We keep hearing Australia should process more rare earth elements domestically instead of shipping concentrates to China. The geology’s there, the deposits are proven, but the processing infrastructure isn’t. And there’s a reason for that: rare earth processing creates radioactive waste that’s expensive to manage and politically difficult to approve.

I’ve been following the Mount Weld project in Western Australia and the proposed processing facilities in Kalgoorlie. The technical challenges are significant, and the regulatory approval process is taking years longer than initial estimates suggested.

The Processing Problem

Rare earth elements don’t exist in pure form. They’re mixed together in ores alongside thorium and uranium, both radioactive. When you process the ore to extract the valuable elements, you’re left with tailings that contain these radioactive materials.

The concentration isn’t high enough to be commercially valuable as uranium, but it’s high enough to require careful long-term storage. We’re talking about tailings that need to remain isolated from groundwater and the environment for hundreds of years.

Most Australian rare earth deposits contain monazite, which has higher thorium content than the deposits China processes. That makes our waste management challenge more difficult. China processes primarily bastnaesite ores from Bayan Obo, which have lower radioactive content.

Where Other Countries Process

China dominates rare earth processing not because they have better technology, but because they accepted the environmental trade-offs decades ago. They built processing facilities in Inner Mongolia where environmental regulations were less stringent and where the political will existed to manage the waste.

Malaysia tried to establish rare earth processing through the Lynas Advanced Materials Plant. The facility faced years of protests and regulatory battles over waste management. It’s operational now, but the controversy delayed commissioning and increased costs significantly.

Australia approved Lynas’s processing facility in Kalgoorlie, but construction’s been slower than planned. The company needs to demonstrate they can safely manage residues long-term, and that requires building storage facilities that meet Australian radiation protection standards.

The Economics Don’t Always Work

Processing rare earths is capital intensive. You need chemical separation facilities, which require significant upfront investment. The rare earth market is relatively small compared to iron ore or coal, so the volumes don’t justify the infrastructure costs unless you’re processing at scale.

Global rare earth demand is around 280,000 tonnes per year. Compare that to iron ore, where Australia alone exports over 900 million tonnes annually. The scale difference means rare earth processing facilities operate on tighter margins.

Price volatility makes investment decisions difficult. Neodymium and praseodymium prices were strong in 2024 and early 2025, which encouraged investment. But if prices drop while you’re mid-construction on a processing plant, your project economics collapse.

Some rare earth elements are worth processing; others aren’t. Neodymium, used in magnets for electric motors and wind turbines, has strong demand. Lanthanum and cerium, which make up a larger portion of most ores, have less commercial value. You’re left with elements you can’t sell, which become waste products you have to store.

What About Automation and AI?

There’s interest in using automated systems to improve processing efficiency and reduce costs. Some companies are exploring AI-driven separation processes that could optimize chemical usage and reduce waste generation.

I spoke with an AI consultancy that’s working on predictive models for rare earth extraction. Their approach uses sensors and machine learning to adjust processing parameters in real-time, potentially reducing the volume of tailings generated. If they can demonstrate this at scale, it might improve the economics enough to make more projects viable.

The challenge is that rare earth processing isn’t a continuous, standardized operation like iron ore crushing. It’s a batch chemical process with varying input composition, which makes automation more complex. You can’t just apply the same parameters to every batch and expect optimal results.

Regulatory Pathways

Environmental approval for rare earth processing in Australia requires demonstrating you can manage radioactive waste for the long term. That means either exporting it, which is politically contentious, or building permanent storage facilities in Australia, which requires state government approval and community acceptance.

Western Australia’s regulations for radioactive waste storage are strict, as they should be. But that creates a chicken-and-egg problem. Investors want to see a clear pathway for waste disposal before they commit capital to processing facilities. Governments want to see proven processing operations before they approve large-scale waste storage sites.

The federal government’s announced support for critical minerals processing, including rare earths. But support means funding for feasibility studies and pilot plants, not a solution to the waste management question. That still sits with state governments and local communities.

Strategic Value vs. Commercial Reality

From a strategic perspective, Australia should probably process more rare earths domestically. We’re dependent on China for processed materials that are essential for defense, renewable energy, and advanced manufacturing. That’s a supply chain vulnerability.

But strategy doesn’t pay for infrastructure. Companies need commercial returns, and right now, shipping concentrates to China for processing is cheaper than building facilities in Australia. Unless there’s government subsidy or regulation that changes that calculation, most producers will keep doing what’s economically rational.

There’s discussion about mandating domestic processing for rare earths from Australian mines. That could work if the government’s willing to subsidize the cost difference or impose tariffs on imported processed materials. Either approach has trade implications and would likely increase costs for manufacturers who use rare earths.

What’s Actually Happening

A few projects are progressing. Lynas is expanding its Kalgoorlie facility to handle more advanced separation. Arafura Resources is developing the Nolans project in the Northern Territory, which includes an integrated processing plan. Northern Minerals has a pilot plant operating at Browns Range in WA.

These are all small-scale compared to Chinese operations. They’re proving the technology works in Australia and building the regulatory track record. If rare earth prices stay strong and geopolitical concerns about Chinese supply continue, we might see more investment.

But we’re not going to see a rapid shift to Australian processing dominance. The infrastructure takes years to build, the environmental approvals are complex, and the economics are marginal at current prices. It’s a long-term build, not a quick solution.

The Waste Question Remains

Until we have a clear, politically acceptable solution for radioactive waste storage, rare earth processing in Australia will be constrained. That’s not a technology problem or a geological problem. It’s a regulatory and social acceptance problem.

Other countries face the same challenge. The U.S. has rare earth deposits but minimal processing capacity. Europe’s in a similar position. Everyone wants supply chain security, but nobody wants to host the waste storage facilities.

Maybe we’ll see technological breakthroughs that reduce radioactive content in tailings or make waste management cheaper. Maybe governments will step in with subsidies or regulatory changes that shift the economics. Until then, Australia will keep mining rare earths and shipping them overseas for processing, despite the strategic arguments for doing it domestically.