US President Donald Trump signed a deal this week with Prime Minister Anthony Albanese giving the United States access to Australia's vast reserves of rare earths and critical minerals essential for everything from solar panels to precision missiles.

And the head of Australian rare earths miner Arafura Resources said developing projects outside of China could only be a good thing.

"China has basically controlled the rare earths market by controlling the price," Arafura boss Darryl Cuzzubbo told AFP.

"The problem right now is China is showing that they'll use their 90 percent control of rare earths production as a geopolitical tool."

China controls some of the world's largest reserves of rare earth elements and wields enormous influence as almost the sole country able to refine the metals on an industrial scale.

Manufacturing nations such as the United States, Germany and South Korea have long been on the hunt for partners less likely to use rare earths as a bargaining chip.

The US-Australia deal paves the way for alternative supply chains outside of China, Cuzzubbo said.

"And that then gives investors confidence that these like-minded countries will do something to change China's control."

In essence, the United States has agreed to help finance a batch of rare earths projects in Australia -- gaining preferential access to the minerals they unearth in return.

Australia is very good at digging up its critical minerals, but like most other mining nations has struggled to process them onshore.

More than 90 percent of Australia's lithium is shipped each year to the hulking refineries of China.

Arafura Resources owns one of the first projects to receive financing under the US-Australia deal, and is aiming to swiftly scale up its own refining capacity.

Another Australian company, Lynas Resources, already has a US$258 million contract to build a rare earths refinery in Texas.

"There's going to be a dance going on with China until there is this diversified supply chain," said Cuzzubbo.

"And China is going to milk it for whatever they can, because they know in three to five years' time, they're starting to lose the control."

Analysts consider it unlikely that Australia will ever produce refined rare earths on China's scale.

But it could loosen the country's stranglehold if it could build up to even a small fraction of its processing capacity.

"Australia is the United States' most important partner in countering China's dominance in rare earths," the Centre for Strategic and International Studies said this week.