Former defence minister accuses China of manipulating critical minerals prices as political weapon
Northern Minerals’ experience trying to get Chinese-linked investors off its register gives weight to Senator Linda Reynolds’ claim the company is caught in a proxy war between Australia and China.
Former Defence Minister Linda Reynolds has accused China of manipulating the critical minerals sector after Chinese-affiliated investors defied an order from the Albanese government to sell their shares in producer Northern Minerals.
ASX-listed Northern Minerals owns a strategically important heavy rare earths project in Western Australia. Non-compliance with the divestment order has come despite previous interventions in the affairs of the company by Jim Chalmers based on the recommendations of the Foreign Investment Review Board.
Senator Reynolds said China employed its dominance in critical minerals as a geostrategic weapon, and used price manipulation to gain leverage over Australian producers and projects.
The former Liberal cabinet minister has taken a keen interest in Northern Minerals and its Browns Range since her time in the defence portfolio, as has former Labor leader Kim Beazley.
“For many years, China has been quietly and persistently manipulating critical minerals and rare earth commodity markets to strategically stockpile the offtake and process it in China,” she said.
“China now dominates global markets for these processed commodities.
“This provides China with an overwhelming economic advantage in the new energy technology sector – an advantage they have been willing to use as a powerful geostrategic political weapon.”
Senator Reynolds said China has been a significant investor in Australia’s resources sector for decades.
“They have systematically manipulated individual commodity markets periodically ‘bombing’ commodity prices providing the opportunity for CCP (Chinese Communist Party) interests to take control of company boards and offtake agreements,” she said.
“The federal government has left itself powerless to enforce the Treasurer’s order and the company, Northern Minerals, is caught in the middle of a proxy fight between both nations.”
Mr Beazley has said Browns Range, a deposit rich in terbium and dysprosium that are essential in permanent magnets used in F-35 fighter jets and other weapons systems, must stay out of Chinese hands.
Dr Chalmers ordered five entities suspected of having links with China to sell their shares in Northern Minerals by September 2 last year.
The company revealed last Friday that at least one of the entities hadn’t complied, and said it was up to FIRB to enforce the Treasurer’s instructions.
A federal government spokesman said Treasury was monitoring the situation closely and warned breaches of foreign investment laws were taken seriously.
Northern Minerals‘ experience gives weight to Senator Reynolds’ claim the company is caught in a proxy war between Australia and China.
Northern Minerals reported a first-half loss of almost $15m last week and warned it may need to seek additional funding if it cannot reach agreement with Iluka Resources on extending the terms of a convertible note.
Government sources told The Australian that unresolved issues around the Chinese investors on its register remain a barrier to Northern Minerals securing the funding it is seeking from the northern Australia Infrastructure Facility and Export Finance Australia.
Northern Minerals managing director Shane Hartwig intends to provide a feasibility study for Browns Range.
“The company notes that changes to its share register are likely given the requirement for additional equity to fund the development of its Browns Range,” he said.
Mr Hartwig also revealed the company had made limited inquiries about Chinese businessman Enping Fu, who came within a whisker of securing a board seat at its annual general meeting last November.
Mr Fu secured 48.3 per cent of the vote despite being virtually unknown to management.
Mr Hartwig said Northern Minerals had held discussions with two small shareholders who were nominated by Mr Fu and understood their interest in the company.
“As Mr Fu’s nomination was unsuccessful, we have not seen the need to make further enquiries,” he said.
Dr Chalmers is now poised to intervene at Northern Minerals for a third time. His first act was to prevent Singapore-registered Yuxiao Fund boosting its stake to 19.9 per cent.
Northern Minerals’ former executive chairman Nick Curtis later raised concerns about trading in the company’s shares around the time Yuxiao signed an agreement with two Chinese companies – China Northern and Shanghai-listed Shenghe Resources.
Yuxiao, led by Chinese businessman Wu Tao, then targeted Mr Curtis. Yuxiao requisitioned a meeting in an attempt to dump Mr Curtis and give it access to the company’s books.
But Mr Curtis resigned on May 27 last year and seven days later, Dr Chalmers ordered Yuxiao, Black Stone Resources Limited, Indian Ocean International Shipping and Service Company, Ms Ximei Liu and Mr Xi Wang to divest their shares.
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