A newly-signed deal between Australia and the United States focusing on critical minerals could be the push to create a thriving rare earths industry in Australia and more specifically, central Australia, according to some mineral experts and rare earths industry players.

Key points: The China-US trade war has thrown rare earths into focus as Beijing controls 85 per cent of supply

The China-US trade war has thrown rare earths into focus as Beijing controls 85 per cent of supply The growing demand for electric vehicles means rare earths are set to soar

The growing demand for electric vehicles means rare earths are set to soar There are currently only a handful of rare earths projects in Australia but significant, untapped supply

The deal comes months after the world's rare earths supply was thrust into the spotlight after Beijing threatened to restrict the rare earth trade as part of its ongoing trade war with the US.

On the other side of the world in outback Australia, Nolans Bore, a rare earths project north of Alice Springs, has welcomed the new deal.

The facility has been more than 15 years in the making, and the company behind it, Arafura Resources, said pending native title approval and finance, it was planning to start construction late next year.

Full details of the deal have not been made public but Brian Fowler, general manager for the Northern Territory with Arafura, said it was a sign that politicians were realising how geopolitically threatened rare earths are due to China's dominance in the market.

"[China] controls 85 per cent of the world's supply of rare earths," he said.

According to the company, the $1 billion project has a large, globally significant rare earth deposit of roughly 56 million tonnes.

"We have the potential to supply somewhere in the region of 8 to 10 per cent of the world's requirement for neodymium and praseodymium, two of the rare earths minerals," Mr Fowler said.

"Their role is in the production of the highest strength magnets on the planet, they are the absolute essential elements in the electrification of motor vehicles and in the production of clean energy using things like wind turbines."

Mr Fowler said considering the amount of car companies looking to make electric models, the current global supply of neodymium and praseodymium was not adequate to meet the predicted demand going forward.

Fresh rare earth samples are sprayed and inspected at the Nolans Bore project. ( ABC News: Katrina Beavan )

'Hunger' for more rare earths

Chris Vernon, processing research director for CSIRO's mineral resources, agreed that demand was about to soar.

He said that although Australia had a significant supply of rare earths and sophisticated technology, investment had been holding the industry back.

"[The deal] looks very promising," he said.

"One of the bottlenecks to getting a project off the ground in Australia was the financing and the uncertainty [so] if government is stepping in and providing some surety about getting finance, that can only be a good thing."

He reiterated that the China-US trade war was to thank for throwing rare earths into focus.

"The rare earths market is about to explode, simply because we expect to put so many electric vehicles on the road; every one of those requires rare earths for their magnets," he said.

"There's also a burgeoning market in other technology uses.

"A car only takes a few tens of kilograms of rare earths but when you're looking at some high-tech military equipment for example, you could be looking at hundreds of kilograms of rare earths.

"There is a real hunger for more rare earths."

The Nolans Bore Rare Earths Project in central Australia plans to start construction in late 2020. ( ABC News: Katrina Beavan )

Although Australia is 'well placed' to take advantage of this demand, Mr Vernon said there were currently only a handful of rare earth projects in the country.

That includes Northern Minerals' Browns Range project, also in central Australia, east of Halls Creek in Western Australia and further to the south in WA sits Lynas' operation at Mt Weld.

On the other side of the country is Alkane Resources' Dubbo project.

Environmental concerns

While Nolan's Bore has the required environmental approvals, a local advocacy group said it still had concerns around the mine.

However, they conceded that rare earths were needed for the transition to green energy by increasing the use of electric cars and wind turbines.

Alex Read, policy officer with the Arid Lands Environment Centre [ALEC], said the organisation was cautiously supportive of the project, providing that environmental regulations were followed.

"We understand the importance of having a supply of these metals for electric vehicles and renewable energy but we need to take a cautious approach to this," he said.

"And we need to have a broader conversation about the costs and benefits of these projects."

The Northern Territory Government will soon start consultation on draft environment protection regulations after passing the Environment Protection Bill earlier this year.

But ALEC would like to see proposed legislation changes in place before any new mines come online.

"One of the key flaws in the current framework is there is no way for directors to be held personally liable if they don't comply with their environmental requirements," Mr Read said.

"We want to make sure they have a chain of responsibility framework to make sure they're held personally responsible and we want to make sure that the rehabilitation program is completed as they say it would be.

"Rare earth mining comes with a lot of risks.

"Particularly with this project, we're seeing it's associated with elevated levels of radionuclides and we understand that they're going to be significant risks to groundwater, surface water [and] public health."

Mr Read said ALEC would also like to see changes put into place to ensure mining companies had to pay for their water licences.