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Australia’s government has ordered funds linked to a Chinese businessman to cut their stake in a rare earth miner, in a sign how control of critical minerals is becoming a political concern.
Jim Chalmers, Australia’s treasurer, cited national interest reasons for requiring the Yuxiao Fund and four associates to reduce or dispose of their stake in Northern Minerals, a rare earths developer in Western Australia.
“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 Treasury spokesman said Monday.
The move comes amid fierce debate in Australia over China’s alleged dominance of rare earths, which are used to build wind turbines and electric vehicles and in the defense industry.
China controls 70 percent of rare earth mining and 90 percent of processing capacity, according to the International Energy Agency.
Australia has identified rare earths as a key part of its critical minerals strategy and wants to help its corporate sector develop a supply chain outside of China.
Northern Minerals has been positioned as the main supplier of rare earth elements for a refinery being built by Iluka Resources off the coast of Western Australia.
The Australian government blocked Yuxiao Fund, which is based in Singapore, from doubling its stake in Northern Minerals to almost 20 percent in February last year.
The Australian company contacted the FIRB last October to ask 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 through the use of linked funds.
The Singapore fund also called an extraordinary meeting of shareholders to remove Nicholas Curtis, Northern Minerals’ executive chairman and a rare earths veteran, from his post. Yuxiao also nominated Wu, alongside other candidates, as a candidate for the Australian company’s board.
Curtis resigned from his role last week. Northern Minerals will hold its annual meeting, which includes proposed board nominations, this week.
A statement issued by the company said: “It appears that the treasurer has concluded that the acquisition of the relevant shares did not comply with the requirements of the Foreign Acquisitions and Takeovers Act 1975 and the previous restraining order made by the treasurer.”
Yuxiao Fund did not immediately respond to a request for comment.
The move by the treasurer will force more than 10 percent of Northern Minerals shares to market in the next two months.
Yuxiao has been ordered to reduce its stake to 8 percent, while four related funds and individuals – including the British Virgin Islands’ Black Stone Resources and UAE-registered International Indian Ocean Shipping and Service Company – were has been told to sell shares that they had bought since September.
The intervention by Australia’s regulator comes after Canada forced Chinese investors to divest stakes in the critical minerals sector by 2022.
This year, graphite producer SRG Mining pulled a planned investment from China’s Carbon One New Energy Group in March and copper producer Solaris Resources scrapped a plan to sell a 15 percent stake in China’s Zijin Mining in May, with both companies that cited foreign investment rules. as a reason for leaving the agreements.
Additional reporting by Harry Dempsey in London