The Association of Mining and Exploration Companies (AMEC) has outlined a proposed framework to the Australian federal government on how to meet the government’s plans for a Critical Minerals Strategic Reserve (CMSR).
AMEC commissioned Mandala Consulting to optimise a CMSR that is in line with commercial bankability, limited tax payer fiscal exposure and consistency with the government’s policy objectives.
The CMSR is a government initiative designed to strengthen Australia’s economic resilience and national security by ensuring reliable access to critical minerals.
The reserve responds to growing global supply chain risks, particularly to highly concentrated overseas markets for rare earths.
The association recommended a model called the Rare Earths Production Scheme (REPS) and uses a contract for difference with a price collar to provide targeted support to both heavy and light rare earth projects, while minimising risks for taxpayers.
AMEC said the REPS model is similar to the Capacity Investment Scheme, derisking investment, and focuses on rare earths required for magnet production.
AMEC CEO Warren Pierce said: “The government went to industry and asked for options and the best practical model for the establishment of a critical minerals reserve.
“Our recommended model centres around rare earths and provides a mechanism that meets the objectives of government, helps support the growth of rare earths projects in Australia, while also minimising risks to taxpayers.”
Under the REPS framework, a contract for difference with a price collar will provide price certainty for rare earth producers during periods of market volatility, while limiting risk for taxpayers.
When prices fall below an agreed floor, the government provides support and when prices exceed a ceiling, the government shares in the upside.
The model is also fiscally sustainable as it caps government exposure and uses competitive tender and reverse auction processes to minimise support costs.
Unlike uncapped price support models, the REPS includes mechanisms that allow the government to recover value when prices are strong.
The Australian government is committed towards establishing a CMSR and has allocated AU$1.2 billion to create the reserve.
The reserve is targeted to be operational from the second half of 2026.
