Chinese companies have become the largest shareholders in two Australian mines that produce zirconium, a critical mineral essential for Beijing's hypersonic missile and nuclear programs. This development highlights China's reliance on imports for zirconium, which it has acknowledged as a vulnerability. Australia is the world's leading producer of zirconium, supplying 41% of China's imports.

Australian regulators have permitted companies backed by Beijing to acquire significant stakes in these mines located in Western Australia. Additionally, the Australian federal government provided a $160 million soft loan to one of these companies to assist in production. This situation raises concerns as Australia simultaneously positions itself as a key partner for the United States, which is working to reduce China's dominance in the processing of rare earths and critical minerals. Recently, Prime Minister Anthony Albanese signed a $13 billion agreement with President Donald Trump to ensure the U.S. has adequate raw materials for its defense and technology sectors.

Data indicates that China is not only using zirconium for its own military needs but is also re-exporting some of it to Russia, contributing to the ongoing conflict in Ukraine. Since the war began in 2022, exports of zirconium from China to Russia have surged by over 300%. The parent company of one of the Australian mines is reportedly involved in this trade.

Military strategist David Kilcullen emphasized the importance of understanding the destination of Australia's critical minerals. He stated, "I think it's really important for us to have an understanding of where our minerals go … it's appropriate to be applying those [controls] to things that might be used for nuclear or missile production."

Zirconium, while often associated with everyday products like bathroom tiles, has significant military applications. It is used in the production of zirconium sponge, which is essential for wrapping nuclear fuel rods. These rods are utilized in civilian power plants, but they are also critical for countries looking to expand their nuclear arsenals. Zirconium's high melting point makes it suitable for the extreme conditions faced by hypersonic missiles, which travel at speeds exceeding five times the speed of sound.

China's National University of Defense Technology has identified its limited zirconium reserves as a national security concern. A recent paper noted that the allocation and use of zirconium are critical for ensuring national security and advancing military technology. Despite having the largest reserves of mineral sands from which zirconium is extracted, Australia faces challenges as China dominates the downstream processing of this mineral.

China has sought to address its zirconium shortfall by acquiring significant stakes in Australian mining companies, including Image Resources, which is listed on the Australian Stock Exchange. The largest shareholder of Image Resources is China's LB Group, which has close ties to the Beijing government. Image Resources sells 100% of its product to China, with LB Group being its primary customer. The company's annual report highlights support from the Chinese government for developing nuclear-grade zirconium sponges.

In a statement, Image Resources' CEO did not address the potential military applications of its minerals, instead noting that the company sells "small quantities" for use in everyday products. The Foreign Investment Review Board approved the acquisition of a major stake in Image Resources by China's Guangdong Orient Zirconic in 2015. Currently, there are no restrictions preventing Australian miners from exporting raw mineral sands to China, and the trade remains lightly regulated.

Despite the military implications of zirconium, Australian Defence Minister Richard Marles does not believe that tighter controls are necessary. He stated, "There are other sources of zirconium from around the world, such that Australia withdrawing from the zirconium market would not mean the military use of zirconium would also stop."

Trade data reveals that a portion of the zirconium exported to China is being re-exported to Russia, aiding its military efforts. In the year leading up to February 2025, China's zirconium exports to Russia were valued at nearly $70 million, with a significant increase since the onset of the war. The largest buyer of Chinese zirconium is a Russian manufacturer that is part of the state-owned nuclear corporation, Rosatom.

Another significant source of zirconium for China is the Thunderbird Mine in Western Australia. In 2020, the Foreign Investment Review Board approved the purchase of a 50% stake in the mine by Chinese company Yansteel. The mine, which sells all its production to China, received a $160 million concessional loan from the Northern Australia Infrastructure Facility in 2022 to facilitate its production. At that time, the NAIF did not mention the known defense applications of zirconium, only stating that demand was expected to grow in construction, advanced manufacturing, and renewable energy sectors.