Critical minerals in Australia: the legal risks ahead

For those proposing to invest in Australia's expanding critical minerals sector, the legal landscape is in a current state of flux.

The US–Australia Critical Minerals Framework

On 20 October 2025, the United States and Australia signed the United States–Australia Framework for Securing of Supply in the Mining and Processing of Critical Minerals and Rare Earths. The Framework commits both countries to mobilise at least US$1 billion each in financing within six months, streamline permitting for critical minerals projects, develop price-floor mechanisms, and establish a Rapid Response Group co-chaired by the US Secretary of Energy and Australia's Resources Minister. A project pipeline of up to US$8.5 billion has been identified, with initial joint funding exceeding US$3 billion.

The Framework is an unambiguous signal that the US and Australian Federal Governments view critical minerals as a strategic priority. However, the Framework is expressly non-binding and does not create legally enforceable obligations under domestic or international law. The commitments the Framework contains – including on permitting reform, financing, and price mechanics – could be modified or abandoned with a change of government in either country. Further, Australian States and Territories are in most cases the owner of minerals and are the primary regulators tasked with permitting for resources projects, and the nature and extent to which the Framework is reflected in these jurisdictions may not be ubiquitous. Accordingly, proponents should be cautious about making investment decisions predicated on the Framework's commitments without obtaining further comfort regarding how these are to be implemented.

Two elements of the Framework warrant particular attention. First, the proposal to implement price floors or similar mechanisms (designed to address the risk of market manipulation by larger market participants) could fundamentally alter commercial offtake arrangements for critical minerals. The design, scope, and legal enforceability of these measures remain uncertain, creating risk for potential investors in critical minerals. Second, the Framework commits both countries to strengthen their authorities to review and deter critical minerals asset sales on national security grounds – a commitment with direct implications for foreign investment in Australia, discussed further below.

Otherwise, the Framework's emphasis on streamlining environmental approvals was present in the recent proposed reforms to the Environment Protection and Biodiversity Conservation Act 1999 (Cth) (EPBC Act). Those reforms will introduce a new "national interest proposal" power that allows the Minister to exempt actions from assessment, where the taking of the action would result in an outcome, and that outcome is in Australia's national interest. In determining this, the Minister may consider Australia's obligations under an agreement with one or more countries. Should such a determination be made, the action would not be required to meet the relevant tests under the EPBC Act, including in relation to National Environmental Standards. This mechanism may be directly relevant to critical minerals projects seeking expedited or facilitated approvals.

China's export controls: the risk of volatility

China is known as the global dominating market force in rare earth refining and processing, and it has demonstrated a clear willingness to use that dominance as a geopolitical lever. In April 2025, China imposed export restrictions on seven rare earth elements, requiring Chinese companies to obtain special export licences. In October 2025, those controls were escalated significantly: five further rare earths were added, and – for the first time – extraterritorial jurisdiction was asserted over products manufactured outside China using Chinese-origin materials or technologies.

A trade truce reached later in October 2025 led to a one-year suspension of the October controls (to approximately November 2026), although the April 2025 controls on the first seven elements remain in force. The speed with which the October controls were both imposed and then suspended illustrates a critical commercial risk: China can tighten or loosen export restrictions rapidly and without warning, creating sudden shifts in global supply and pricing. The imposition of controls constrains supply and drives prices upward; their removal can flood the market and drive prices downward just as quickly. For Australian producers and investors, this volatility is difficult to hedge against through traditional contractual mechanisms.

This unpredictability is one of the key reasons the US–Australia Framework proposes the development of price-floor mechanisms for critical minerals. A suitably-implemented price floor would, theoretically, better insulate Australian critical mineral producers from the market disruption caused by sudden Chinese policy shifts – whether those shifts take the form of new restrictions or their unexpected withdrawal. However, the design of any mechanism remains uncertain at this stage of the Framework, and for the foreseeable future producers will need to engage directly with the Australian Government to confirm the precise mechanisms before they can be relied upon as an effective safeguard.

Foreign investment screening

The Foreign Investment Review Board (FIRB) identifies the extraction, processing, and sale of critical minerals as a key area of national security concern. Critical minerals are designated as a sensitive sector requiring heightened FIRB scrutiny, alongside critical infrastructure and critical technology.

For investors – particularly those from non-allied nations – this means that any transaction involving Australian critical minerals assets will attract rigorous national security review. FIRB has previously blocked Chinese-backed investments in rare earth deposits, and the US–Australia Framework's express commitment to strengthening asset sale review mechanisms suggests that this scrutiny will only intensify. Proponents and investors are well advised to engage with FIRB early in the transaction planning process, as early discussions can help identify national interest concerns and potential conditions before formal applications are lodged.

ACCC merger clearance

In addition to FIRB screening, proponents and investors must now also account for Australia's new mandatory merger clearance regime. From 1 January 2026, the Competition and Consumer Act 2010 (Cth) requires mandatory notification to the Australian Competition and Consumer Commission (ACCC) for acquisitions that meet prescribed monetary thresholds, replacing the previous voluntary, informal clearance process. The notification thresholds are set out in the Competition and Consumer (Notification of Acquisitions) Determination 2025 (Cth) (as amended) and operate across multiple pathways.

The primary pathway captures acquisitions where the combined Australian revenue of the acquirer group and the target is AUD$200 million or more, and either the Australian revenue of the target alone is AUD$50 million or more, or the transaction value (being the greater of market value and consideration) is AUD$250 million or more. A second pathway applies to very large acquirer groups: where the acquirer group's Australian revenue is AUD$500 million or more, notification is required if the target's Australian revenue is as low as AUD$10 million or more. A third pathway captures creeping or serial acquisitions, aggregating the value of acquisitions over a rolling three-year period. Acquisitions below a AUD$2 million small acquisition threshold are excluded.

The regime operates to invalidate particular transactions without approval: parties cannot complete a notifiable acquisition until the ACCC has granted clearance or the statutory timeframe has elapsed. For critical minerals transactions, which frequently involve larger acquisitions of tenements, processing facilities, and associated supply chains, the new regime gives rise to an additional regulatory pathway that must be considered alongside FIRB. The ACCC's assessment will focus on whether the acquisition would have the effect, or be likely to have the effect, of substantially lessening competition in a market – a question that may arise acutely in concentrated critical minerals markets where a small number of producers dominate particular commodities. Proponents should ensure that merger clearance timelines are factored into transaction planning from the outset, ideally in parallel with FIRB engagement, and that transaction documentation appropriately addresses the risk that clearance may not be obtained or may be subject to conditions.

The Critical Minerals Strategic Reserve

The Australian Government committed $1.2 billion in the 2025–26 Federal Budget to establish a Critical Minerals Strategic Reserve, intended to be operational from the second half of 2026. Much of the operational detail – including how minerals will be procured, stored, and released – remains to be determined. The interaction between the Reserve, price-floor mechanisms under the US–Australia Framework, and normal commercial offtake arrangements remains a source of both regulatory and commercial uncertainty. Producers should monitor the development of the Reserve's operational framework closely, as government decisions in this space could materially affect market conditions and/or offtake arrangements.

Price volatility and non-market practices

Finally, price volatility remains one of the most acute risks facing the sector. After a sharp increase in 2021 driven by electric vehicle demand, prices for lithium and nickel declined substantially in 2024, causing several Australian mines to pause operations. The US–Australia Framework specifically addresses "non-market policies and unfair trade practices" – widely understood as a reference to allegations that China has flooded global markets to suppress prices and render competing mines unviable. While the proposed price-floor mechanisms may eventually provide downside protection, how they are to be drafted and implemented remains uncertain.

Key takeaways

The critical minerals sector in Australia is being reshaped by the competing forces of geopolitical rivalry, evolving trade controls, domestic regulatory reform, and novel government market interventions. Each of these carries legal risks that affect strategic planning on top of existing areas of ongoing intervention (such as declarations based on cultural heritage protection). The pace of change is rapid, although more on how the Australian and U.S. Federal Governments intend to foster this sector should be known by mid-2026.

_Disclaimer

_{Clayton Utz communications are intended to provide commentary and general information. They should not be relied upon as legal advice. Formal legal advice should be sought in particular transactions or on matters of interest arising from this communication. Persons listed may not be admitted in all States and Territories.}