Australia directs Chinese crit-min backers to divest

Australia has ordered several China-linked investors to sell their 10.4% holding in rare earths project developer Northern Minerals (ASX: NTU) in a move similar to Canada’s two years ago.

The Singapore-based Yuxiao Fund; Black Stone Resources registered in the Virgin Islands; Indian Ocean International Shipping and Service Co. of the United Arab Emirates; Ms. Ximei Liu of China and Mr. Xi Wang of Singapore must sell their stakes within 60 days, Australia’s treasury ordered.

“The decision, based on advice from the Foreign Investment Review Board, is designed to protect our national interest and ensure compliance with our foreign investment framework,” a spokesperson for treasurer Jim Chalmers said on Monday.

Northern Minerals is advancing the Browns Range project for heavy rare earths dysprosium and terbium in the far northeast of Western Australia. The minerals are used in the magnets of electric vehicle motors and solid-state devices. The company is drilling to update a resource estimate to add to a definitive feasibility study.

“It appears that the treasurer has concluded that the acquisition of the relevant shares was inconsistent with the requirements of the Foreign Acquisitions and Takeovers Act 1975,” Northern Minerals said in a release on Monday.

Shares in Northern Minerals gained 19% on Tuesday in Sydney to close at A4.3¢ (3.9¢) apiece, valuing the company at A$228.8 million. They’ve traded in a 52-week range of A2.4¢ to A4.4¢.

Canada also

Canada stiffened its foreign investment rules in October, 2022 then a month later told three Chinese investors to divest stakes in Canada-based battery metals companies, even though some of their projects were abroad.

This year, two Canadian companies scrapped Chinese investment citing regulatory reviews. Solaris Resources (TSX: SLS; NYSE: SLSR) nixed a $130-million investment last month by China’s Zijin Mining for a 15% stake to aid the Warintza copper project in Ecuador. In March, Montreal-based SRG Mining (TSXV: SRG) cancelled a $16.9-million deal with China’s Carbon ONE New Energy Group to take 19.4% of the graphite miner.

The Canadian and Australian moves show the rise of resource nationalism in the West to counter China’s control of green energy critical minerals. The Asian giant mines 70% of the world’s supply of rare earths and processes 90% of it, according to the International Energy Agency.

The divestment order will reduce the Yuxiao fund’s holding in Northern Minerals to 8%. Australia’s Foreign Investment Review Board refused to allow the fund to increase its stake last year to 19.9% from 9.8%.

New chairperson

The fund, controlled by Wu Tao, the chair of China-based Jinan Yuxiao Group, also called for Northern Minerals’ executive chair, Nicholas Curtis, to be replaced. It nominated Wu and other candidates to the board.

Curtis resigned on May 27 and the board is to hold its annual general meeting to consider the proposed slate on Thursday in Perth where Northern Minerals is based. It wasn’t clear if the government could or would block a Chinese national from becoming chairperson of the critical minerals developer.

“National security threats are increasing due to intensifying geopolitical competition,” Steven Kennedy, Secretary to the Treasury, said in opening remarks to Australia’s Economics Legislation committee on Monday.

“The government is dedicating greater resources and scrutiny to foreign investment proposals in critical and sensitive sectors of the economy in order to consider economic benefits, security risks and potential mitigations.”