Chinese investors forced to sell down Northern Minerals
The Treasurer’s decision comes after a board restructure triggered by Yuxiao Fund’s push to oust Northern Minerals’ chairman.
Treasurer Jim Chalmers has ordered a Chinese-linked investment funds to significantly reduce their holdings in ASX-listed rare earths explorer Northern Minerals after the government decided the company’s holding was in Australia’s “national interest”.
Northern Minerals has significant deposits of heavy rare earths in Western Australia, particularly the high value element, dysprosium — a rare element used in wind turbines, electric vehicles and control rods for nuclear reactors due to its ability to resist demagnetisation at high temperatures.
The Treasurer on Monday issued orders that Yuxiao Fund and four associates including Black Stone Resources, Indian Ocean International Shipping and Service Company, Ximei Liu and Xi Wang, dispose of around 530 million shares in the rare earths-focused explorer.
The Singapore-registered Yuxiao Fund controlled by Chinese businessman Wu Tao and the four other entities must sell holdings worth a combined 10.37 per cent of Northern Minerals’ register within the next 60 days.
The decision comes ahead of a visit to Australia in the next fortnight from China’s Premier Li Qiang, who is expected to raise foreign investment issues with Prime Minister Anthony Albanese.
The production of rare earth and critical minerals has become a major concern for Australia and its allies amid increasing competition and assertiveness from China, which is estimated to control around 70 per cent of the supply chain.
The chairman of the Business Council of Australia’s global engagement committee, Warwick Smith, told The Australian that issues around the production and holding of critical minerals had risen in importance for the government.
“All governments have made rulings on the grounds of national interests since the FIRB was formed in 1975. We saw Joe Hockey decide that it was not in the national interest for a US company to take control of GrainCorp,” he said.
“Each case is based on its merits on the advice of the FIRB, and you wouldn’t say this decision is hardly surprising given it is widely documented how the government views critical minerals as being very important.”
In February last year, the Treasurer prohibited the acquisition by Yuxiao Fund of an additional 9.92 per cent stake in the company, which would have increased Yuxiao Fund’s interest in the company to 19.9 per cent.
Northern Minerals, which is focused on the Browns Range heavy rare earths project in Western Australia, has come under scrutiny over the Chinese businessman’s bid to boost his stake in the business via his Singapore based fund.
The fund had also pushing to get rid of Northern Minerals chairman Nick Curtis at an extraordinary general meeting scheduled for June 6. The meeting was cancelled after a board restructure was announced on May 27 which saw Mr Curtis announce his resignation.
Mr Curtis is now a strategic adviser and Adam Handley, who has been a director since late 2021, has been appointed executive chairman. Former finance director Shane Hartwig is the new managing director and chief executive. Mr Handley is the Perth-based partner of global law firm HFW and immediate Past President of the Australia China Business Council (WA).
“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,” Dr Chalmers said.
“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.”
Last December, Lynas Rare Earths chief executive Amanda Lacaze said Australia needed to take steps to increase the sovereign capability of critical minerals and to ensure that local firms don’t fall into foreign hands.
“There is no question that a number of Chinese investors are particularly interested in the Australian minerals industry and rare earths in particular. We cannot speak to the need for resilient supply chains and deal with that logistically, but then give it up financially,” Ms Lacaze said at the Australian British Chamber of Commerce’s Rare Earth and Lithium – The Australian Advantage event.
Shares in Northern Minerals are trading near 3.5c each.