U.S. Secretary of State Hillary Clinton said she will use a weekend visit to Australia to discuss China's policy on key materials called rare-earth metals.

China earlier this year curtailed export quotas of the metals, used by high-tech companies, auto makers, and in military equipment, citing the environmental hazards rare earths have caused, as well as efforts to quell smuggling.

China currently controls around 97% of the world's supply of the metals, raising fears about its ability to control the market.

Clinton, who is in Australia until Monday for defense and security talks as part of a seven-nation Asia-Pacific tour, said the U.S. and Australia "need to discuss in depth is the supply of rare-earth minerals throughout the world."

"The slow-down, or the potential of the supply coming from China, which is about 97% of the currently available supply of rare-earth minerals, raised questions in many of our minds that it is not--whether it is China or anyone else--wise to be so dependent upon a single source for elements that are critical to many of the most advanced civilian and military technology that countries like Australia and the U.S. produce and utilize," Clinton told reporters late Saturday.

Last year Canberra blocked plans by China Non-Ferrous Metal Mining (Group) Co. to invest A$252 million in Lynas Corp. (LYSDY, LYC.AU), an Australian miner of rare-earth metals.

Australia's Foreign Minister Kevin Rudd has just returned from a week-long visit to China. Clinton said she is eager to discuss his "current thinking" on China matters, including rare earths.

Because the issue has "direct military and defense" importance, the two countries need to work together "to ensure that there is a broad-based global supply of these critical minerals," Clinton added.

-By Rachel Pannett, Dow Jones Newswires; 61-2-6208-0901; rachel.pannett@dowjones.com
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