain. The geology is here, as shown in Victorian Government resource surveys and Geoscience Australia's annual reports, but the problem is complacency. Industry titans like Gina Rinehart, with investments in Arafura Rare Earths Ltd, and Andrew Forrest, through Wyloo Metals (which backs the Yangibana Rare Earths Project), are deeply involved in critical mineral ventures. But a more strategic alliance between private firms and government is required to build processing hubs that serve the nation’s long-term interests.

This is no longer a question of landholding dominance in the Pilbara. It’s about harnessing the value generated by iron ore and other exports to reinvest in the industries that will power a low-carbon economy. While prices for nickel and lithium will likely rebound, the current dip offers a rare moment to invest in undervalued assets and ready them for the requirements of 2030—and beyond to 2050.

Donald Trump’s tariff strategies may be controversial, but his focus on critical minerals has merit. The idea of a targeted tariff regime, combined with investment in domestic processing capacity, is one way to counter China’s dominance. Yes, it will cost more in the short term—but doing nothing will cost far more in the long run.

Mining has always been, and will continue to be, the backbone of Australia’s economic prosperity. But the world is changing. Australia must adapt by deeply integrating green energy priorities into mining development. Only then will this lucky country truly live up to its promise and potential. The opportunity is there. It’s time to seize it.