(Reuters) – The federal government has unveiled new details of its plan to create a A$1.2 billion critical mineral reserve.

Three minerals will initially be the focus: antimony, gallium and rare earths (a group of 17 different elements).

The details came as Treasurer Jim Chalmers travelled to Washington this week to promote the new reserve to key allies. At a meeting with finance ministers from the “G7 plus” group of countries, hosted by US Treasury Secretary Scott Bessent, Chalmers said the move was:

all about helping us and our partners shore up access to critical minerals during periods of market disruption.

The announcement puts meat on the bones of an idea first outlined by Labor in the lead-up to the last federal election.

Australia has untapped reserves of all three minerals in question. However, China currently dominates their processing. It accounts for 48% of global antimony production, 98% of gallium and 69% of rare earths.

So, why have these particular minerals been deemed so internationally important? And can Australia, as the government hopes, successfully establish itself as its allies’ “most reliable” critical minerals partner?

What are critical minerals?

Critical minerals are metals and minerals we rely upon for modern technologies that currently have no real alternative.

They’re essential for a range of applications, including:

solar and wind power
lithium-ion batteries
defence technologies (such as radar, fighter jets, submarines, and unmanned aerial vehicles)
communications
computing
medicine
other high-tech industries.

Many of the minerals Australia has in abundance still have a high supply risk, because we depend on importing the finished product.

For example, Australia exports most of its critical minerals to China for processing before they are on-sold to become parts of goods such as solar panels.

Critical mineral markets are also vulnerable to supply disruptions, such as global pandemics or trade disputes.

Why choose these three?

All three of the minerals nominated for Australia’s strategic reserve can be used to produce “dual-use” technologies for both civilian and military purposes.

Antimony can be used in flame retardants, lead-acid batteries, night vision goggles and ammunition. Gallium has applications in integrated circuits, optical devices, semiconductors, radar systems and solar panels.

And rare earths are needed for permanent magnets (used in fighter jets), metal alloys, medical imaging and lasers.

How it will work

With the strategic reserve, Australia will use its export finance credit agency to enable buyers to make “offtake agreements”. This is where buyers – which in this case will include the government itself – agree to buy the minerals as security, in some cases before the mining has begun. Buyers can then sell the minerals to Australia’s international allies and partners.

Currently, the West is not as competitive in establishing off-take agreements for critical minerals.

Chinese investors are more willing to provide equity and long term off-take agreements early in mining projects. China also has cost and technical knowledge advantages over Western companies.

Pitching to the G7

Australia’s decision to announce details of the reserve before this week’s G7 plus meeting was no accident. The G7 comprises the United States, Britain, Canada, France, Germany, Italy and Japan.

Ministers from India, Mexico and South Korea were also invited.

Short for “Group of Seven”, the G7 began as an informal meeting of the world’s largest economies (though all except the US have been overtaken by China). It has enabled financial decisions to be made quickly, without being hampered by a formal agreement or treaty.

Australia is not part of the G7, but often aligns on positions taken by the group.

Critical minerals mining and processing requires significant investment from both public and private sources using a range of financial tools, including export credits and development finance. Export credits, often provided by national agencies, include providing credit, loans, or guarantees to aid companies selling goods overseas.

That’s important, because entering these markets is risky. For example, lithium mining in Australia boomed as a result of the high demand for elective vehicles (EVs) using lithium-ion batteries. But the market went bust when EV sales slowed, leading some mines to stop or scale back production.

Countering China’s dominance won’t be easy

With the announcement, Australia has signalled it’s willing to intervene in critical mineral markets to further the needs of its allies and like-minded states.

Perhaps above all, Australia is seeking to reassure the US it’s a reliable partner for providing critical minerals. The US is urgently seeking critical minerals, even threatening to acquire Greenland for its minerals and strategic position in the Arctic circle.

Australia’s strategic reserve is what might be called a “geoeconomic” decision. This is where economic decisions are made based on accessing resources that benefit Australia and its partners and diversifying away from being dependent on China.

Many members of the G7 are part of the Minerals Security Partnership, which aims to secure a sustainable supply chain of critical minerals from diverse sources by working with industry and other governments.

It also contributes to the five-point plan agreed upon by the G7 in 2023 for critical minerals security.

The new strategic reserve may provide the West with greater access to minerals. But China still dominates the processing of many of them with advanced knowledge, skills and technology.