The Australian Federal Government has granted A$5m ($3.36m) to Australian Strategic Materials (ASM) to advance rare earth production at its Dubbo Project in New South Wales.

The funding, part of the International Partnerships in Critical Minerals (IPCM) programme, aims to explore more efficient production pathways.

The grant will support the RE Options Assessment and Pilot Programme, a precursor to the comprehensive front-end engineering design services contract with Bechtel Mining and Metals, set to commence in March 2024.

Launched in February 2024, the IPCM programme seeks to bolster critical minerals businesses and foster end-to-end supply chains with international partners.

The Commonwealth's contribution to ASM under this programme will fund up to 50% of a study to optimise rare earth refining processes at the Dubbo mine and processing plant.

This funding builds on a previous A$6.5m grant awarded to ASM through the Critical Minerals Development Programme.

Earlier this year, ASM received a non-binding letter of interest from the Export-Import Bank in the US for up to $600m to support the project's construction.

Export Finance Australia has also expressed support, offering ASM a letter for $200m in debt funding.

The Dubbo Project is poised to produce a suite of critical minerals including zirconium, niobium, hafnium and various REEs, which are essential for the defence industry.

The project is expected to generate up to 1,000 jobs during construction and sustain approximately 270 jobs once operational.

ASM managing director and CEO Rowena Smith said: “This funding recognises the Dubbo Project’s national and international strategic importance.

“With this funding, we will be able to undertake important work to identify lower capital and shorter implementation pathways to unlock rare earth production at the Dubbo Project and ensure a focused completion of our final front-end engineering design (FEED).”