*

Nyrstar to study production of antimony, bismuth at Port

Pirie

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Will consider producing geranium, indium at Hobart zinc

plant

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Funding will allow for studies into modernising plants

(Adds context, detail throughout)

By Melanie Burton

MELBOURNE, Aug 5 (Reuters) - Australia said on Tuesday

that it will provide A$135 million ($87.4 million) in financial

support for two smelters owned by Trafigura unit Nyrstar, as

part of its strategy to become a key supplier of critical

minerals to Western allies.

The funding, announced by federal and state governments and

supported by investment by Nyrstar, comes amid growing worries

about supply chain vulnerabilities tied to China that have

ramped up pressure on Western nations to secure access to

critical minerals vital for the energy transition and defence.

Australia aims to position itself as a main player in this

shift, but its metals processing sector is under strain from

high energy and labour costs, while oversupply from top producer

China continues to depress prices.

Earlier this year, Nyrstar put its troubled Port Pirie lead

smelter in South Australia and Hobart zinc processing operations

in Tasmania under strategic review, citing high energy prices

and lower processing fees.

The support package will now allow Nyrstar to maintain

operations while it explores modernisation of both facilities

and accelerates studies to produce critical minerals - germanium

and indium in Hobart and antimony and bismuth in Port Pirie.

The initial focus will be on fast-tracking an antimony pilot

plant in Port Pirie, Nyrstar said. It first told Reuters in May

that it was considering production of the metal used in

ammunition and lead-acid batteries at the site.

But modernising Australia's ageing smelters will require

significantly more capital, potentially testing the

government's, and taxpayers', resolve.

China, which dominates global processing of many critical

minerals, has over the past year imposed restrictions on

antimony and rare earths exports, disrupting supply chains for

industries including automotive and defence and underscoring the

geopolitical risks of over-reliance on Chinese refining.

Bolstering an alternative supply chain has become a top

priority for Western governments and for the Trump

Administration.

South Australia Premier Peter Malinauskas warned that

without Western intervention, China could hold all the world's

smelting capacity. "That's an unacceptable risk, particularly in

the current geostrategic environment," he told broadcaster ABC.

Australia's minister for industry and innovation, Tim Ayres,

told the ABC that he expected Port Pirie would be capable of

producing 15,000 metric tons of antimony metal.

Antimony is an alloy hardener for other metals in ammunition

and batteries and is critical for the manufacturing of

semi-conductors found in electronics and defence applications.

It is also used in flame retardant materials.

Meanwhile, the bailout of Nyrstar may trigger a flurry of

aid-seeking calls to government officials from other struggling

processing companies.

Last week IGO said it was assessing the future of

its loss-making lithium hydroxide plant on the outskirts of

Perth, run by joint venture partner Tianqi Lithium.

Glencore has asked for government assistance to

support its Mount Isa copper smelter in Queensland state, while

Rio Tinto has repeatedly flagged a tough outlook for

its Tomago aluminium smelter in New South Wales, the state's

biggest energy user, given costly power.

BHP already pulled the trigger on its Western

Australian nickel operations, putting them on ice a year ago.

($1 = 1.5451 Australian dollars)