Japan has secured a tentative agreement with Australia to buy rare earths, key minerals used in the manufacturing of electronic products from car batteries to military equipment, in a strategic move to cut its dependence on China, the world’s dominant producer. Sojitz, a Japanese trading company and the country’s largest importer of rare earths, said on Wednesday it had entered a “strategic alliance” with Lynas, an Australian-listed group that owns one of the world’s richest rare earth deposits. The groups were “investigating a long-term supply agreement”, Sojitz said. The announcement came a day after Kevin Rudd, Australia’s foreign minister, told his Japanese counterpart, Seiji Maehara, in Canberra that Australia would be a long-term supplier of rare earths to countries such as Japan. Lynas shares jumped 10.5 per cent to A$1.53, while shares in Sojitz rose 9 per cent to Y168. Under the agreement, Sojitz said it would seek funding from the Japan Oil, Gas and Metals National Corporation, a state-affiliated investment body, to help pay for a $250m expansion of Lynas’ Mount Weld rare earth mine in western Australia. Sojitz said it was seeking 9,000 tonnes of rare earths a year from Lynas during the next 10 years.

China accounted for 97 per cent of the world’s rare earth production last year. Concerns about its dominant market position escalated in September when Japanese traders reported their shipments were halted during an unrelated diplomatic dispute with China.

Japanese vehicle and electronics makers are the world’s biggest consumers of rare earths, and several groups are looking to support more rare earth mining outside China.