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The Australian government has ordered funds linked to a Chinese businessman to cut their stakes in a rare earths miner, in a sign that control of critical minerals is becoming a political concern.
Jim Chalmers, Australia’s treasurer, cited reasons of national interest in demanding that the Yuxiao Fund and four associates reduce or divest their interests in Northern Minerals, a Western Australian rare earths developer.
“The decision, based on advice from the Foreign Investment Review Board, is intended to protect our national interests and ensure compliance with our foreign investment framework,” a spokesperson for the Treasurer said on Monday.
The move comes amid fierce debate in Australia over China’s alleged dominance in rare earths, used to build wind turbines and electric vehicles, and in the defense industry.
According to the International Energy Agency, China controls 70 percent of rare earth mining and 90 percent of processing capacity.
Australia has identified rare earths as a key part of its critical minerals strategy and wants to help its business sector develop a supply chain outside China.
Northern Minerals is positioned as a major supplier of rare earths to a refinery being built by Iluka Resources on the coast of Western Australia.
The Australian government has stopped Singapore-based Yuxiao Fund from doubling its stake in Northern Minerals to almost 20 percent in February last year.
The Australian company contacted the FIRB last October to urge the regulator to investigate whether Yuxiao, which Northern Minerals said was controlled by businessman Wu Tao, had breached that order by secretly increasing its stake using of associated funds.
The Singaporean fund also called an extraordinary shareholders’ meeting to remove Nicholas Curtis, the executive chairman of Northern Minerals and a rare earths veteran, from his position. Yuxiao also nominated Wu, along with other candidates, as a candidate for the Australian company’s board.
Curtis resigned from his position last week. Northern Minerals will hold its annual meeting this week, which will include proposed board nominations.
A statement from the company said: “It appears that the Treasurer has concluded that the acquisition of the relevant shares was contrary to the requirements of the Foreign Acquisitions and Takeovers Act 1975 and the Treasurer’s previous prohibition order.”
Yuxiao Fund did not immediately respond to a request for comment.
The treasurer’s move will see more than 10 percent of Northern Minerals’ shares come onto the market in the next two months.
Yuxiao has been ordered to reduce its stake to 8 percent, while four associated funds and individuals – including Black Stone Resources of the British Virgin Islands and Indian Ocean International Shipping and Service Company registered in the United Arab Emirates – have been told to have to sell shares. which they had purchased since September.
The Australian regulator’s intervention comes after Canada forced Chinese investors to divest stakes in the crucial minerals sector by 2022.
This year, graphite producer SRG Mining in March canceled a planned investment from China’s Carbon One New Energy Group, and copper producer Solaris Resources in May canceled a plan to sell a 15 percent stake to China’s Zijin Mining, citing both companies on rules for foreign investments. as a reason to walk away from the deals.
Additional reporting by Harry Dempsey in London