Critical Minerals: A Resource Race

FORUM Staff

Powering a global green energy transition — one that combats the destabilizing effects of climate change on governments, militaries and citizenry — will require vast increases in the world’s critical mineral production. Meeting explosive demand while easing impacts on Earth and its inhabitants will demand international cooperation and evolving models of sustainability.

Environmental devastation surrounding mineral mining and processing is well documented, particularly in the People’s Republic of China (PRC), where a near-monopoly on the world’s critical mineral supplies is driven by economic factors as much as mineral endowment. Concerns over inequitable treatment of Indigenous people and developing nations surround PRC and other projects worldwide. Supply chains concentrated in limited areas mean access to minerals could be unreliable at best. At worst, the vital materials could be — and have been — weaponized against import-dependent nations.

Multilateral partnerships forming worldwide aim to diversify supply chains and address the environmental and social costs of producing critical minerals. For example, the Minerals Security Partnership (MSP), with members Australia, Canada, the European Union, Finland, France, Germany, Italy, Japan, Norway, South Korea, Sweden, the United Kingdom and the United States, formed in 2022 to support sustainable mineral sourcing and ethical mining.

Transformative Minerals 

Critical minerals are those that governments, militaries and industries recognize as essential to technologies, economies, defense and security. They are key components in smartphones, computers, fiber-optic cables, and medical and defense equipment in addition to low-emission technology. Critical minerals include familiar elements such as cobalt, graphite and lithium, which have uses ranging from electric vehicle (EV) batteries to alloys for jet engines. More obscure rare-earth elements (REE), such as lanthanum used in night-vision goggles and hybrid automobile batteries or samarium used in laser technology and precision-guided weapons, are also key. A worldwide move to cleaner energy could increase demand for certain minerals by nearly 500% in less than three decades, estimates the World Bank’s Climate Smart Mining Initiative.

The PRC largely controls processing markets for key minerals, refining more of the world’s cobalt, lithium, nickel and REEs than any other country, even in cases when it is not a top producer of the raw mineral. Analysts say the PRC created a lowest-cost option by offering its companies inexpensive land and energy, in addition to lax environmental regulations. The result: Most technology-grade minerals are refined in the PRC regardless of where the ore was mined.

Other nations, however, hold larger supplies of the critical minerals. The world’s largest cobalt reserves are in the Democratic Republic of the Congo (DRC), Australia and Indonesia, respectively. Australia and Indonesia claim the largest nickel reserves, followed by Brazil. Turkey has the largest graphite reserves, followed by Brazil and the PRC. Chile, followed by Australia, boasts the world’s largest reserves of lithium with the PRC a distant third.

The PRC is home to the world’s largest REE reserves, although Australia, India, Japan, the U.S. and others are increasing extraction and refining activities. A strong, lightweight class of metallic materials, REEs are vital for powerful magnets that power wind turbines, EV motors, satellite communications, missile guidance systems and myriad other technologies. Many of the elements, despite their classification, are “relatively abundant” in Earth’s crust, according to the U.S. Geological Survey, but are rarely found in a pure form and require processing to be separated. REEs are also linked to environmental destruction that can result from recklessly mining and processing the materials.

‘Cannot Undo the Harm’ 

The PRC’s Bayan Obo mine in the Inner Mongolia region is the world’s largest REE mine and, coupled with the nearby Baotou processing facility, the most notorious. In her 2019 book, “Rare Earth Frontiers: From Terrestrial Subsoils to Lunar Landscapes,” Julie Klinger, an assistant professor of geography at the University of Delaware in the U.S., describes the forms of cancer associated with exposure to radioactive and other contaminants from REE extraction and refining in the remote mining district, once populated by nomadic Mongolian pastoralists. She also cites the debilitating conditions that result from other REE extraction- and processing-related toxins collecting on soil, being absorbed by crops or ingested by livestock, and concentrating in drinking water. “It is, heartbreakingly enough, often possible to distinguish true natives from migrants by the skin lesions caused by arsenic poisoning and by the malformed bones and decaying teeth which are symptoms of chronic fluorosis,” Klinger wrote.

The mining produces dust laden with heavy metals and radioactive material that occur in rare-earth reserves. Separating the elements from rock involves a toxic cocktail of chemical compounds. By some estimates, refining less than 1 metric ton of REEs can leave behind more than 1,800 metric tons of toxic waste. In the PRC, the byproducts include poisoned soil and crucial water supplies threatened by the resulting waste, such as the unlined artificial lake in Baotou filled with an estimated 180 million metric tons of “radioactive slurry” 10 kilometers north of the Yellow River, an important water source for more than 100 million people.

While Klinger says satellite evidence suggests that the PRC has remediated some of the land destroyed by decades of mining and processing across China, there is less available research to show an investment in public health burdens. Many chemicals released by irresponsible mining can stay in the body and cause multigenerational health defects, Klinger said. “When it comes to mining and exposure to industrial waste, you cannot undo the harm that is done,” she told FORUM.

The PRC has traditionally applied lax environmental standards to its mining, inside and outside the country, Sharon Burke, a global fellow with the Environmental Change and Security Program at the U.S.-based Wilson Center, said in a February 2023 webcast on critical minerals. “Now, to be fair, the entire mining sector doesn’t have a sterling history here,” she said. “There’s a long history of there being problems on all fronts. Increasingly though, in recent years you’ve seen that a lot of mining companies are trying to do much better and develop a better social license to operate. And that has included their environmental conduct.” However, the PRC has not “tried all that hard to do better on sort of rule of law and regulatory fidelity around mining issues,” she said.

Overseas Exploitation

The PRC’s vast overseas mining investments have also come under scrutiny. Among the examples:

Between 2013 and 2020, The Business & Human Rights Resource Centre, a global nongovernmental organization (NGO), recorded more than 230 human rights complaints in Chinese-owned mining and metals industries. Mining companies in the PRC responded to those complaints in less than a quarter of cases, according to the NGO. “Chinese companies appear reluctant to engage with civil society openly and transparently,” Golda S. Benjamin, the group’s program director, said in the report.

PRC investments in Indonesia have sometimes created minimal profits for local miners that won’t be sufficient to manage environmental damage caused by extraction, reported the U.S.-based Center for International Private Enterprise (CIPE). Indonesia’s Corruption Eradication Commission also warned that Chinese investors create a scenario in which officials could be bribed to relax environmental regulations. In Indonesia and elsewhere in Southeast Asia, CIPE reported, investments from the PRC have been linked with corruption, importing illegal workers, undermining regulations and evading taxes.

Africa’s mining sector is largely controlled by Chinese firms, which have come under fire for worker mistreatment and unsafe practices. In the DRC, President Felix Tshisekedi has criticized a minerals-for-infrastructure deal his nation struck with the PRC in 2008, saying the PRC profited from African minerals without releasing the promised U.S. $6.2 billion, the Bloomberg news agency reported. “There’s nothing tangible, no positive impact, I’d say, for our population,” Tshisekedi said in January 2023.

Across Latin America, Chinese mining concerns have been accused of ignoring basic obligations for workers and surrounding communities. The abuses range from refusals to share required environmental studies and damage to ecosystems to the illegal evictions of Indigenous families, according to the International Federation for Human Rights.

Partnering for Change 

The Minerals Security Partnership has identified 16 mining, recycling and refining projects to support, which include efforts in East Asia and the Pacific region, Jose Fernandez, the U.S. undersecretary of state for economic growth, energy and the environment, told the Politico news outlet in January 2023. The extraction and refining projects must comply with a host of environmental regulations to secure support from the partnership, he said. Fernandez added that reputable mining concerns see environmental stewardship as a necessity. “They won’t make investments in projects that destroy precious rainforests, that are not committed to remediation of mine sites or that require payoffs to government officials,” he said during the 2023 Investing in African Mining Indaba, a Cape Town, South Africa, conference.  “They won’t do it. Their shareholders won’t allow it, their customers will reject them and our laws will punish such conduct.” 

Particularly in Australia, Europe and North America, Klinger says, industry leaders are adamant about complying with environmental regulations. She warns that those rules need to be tailored to the specific type of mineral being extracted, stored and processed. “There’s room for a great deal of precision and sophistication as we work to build up these industries as quickly as possible,” she said, adding that continued government support could help ensure mining companies act sustainably. “We’re effectively demanding that this has to be clean and green but on the other hand saying you have to survive in a cutthroat economy.” 

Klinger also insists now is the time to focus on recycling in the critical minerals race even though there’s currently limited waste, such as used EV batteries. “What if, 20 or 30 years from now, we still haven’t invested in the infrastructure?” she asked. “We do need to build out our recycling infrastructure in parallel with mining facilities.” 

Expanding recycling opportunities is among the projects the MSP has agreed to support, according to Fernandez, who pointed to electronic scrap and other waste as a potential source of needed minerals. For instance, by 2040, 10% of EV battery minerals could come from recycled copper, lithium, nickel and cobalt. With EVs on track to make up half the global market before then, the amount could be significant, he said.

Risky Supply Chains 

The PRC controls more than half the production of graphite and REEs, according to the Paris-based International Energy Agency (IEA). It also is the leading importer of raw materials mined elsewhere and has invested heavily in foreign mining, such as in cobalt from the DRC, nickel from Indonesia, and lithium from Argentina, Australia, Chile and other nations. Subsequently, Beijing dominates processing for minerals such as nickel, copper, lithium and cobalt, and manufactures or assembles 75% of the globe’s solar panels and EV batteries. (See “PRC Largely Controls the Processing Market for Critical Minerals,” Page 19.) “The risk of supply chain disruptions and volatile prices is exacerbated by the fact that clean energy technology supply chains are highly concentrated,” the IEA said in its 2022 World Energy Outlook.

Nations committed to addressing climate change are responding to vulnerabilities by securing supply chains. Australia, one of the world’s largest critical mineral suppliers, agreed in early 2023 to expand its mineral trade with India and has signed critical mineral deals with Japan, South Korea and the U.S., the Reuters news agency reported. Japan and the U.S. agreed in March 2023 to promote mineral trade, share information and support efficient approaches to sourcing raw materials. MP Materials, a U.S.-based REE producer, also committed to supply a Japanese magnet maker with key materials, which will be refined in the Philippines and Vietnam.

Flexing Mineral Muscle 

The PRC’s investment in minerals, particularly in REEs, dates almost to its founding in 1949 and was rooted in a goal of self-sufficiency, Klinger says. Beijing’s national strategy on rare-earths and other critical minerals solidified in recent decades, according to analysts. It included low labor costs, a willingness to sustain environmental impacts and generous state subsidies. In 2018, the U.S. Department of Defense (DOD) wrote that the PRC had “strategically flooded the global market with rare earths at subsidized prices, driven out competitors and deterred new market entrants.” 

The report also pointed to a 2010 dispute in which Beijing blocked REE exports to Japan after Tokyo’s detention of a Chinese trawler captain whose boat collided with Japan Coast Guard vessels as it tried to fish near the Japanese-controlled Senkaku Islands in the East China Sea. “When China needs to flex its soft power muscles by embargoing rare-earths, it does not hesitate,” the DOD reported. 

More recently, Beijing has repeatedly threatened to cut off REE exports to the U.S. Beijing’s state-run People’s Daily newspaper reported in 2019 that the country could play the “rare-earths card.” A year later, the PRC responded to a U.S.-Taiwan defense deal with a warning that it could halt REE supplies to defense manufacturers. In July 2023, the PRC said it would restrict international exports on two rare metals, gallium and germanium, used in products including computer chips and solar panels. Both are considered critical minerals.

A Chance to Get it Right

Nations with robust mining industries and commitments to ethical extraction, such as Australia, are positioned to become suppliers of choice for the components that will build a clean energy future, U.S. Counselor for Economic Affairs Michael Sullivan said at a March 2023 battery minerals conference in Perth, Australia. “The United States cannot develop, resource and manufacture all the technology to meet global climate goals. Neither can Canada, Australia, Europe, Japan, China or any other one country,” Sullivan said, according to Mining Weekly magazine. 

Australia supplies about half of the world’s lithium and is a top producer of cobalt. The nation is a significant producer of rare-earths, copper, graphite and other minerals crucial to cleaner energy. It has also adopted the “Towards Sustainable Mining” framework to help companies improve relationships with Indigenous and other communities, as well as manage and advance environmental stewardship. 

Protections for certain Indigenous communities include a requirement for mining consent. Australia’s Organisation for Economic Co-operation and Development recommends community engagement throughout the life span of mining projects. In Western Australia, resource contracts must be made public, and numerous states require closed mines to be rehabilitated until they are “safe, stable, nonpolluting and allow a sustainable new land use.” Such environmental, social and governance (ESG) standards protect investments because global consumers demand transparency and environmental stewardship, analysts say. Developing a stronger rule of law and an approach to mining that respects Indigenous rights, along with environmental issues and other aspects of fair governance, can create an advantage for companies that put in the effort, said Burke, the Wilson Center fellow. “There’s always a price to pay when you do things wrong, and the United States has the opportunity to get it right with our allies and our partners. And I think that becomes for us a really strong benefit in strategic competition” she said in the center’s “Report on Critical Minerals” webcast.

Fernandez, of the U.S. State Department, has said that MSP support, which can include guarantees or financing from member export credit agencies, development institutions and the private sector, will require projects to adopt ESG principles. “Through our work on responsible mining, the MSP partners seek to move away from unsustainable development toward a framework that prioritizes transparency, community welfare, and environmental protection,” he said in Cape Town. Partners in the MSP, he said, are betting on the belief that ethical principles across the critical minerals industry can improve outcomes for nations, their populations and the planet.