New phase in Australia-Korea alliance underway, IMARC hears
- 29 October 2024
South Korea brings an urgent and growing market need, unrivalled engineering prowess and major financing capacity to Australia’s critical minerals project pipeline, IMARC 2024 has heard.
Darryl Cuzzubbo, CEO of Arafura Rare Earths, indicated a significant offtake deal with Korean car maker Hyundai, backed by financing from Export-Import Bank of Korea (KEXIM), could be the tip of the proverbial iceberg when it comes to potential expansion of the bilateral bond between the two countries around energy-transition minerals and metals, and strategic value chains.
As well as the circa-US$400 million of finance and offtake for Arafura’s proposed $1.2 billion Nolans rare earths project in Australia’s Northern Territory, major battery manufacturer LG Energy Solution made its biggest investment in Australia with its $250 million backing (investment and offtake) of Liontown Resources’ Kathleen Valley lithium mine in Western Australia.
“We want to be to Korea what Lynas is to Japan, and that is a secure supply of NdPr [neodymium praseodymium] to underpin their EV sector,” Cuzzubbo said on a panel moderated by Australia-Korea Business Council CEO, Liz Griffin.
Also on the panel were LG Energy Solution’s Changwoo Lee and Korea Embassy senior adviser, Joon Heo.
“Nolan’s project will produce NdPr – the rare earths that you need in everyday electronics, electric vehicles and wind turbines. Today, nearly 90% of that supply is controlled by China, and most of the 10% that isn’t is locked up with Japan,” Cuzzubbo said.
“So if you're a Korean, US or European car manufacturer, and we're talking trillions of dollars per annum, you're very exposed.
“Hyundai saw this risk early on and they were our first binding offtake agreement to diversify the supply chain and have a secure supply of NdPr.”
Griffin said Korea was Australia’s third largest trading partner and export market. The AKBC recently marked the 10th anniversary of the Korea-Australia Free Trade Agreement.
“[Korean steel major] POSCO is Australia's single largest customer,” she said.
“Korea lacks natural resources and imports about 95% of its energy needs, and it also has 33 critical minerals on its critical minerals list, with a 99% import dependency.
“But what Korea lacks in natural resources it makes up for in its technology prowess. It's home to many of the world leading tech companies.”
Lee said LG Energy Solution had a complicated and diversified supply chain, so it was important to have a long-term, stable, “visible” supply chain source in a safe jurisdiction.
“The cost is [also] very important,” he said. “One of the [company’s] key objectives is we want to have direct control over a certain portion of our own [raw material] requirement by the end of this decade. We want to get closer to controlling the costs rather than being controlled by the external factors.
“The Liontown transaction … will absolutely support us to better understand how the mining cost is structured.
“LG Energy Solution is [also] spending a few billion dollars every year to build our capacity in North America. Most of our key customers are also North American-based, such as General Motors or Hyundai, Honda and Ford, Tesla, etc. When we design our supply chain strategy we must take into consideration how the North American regulations are evolving. So in that sense the recent transaction with Liontown ... will absolutely support us in getting benefit from the IRA.”
Heo said KEXIM’s Supply Chain Resilience Fund had US$3.7 billion of government guaranteed bonds earmarked for “priority areas” this year, including high-tech industries such as EV batteries, semiconductors and biotech.
“It also focuses on resource security like critical minerals and energy and also essential commodities like food and industrial materials and as well as the logistics sectors,” he said.
“The fund supports key projects across the entire value chain, whether it be resource developments or diversification of import sources, refining, processing and also manufacturing production and recycling technologies and facilities as well.”
Cuzzubbo, a veteran Australian mining leader who spent 24 years at BHP and was president of the giant Olympic Dam copper-gold-uranium mine in South Australia, said as an engineer he had nothing but respect for what Korean enterprises had achieved in the face of Japanese and then Chinese industrial domination in Asia over the past five decades.
“If you ever want to bank on a country that will be successful in an ever changing and competitive sphere it’s Korea,” he said.
“A few months ago I visited [POSCO’s] Gwangyang steel plant. It’s the largest, most productive steel plant in the world. And what makes it quite remarkable is Korea only came into the steel sector relatively recently.
“Thirty years ago I was an engineer working at the Port Kembla steel works and it is complex; it is operating-wise very challenging, and it’s fiercely competitive. Back then, Japan dominated [the industry]. More recently it's the Chinese.
“The Koreans decided to enter that sector and within a few decades POSCO was voted number one steel manufacturer in the world.
“You see it with Hyundai, too. Hyundai entered the car manufacturing industry just four decades ago and is now number three in the world.”
Cuzzubbo said in Arafura’s recently released 2024 annual report the company was predicting a supply gap of around 88% of current annual NdPr consumption by 2032 due to global demand for lower carbon technology.
“To bridge this gap the equivalent of 12 Nolans projects are required to be producing at nameplate production capacity,” he said.
“This is hard to envisage given the average time to develop a project like Nolans is, from exploration to first production, 18 years.”
EU trade restrictions, US tariffs and other global policy shifts would incentivise ex-China supply of rare earths, creating a structural deficit that could push average incentive prices out to US$163/kg – more than three times today’s pricing – Cuzzubbo said.
“Australia continues to be a large and reliable source of raw materials that Korean needs to support their manufacturing sector which is even more critical as the nature of what is manufactured changes rapidly as part of the energy transition,” he told Mining Beacon at IMARC.
