Australia holds a plethora of rare earths — minerals essential for all sorts of cutting-edge technologies from wind turbines to hypersonic missiles.

Until now, most of them have been sent to be refined in China.

That is largely because the process is dirty, expensive, and politically unpopular.

Wastewater ponds on the outskirts of the city of Baotou in China's Inner Mongolia have polluted soil and water. (Reuters: File)

But after last month signing a $13 billion critical minerals deal with the United States to boost production and refining, Australia must deal with some significant environmental challenges — mostly around water.

Marjorie Valix, a professor of chemical engineering at the University of Sydney, who researches sustainable mineral processing, said Australia has plenty of opportunity — and responsibility — in this space.

"Rare earths aren't rare in Australia — especially light rare earths," said Professor Valix.

"But water is one of the vulnerabilities."

The bottleneck

When researcher Jane Klinger first visited China's Bayan Obo mine at Baotou in Inner Mongolia — the world's largest rare-earth operation — more than a decade ago, she expected to see the future of green technology.

What she found instead was a cautionary tale: acidic wastewater and radioactive residue in unlined ponds along with contaminated rivers and farmland.

China has reduced its use of the most-polluting refining processes.