“The world needs critical minerals — Australia has plenty of them and our critical minerals reserve will help us weather global economic uncertainty and help to boost trade and investment,” Treasurer Chalmers said.
“Ensuring we have a reliable reserve of these critical resources will strengthen supply chains and help to stabilise critical minerals markets.”
The CMSR will secure rights to minerals produced in Australia and on-selling those rights to meet demand, giving an added boost to the critical minerals sector and strengthening reliable supply chains for trading partners.
What is the strategic reserve?
In April 2025, the Federal Government pledged an initial investment of $1.2b to create the CMSR.
The move closely followed China placing export restrictions on several critical minerals in response to US imposed tariffs on Chinese goods.
Australia has major deposits of various critical minerals and rare earths; however, almost the entirety of the processing of critical minerals is sourced internationally to China.
The reserve will build on government investment in critical minerals through two new mechanisms: national offtake agreements and selective stockpiling.
Through voluntary contractual arrangements, the Federal Government will acquire agreed volumes of critical minerals from commercial projects or establish an option to purchase at a given price, holding security over these assets as part of the CMSR.
According to the Federal Government, the primary consideration for entering into offtake agreements will be securing priority critical minerals for strategic reasons. As its holdings mature, the reserve will generate cash-flow from sales of offtake on global markets and to key partners.
The Federal Government will also establish Australian stockpiles of certain key critical minerals produced under offtake agreements as required.
The CMSR will accumulate stockpiles of priority minerals when warranted by market conditions and strategic considerations, but the Federal Government says it is anticipated that these will be modest and time-limited in most cases.
Minerals held by the CMSR will be made available to domestic industry and key international partners, with the mechanism and allocations to be determined by government and subject to consultation.
At the time of announcing the CMSR, Prime Minister Anthony Albanese said that Australia needed to do more with its natural resources.
“In a time of global uncertainty, Australia will be stronger and safer by developing our critical national assets to create economic opportunity and resilience,” he said.
“The strategic reserve will mean the government has the power to purchase, own and sell critical minerals found here in Australia.
“It will mean we can deal with trade and market disruptions from a position of strength
“Because Australia will be able to call on an internationally significant quantity of resources in global demand.”
At the time, the Minerals Council of Australia (MCA) was speculative of whether a strategic reserve, as proposed by the Federal Government, was the best approach for Australia. The MCA requested a clear plan on critical mineral exploration and expansion.
The MCA acknowledged that a reserve may increase Australia’s chances of minimising the impact of US tariffs but was concerned that the initiative was not without domestic risk.
MCA chief executive Tania Constable said that the objective and merits of the initiative remained unclear and must be evaluated against other opportunities to leverage Australia’s mining industry.
“We must focus on the fundamentals that will give Australia back the edge over other mining nations,” she said.
“That means lower energy prices, a wind back of draconian industrial relations laws and faster environmental approval times.
“These changes would make it easier for companies to invest in Australia, without the need for taxpayer-funded incentives and government intervention in markets.
“Australia’s real advantage lies in securing end-to-end supply chains, building strategic partnerships with like-minded countries and connecting Australian mines to international manufacturers.
“That means co-investing with trusted allies to build technical capability at every stage: from raw materials and concentrates to oxides, metals and final products.
“Security of supply is essential, but it’s required at the end of the supply chain, not just at the beginning.”
Updates to the reserve
Despite the urgency for diversification, Federal Resources Minister Madeleine King now says Australia faces a long road to revenue with government seeking support for the industry which faces weak pricing and high startup capital.
“[It’s important] the investment the [Federal] Government is making in supporting the industry itself will be job-creating, both in the extraction side of the sector, but also in advanced processing and advanced manufacturing into the future,” she said.
“There’ll be many upsides, [but] it won’t be revenue upside in the immediate term.”
With a similar reliance on antimony, gallium and rare earths, the US has emerged as a major investor in the development of Australia’s critical minerals sector following the signing of a $13b critical minerals agreement between the countries in October last year.
Minister King says that Australia as a nation is always dependent on international investments to build its industries and, despite the US’ recent interest in pursuing deposits in Greenland, Australia remains the superior choice for US investment.
“Australia is recognised around the world as a globally important initiative into mineral exploration,” she said.
“In the immediate, short to medium term, Australia is a much more desirable location [than Greenland] for extracting and processing minerals.”
Industry has welcomed the additional details, with the Association of Mining and Exploration Companies (AMEC) chief executive Warren Pearce saying AMEC has been engaging closely with the government as it contemplates design options for the CMSR.
“While the announcement is an important step, we await further advice from the government on the remaining design options – including the financial mechanisms it will need to implement to operationalise the CMSR,” he said.
“It is also vital the government is able to ensure state and federal permitting processes are appropriate, efficient, streamlined and fit-for-purpose to enable rare earth, gallium and antimony projects to proceed and enable the government’s objectives with the CMSR to be met.”
To assist the government in its design considerations, AMEC recently commissioned Mandala Consulting to work with 10 rare earth developers and offer a framework to optimise a CMSR which ensures commercial bankability, limited taxpayer fiscal exposure, and consistency with the government’s policy objectives.
The model is called the Rare Earths Production Scheme (REPS) and leverages a Contract for Difference with a price collar to provide targeted support to both heavy and light rare earth projects, while minimising downside risk for taxpayers. The REPS model is similar to the Capacity Investment Scheme, derisking investment.
“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,” Mr Pearce said.
“AMEC will continue advocating the REPS model to the government as it considers how it can best operationalise the CMSR.”
Manganese outlook
Outside of the early targets of the CMSR, Australia is still looking to leverage its critical minerals wealth. Manganese is found not only on Australia’s critical minerals list, but also the lists of G7 members including the US, Canada and Japan. It has long been used in steelmaking and alloys and is now gaining attention for its role in emerging battery technologies, grid-scale storage and other clean energy applications.
Globally, manganese is more abundant than many other critical battery or speciality metals, and some analysts argue it does not face the same scarcity risks as rarer minerals. However, as demand for battery chemistries that incorporate manganese grows, its strategic value is being reassessed.
According to Geoscience Australia, manganese is the fourth-most used metal by tonnage after iron, aluminium and copper, with around 90% of annual consumption going into steelmaking as an alloying agent where there is no satisfactory low-cost substitute for its sulphur-binding and de-oxidising properties.
Beyond steel, manganese is increasingly needed for rechargeable EV batteries, via electrolytic manganese dioxide and electrolytic manganese metal used alongside lithium, cobalt and nickel, supporting renewed interest in mine expansions and re-evaluating historic deposits as EV and storage demand grows.
Australia is already a significant supplier of manganese ore. Geoscience Australia data indicates that the country is among the world’s leading producers.
The key issue is that much of this material is exported in raw or low-value forms rather than being refined into battery-grade products. As with many critical minerals, the global shift toward downstream processing and value-adding could change manganese’s role if investment, technology and demand for manganese-rich batteries continue to develop.
Australia’s resource base gives it a strong foundation should markets move more decisively in this direction.
