Australia’s lawsuit over rare minerals is a geopolitical litmus test

Treasurer Jim Chalmers is enforcing national sovereignty and defying risk of economic intimidation in taking court action to force a China-linked entity to divest from a key rare earths miner.

Treasurer Jim Chalmers is trying to protect access to resources.Credit: Alex Ellinghausen

This is a matter of enforcing red lines – or, in Seinfeld parlance, knowing not just how to make a reservation but how to hold one. That’s why, if we’re serious about holding on to the strategic advantages of our critical-minerals sector and not just making short-term profits, this is a moment for resolve.

At the heart of the matter is Northern Minerals, an Australian company developing the Browns Range project for heavy rare earths in Western Australia. The project could become one of the first non-Chinese sources of the critical minerals essential for advanced military systems, clean energy technologies and high-end electronics.

Despite a clear directive from Chalmers last year for five China-linked entities to divest their stakes in Northern Minerals, at least one, Indian Ocean International Shipping and Service Company Ltd, allegedly failed to comply.

Now, in a move that’s both unprecedented and essential in this industry, the Commonwealth is suing in the Federal Court. Yes, we are dealing with companies here, but no Chinese company is really private if the government in Beijing decides otherwise. Any and all can be tools of the state if it so pleases.

So as much as the Australian government will present this as a commercial matter, it is really about the threat from the Chinese government and its objective of controlling critical minerals, not just for economic development but as a weapon of strategy.

Foreign investors’ alleged open defiance of a lawful Australian government directive is deeply concerning. Beijing would tolerate no such thing. In China, foreign companies abide by tight restrictions or risk immediate expulsion.

Yet in Australia, even after stern reaction to years of intensifying Chinese economic coercion and domestic interference, some state-linked actors still seem to think that following our foreign investment laws is optional. Maybe some think Australian fear of retaliation from China will ensure they can do almost as they please.

To the government’s credit, its court action challenges such dangerous assumptions head-on. Chalmers was unequivocal: “Foreign investors in Australia are required to follow Australian law.”

What is at stake is Australia’s ability to protect the integrity of its critical minerals sector. These minerals, such as dysprosium, terbium and neodymium, are necessary for advanced products ranging from F-35 fighters and hypersonic missiles to electric vehicles and wind turbines.

China controls more than 80 per cent of global rare earths processing and nearly all production of heavy rare earths. That’s not an accident. It has spent decades building this dominance through state-backed investment, export restrictions and strategic acquisitions. Australia, alongside the United States, Japan and others, has begun pushing back, attempting to build alternative, diversified supply chains for critical minerals. But Beijing won’t relinquish its stranglehold willingly.

So the Northern Minerals case has been a test for Australia’s strategic resolve. Now that it’s gone to court, it becomes a test for the adequacy of our laws.

If we fail to enforce foreign investment directives, we send a clear signal to Beijing and the world that we’re unwilling to defend our economic and national security. Worse, we risk undermining the very alliances and partnerships we’re cultivating to create a supply of critical minerals that China cannot throttle at will.

With this action, the government is applying the strengthened powers of Australia’s foreign investment regime, which was updated in 2024 to reflect contemporary geo-economic risks better. The government didn’t strengthen its powers because it merely imagined China might want to exert economic control; Beijing has already targeted Australia with intrusions into sectors as diverse as academia, infrastructure and now mining.

There’s no doubt that Beijing will respond to the treasurer’s court action – definitely diplomatically, perhaps economically. In 2010, it cut off rare earth exports to Japan during a territorial dispute. Beginning in 2018, it unleashed sweeping trade sanctions on Australia after national security decisions on 5G telecommunications, foreign interference laws and the calling for an inquiry into the origins of COVID-19.

Australia must demonstrate that its sovereignty isn’t for sale. Beyond legal action, this means accelerating investment in domestic processing and refining capacity. It means supporting partner countries through establishing joint ventures and strategic stocks. It means aligning our critical minerals strategy with broader defence and national security planning. And it means holding foreign investors, no matter how politically connected, to the same standards we expect from Australian firms.

The treasurer’s lawsuit is about credibility as much as compliance. It’s about showing that, while we welcome foreign investment, we do so on our terms, in line with our national interest. We must not let Australian assets, especially those central to our technological, military and economic future, be quietly absorbed into the strategic plans of foreign powers.

Global collaboration is not dead, but the era of naive globalisation is over. International affairs must be undertaken within a framework of rules, with sovereignty the primary national principle. Australia is now operating in an environment defined by geo-economic competition, state-backed capital and strategic interference. As the Northern Minerals case shows, holding the line won’t be easy. But, having drawn the line, we must enforce it. Jim Chalmers is doing that.

Dr John Coyne is director of the Australian Strategic Policy Institute’s national security program. Justin Bassi is ASPI executive director.

Get a weekly wrap of views that will challenge, champion and inform your own. Sign up for our Opinion newsletter.