WASHINGTON — The Pentagon is in early talks with Australia’s government about a deal that would lead to that nation processing a significant portion of rare earth materials required by the U.S. Department of Defense, according to the department’s top acquisition official.

Ellen Lord, the undersecretary of defense for acquisition and sustainment, told reporters during a Monday briefing that she spoke with counterparts in Australia during a summer visit there about “whether or not we could work with Australia to stand up a facility that would take care of our DoD needs, but a variety of other international needs as well.”

She said such an option is one of the “highest potential avenues” under consideration by the department as it tries to break China’s stranglehold on the production of rare earth materials that are vital to everything from lasers to radars to jet engines.

Any such agreement would be focused on the processing side of rare earths, as opposed to the digging of the materials, she noted. “The challenge is really the processing of them and having facilities to do that because quite often China mines them elsewhere and brings them back to China to process them,” Lord said. “So we are looking at a variety of mechanisms to stand up processing facilities.”

While experts have been nervous about the U.S. supply of rare earth materials ever since the only American refinery went bankrupt in 2015, the Pentagon underlined the alarm with a major October 2018 review of the defense-industrial base.

“China represents a significant and growing risk to the supply of materials and technologies deemed strategic and critical to U.S. national security; a challenge shared by key allies such as Germany and Australia,” the report read, singling out rare earth metals and critical energetic materials for munitions and missiles as areas of concern.

As a result, the Trump administration issued five presidential determinations that DoD funds should go toward developing a new rare earths capability.

The Australian firm Lynas is central to the Pentagon’s proposed plan. The firm has both a mine in Australia and a processing plant in Malaysia, but does not have capabilities to handle the heavy earth separation required for most of the materials needed by the DoD. (It is unclear from Lord’s comments if the department is talking primarily to Lynas or the government over the issue.)

Investing in some way to help build that capability would be a smart move for the department, said Jeff Green, president of J.A. Green & Company, a specialty government relations firm.

“You’re never going to beat the Chinese on a huge scale. The department’s strategy is focused on: ‘I don’t need to worry about the automotive industry, I just need to make sure my defense supply chain is secure.’ And for a relatively small investment, they can get that capacity up and running,” Green said.

As to why Australia, Green said the only other supplier outside of China would be Vietnam, and Australia is a much closer ally. “DoD is trying to leverage the only capability outside of China from an ally that exists,” he said.

Aaron Mehta was deputy editor and senior Pentagon correspondent for Defense News, covering policy, strategy and acquisition at the highest levels of the Defense Department and its international partners.

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