Peak Rare Earths recruits Macquarie support amid fears FIRB may not shield miner from Shenghe takeover

Interest in the critical minerals sector has surged amid geopolitical tensions caused by Russia’s invasion of Ukraine. Picture: Bloomberg

Peak Rare Earths has appointed Macquarie Capital as its defence adviser to help fend off a potential move from Shenghe Resources Holdings, despite ongoing concerns about government influence on the Chinese resources major.

Interest in the critical minerals sector has surged amid geopolitical tensions caused by Russia’s invasion of Ukraine. The Australian government threw down a marker in the space on Monday by agreeing to a $1.05bn loan to back Iluka Resources plans to build a domestic refining capacity in WA.

Peak’s project is in Tanzania, but the company has plans to build its own refinery in the UK and has won support British government support for its plans.

The company has now hired Macquarie as an adviser to weigh its options.

The move comes after Shenghe snapped up a 20 per cent stake in Peak in February, paying a 25 per cent premium to private equity firm Appian for the holding as the Chinese rare earth and industrial major looked to extend its presence in global rare earth markets.

Since then, Peak is believed to have rejected a Shenghe request for board representation amid ongoing concerns – first revealed by The Australian in February – that the company’s move on Peak’s register could be in breach of Australia’s strict foreign ownership rules.

An analysis of Shenghe’s top shareholders in February, sourced from Bloomberg, suggested that Chinese SOEs hold more than 20 per cent of the company’s stock – potentially putting the company in breach of rules requiring it to seek Foreign Investment Review Board approval for buying more than 10 per cent of an Australian company.

It is understood that attempts by Peak to clarify details of the ultimate owners of large sections of Shenghe’s share register have been rebuffed by the Shanghai-listed company, and the status of FIRB investigations into the matter are unclear.

While there is no confirmation that Shenghe is considering plans for a full takeover offer for Peak, the Chinese company – best known for helping bankroll the return to production of the only operating rare earths mine in the US, Mountain Pass – is believed to have remained close to Standard Chartered, which advised Appian on the divestment of its holding in Peak, and is more than familiar with details of the Australian-listed company’s plans and outlook.

Any such move would be stymied by an adverse ruling by the FIRB on its earlier share acquisition, but six weeks of silence from Australia’s foreign investment regulator suggest Peak’s move to look to its own defence may be its best option.