U.S.-Australia critical minerals pact targets rare earth supply

In October, the United States and Australia signed a Critical Minerals Framework to expand mining and refining of lithium, cobalt and rare earth elements and to reduce reliance on Chinese processing networks. The agreement sets a timetable for deeper cooperation on sourcing, processing and trade policy for the materials used in electric vehicles, high-performance electronics and defense systems.

Under the framework, Washington and Canberra plan to align trade rules and promote private investment in both upstream extraction and downstream processing. Officials prioritized capacity for separation and refining, the steps that convert raw ore into the magnetic and electronic materials used in advanced technologies.

Australia is identified in the agreement as a partner with large reserves and a stable regulatory environment. The United States intends to source more material from like-minded suppliers and to limit exposure to processing routes that pass through China’s facilities.

The framework identifies uses for the covered minerals in civilian and military applications. Lithium and cobalt are central to battery production for electric vehicles and energy storage, while certain rare earths supply the strong permanent magnets and electronic properties required in AI accelerators, wind turbines and some weapons systems.

The pact could influence capital flows in mining and processing sectors. Exchange-traded funds that focus on rare earths and related firms may increase allocations to companies expanding capacity outside China. The Sprott Rare Earths ex-China ETF (ticker: REXC) targets a high allocation-about 95–96%—to companies involved across exploration, mining and downstream separation and refining, and the fund excludes Chinese firms to align with non-China sourcing objectives.

Investors should note standard market risks. Past performance is not a guarantee of future results. Investors cannot invest directly in an index. Funds concentrated in small- and mid-cap companies can experience greater price volatility. ETFs trade through the day, and higher portfolio turnover can raise transaction costs and tax consequences that affect net returns. Sprott Asset Management USA, Inc. is the investment adviser for the Sprott ETFs and ALPS Distributors, Inc. is the distributor; the distributor is not affiliated with the adviser.

The U.S.-Australia framework forms part of a broader pattern of countries seeking alternative processing capacity outside China as demand for low-carbon and advanced technologies grows. Policy decisions and private-sector investment following the agreement will determine how quickly new non-Chinese processing hubs and supply chains for critical minerals develop.