Australian Treasurer Jim Chalmers on Sunday instructed a Chinese investment fund to divest its shares in Northern Minerals, a Sydney-based rare earths mining company deemed crucial to Australian national interests.
“Australia operates a robust and non-discriminatory foreign investment framework, and will take further action if required to protect our national interest in relation to this matter,” the spokesman added.
Chalmers issued a disposal order — a directive to sell stocks — to an investment company called the Yuxiao Fund. The fund has been given 60 days to sell the 80 million shares of Northern Minerals it acquired in September. These shares account for about 10.4 percent of Northern Minerals’ total capital.
Treasurer of Australia Jim Chalmers (Tracey Nearmy/Getty Images)
The Yuxiao Fund, which is registered in Singapore, is controlled by a Chinese investor named Yuxiao Wu and a businessman named Wu Tao. The fund is connected with several other conglomerates and two other Chinese nationals named Xi Wang and Ximei Liu, all of whom were also ordered to sell their shares in Northern Minerals.
The Yuxiao Fund has been aggressively seeking to gain control of Northern Minerals, which is developing heavy rare earths mining projects in Western Australia. The company’s Browns Range mines will supply a significant rare earths refinery under construction in Western Australia that has already secured $665 million in funding commitments from the Australian government and could receive even more.
China has a dominant position in the rare earths industry, an industry critical to green energy products like electric vehicle batteries and solar panels. The Chinese Communist Party has prioritized maintaining its near-monopoly on rare earths supplies.
The U.S. government has also increased funding for rare earths projects to challenge China’s dominance and develop a “mine-to-magnet” domestic supply chain, as the Department of Defense (DOD) refers to it. This initiative aims to create “resilient supply chains” to replace “overseas, single-points-of-failure” chains for defense-critical products.
In November, Northern Minerals rejected an attempt by Yuxiao to access its accounting ledgers and marketing contracts. The company also accused Yuxiao and its associates of plotting to remove its executive chairman, Nick Curtis, who was resisting the Chinese takeover effort.
Curtis filed a complaint with Australia’s Foreign Investment Review Board (FIRB), urging it to investigate Yuxiao for using associates and proxies to buy up stock and quietly building a significant stake in Northern Minerals, even though Chalmers had expressly limited Yuxiao to holding no more than 9.98 percent.
Curtis resigned as executive chairman of Northern Minerals on May 27, transitioning to a “strategic advisor” role. It appears he stepped down because Yuxiao used its current 9.8-percent stake in the company to call a shareholders’ meeting, where it intended to push for Curtis’s removal. The shareholder meeting, originally scheduled for June 6, was canceled after Curtis stepped down.
Curtis’s successor is Adam Handley, a former non-executive director of the company and previous president of the Australia China Business Council, where he focused on developing relationships between Australian businessmen and “North Asian investors.”
Some Australian mining executives are skeptical that the government can prevent China from ultimately financing and controlling the rare earths industry. Arcadium Lithium chairman Peter Coleman told the Australian Financial Review in May that Chinese investment is essential for major critical minerals projects, even though the U.S. has threatened to cut off its own subsidies for Australian rare earths if Chinese money is involved.
