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Commissioned by the Association of Mining and Exploration Companies, in collaboration with rare earth developers and independent experts, this briefing paper responds directly to the Australian Government’s election commitment, to develop a Critical Minerals Strategic Reserve (CMSR) for Australia. This is a growing imperative to strengthen supply chain resilience for critical minerals, particularly rare earths. This briefing paper sets out an industry-informed framework for how Australia’s CMSR can be designed and implemented to deliver genuine national, economic and strategic benefits.
The paper focuses on rare earths as a priority due to their essential role in defence capability and clean energy technologies, and Australia’s strong resource endowment in this area. It outlines a practical, fiscally responsible model that supports commercial investment, limits taxpayer risk and aligns with the Government’s Future Made in Australia objectives. By providing a clear, workable pathway for the establishment of a CMSR, the briefing paper is intended to support informed decision-making and ongoing collaboration between industry and government.
There are 17 rare earths which are generally grouped into light and heavy rare earths based on atomic number.
Of the 17 rare earths, four are particularly crucial for making permanent magnets. These are the light rare earths praseodymium (Pr) and neodymium (Nd), and the heavy rare
earths dysprosium (Dy) and terbium (Tb).
Permanent magnets are preferred to conventional magnets because of their high magnetic strength and energy density.
These qualities make permanent magnets crucial to the electric motors and generators used in electric vehicles, wind turbines, and the driving systems of aircrafts.
Permanent magnets (and magnet rare earths) are therefore essential to Australia’s national security and the energy transition.
The Critical Minerals Strategic Reserve is a Commonwealth Government initiative designed to strengthen Australia’s economic resilience and national security by ensuring reliable access to critical minerals. The reserve responds to growing global supply chain risks, particularly Australia’s exposure to highly concentrated overseas markets for rare earths, which are essential to defence, clean energy technologies and advanced manufacturing.
Rare earths, particularly magnet rare earths, are critical inputs into permanent magnets used in technologies such as fighter jets, radar systems, electric vehicles and wind turbines. Australia has significant rare earth reserves and production capability, but global supply chains remain highly concentrated. AMEC’s recommended model sharpens the focus on rare earths to deliver the greatest strategic, economic and national security benefit from the Government’s investment.
The Rare Earths Production Scheme is AMEC’s recommended framework for implementing the Critical Minerals Strategic Reserve. It uses a Contract for Difference with a price collar to provide price certainty for rare earths producers during periods of market volatility, while limiting downside risk for taxpayers. When prices fall below an agreed floor, support is provided; when prices exceed a ceiling, the Government shares in the upside.
The REPS model is designed to be fiscally sustainable by capping government exposure and using competitive tender and reverse auction processes to minimise support costs. Unlike uncapped price support models, the REPS includes mechanisms that allow the Government to recover value when prices are strong, ensuring public funds are used efficiently and responsibly.
AMEC will continue working closely with rare earths developers and government stakeholders as the Critical Minerals Strategic Reserve moves towards implementation. Ongoing industry consultation will help refine delivery, governance and eligibility settings to ensure the reserve supports commercially viable projects, strengthens sovereign capability and aligns with the Government’s broader Future Made in Australia agenda.
Australia is one of the world’s largest holders of rare earths, ranking fourth globally by mine reserves. With an estimated 5.7
million tonnes (Mt) of rare earths, Australia can support global supply diversification. Australia is only behind China, Brazil, and India, who have 44Mt, 21Mt, and 6.9Mt, respectively.
