Northern Minerals’ Chinese investors in breach of Treasurer’s order
China-linked investors are defying orders from the Albanese government to sell shares in Northern Minerals’ strategically important rare earths project.
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China-linked investors are defying orders from the Albanese government to sell shares in a strategically important rare earths project in Western Australia.
Project owner Northern Minerals revealed the breach of a divestment order issued by Treasurer Jim Chalmers in a half-year report that showed the company on shaky ground despite years of hype about its Browns Range heavy rare earths project.
Dr Chalmers ordered five entities, suspected of having links with China, to divest shares in Northern Minerals by September 2 last year.
Seven months on, at least one of the entities is in breach of the order.
The Australian reported on Monday that Dr Chalmers faced the prospect of having to intervene for a third time in the affairs of Northern Minerals, which is trying to secure taxpayer funding to develop Browns Range.
The company said on Friday that it was up to the Foreign Investment Review Board to enforce the Treasurer’s orders.
Northern Minerals reported a first-half loss of almost $15m 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.
Some 146.2 million shares in Northern Minerals remain un-divested in defiance of the Treasurer’s orders.
The shares in question are worth just over $2.9m with Northern Minerals stock trading at a near five-year low of 2 cents.
A government spokesman said Treasury was monitoring this situation closely.
“All allegations of breaches of foreign investment laws are taken extremely seriously,” the spokesman said.
The divestment order handed down last year marked the second time Dr Chalmers had acted to stop Chinese interests gaining control of Northern Minerals.
Criminal offences and civil penalties apply for non‑compliance with orders issued by the Treasurer under Australia’s foreign investment framework.
Imposing any such penalties may prove difficult given Northern Minerals appears to have great difficulty finding out information about some big investors and has numerous Chinese names on its register.
The Australian reported on Monday that unresolved issues around the Chinese investors remained a barrier to Northern Minerals securing funding it is seeking from the Northern Australia Infrastructure Facility and Export Finance Australia, and that FIRB was continuing to scrunitise the company.
Northern Minerals managing director Shane Hartwig said late on Friday that the company was committed to becoming part of an Australia-based rare earths supply chain, and continued to work Australian government agencies in a transparent and open manner.
“The company is aware the profile of its larger shareholders will be one of the items that NAIF and EFA will review as part of their standard diligence processes. The next stage of engagement with these agencies is the provision of the feasibility study for the Browns Range project once completed.
“The company notes that changes to its share register are likely given the requirement for additional equity to fund the development.”
The Northern Minerals annual general meeting last November saw a mystery Chinese businessman comeclose securing a seat on the board.
The company also revealed at the meeting that it had been unable to contact a Hong Kong-registered entity that became a major shareholder in the wake of the divestment order.
Northern Minerals had until late on Friday declined to speak to The Australian or respond to a series of questions about whether it had been able to shed any more light on board nominee Enping Fu or Hong Kong-registered companies Qogir Trading & Service and Hong Kong Ying Tak, which each control about 8.4 per cent of Northern Minerals.
Mr Hartwig attempted to air the air on Mr Fu’s board nomination and other matter post the release of the half-year results.
“Mr Fu was nominated by two smaller shareholders. We understood that Mr Fu was the chief financial officer of one of these shareholders. The company has had discussions with both shareholders to understand their interest in Northern Minerals,” he said.
“As Mr Fu’s nomination was unsuccessful, we have not seen the need to make further enquiries.”
Mr Fu received the support of 48.3 per cent of shareholders despite being virtually unknown to Northern Minerals management.
On Qogir Trading & Service, Mr Hartwig said: “Any entity that is compliant with Australia’s foreign investment regime is able to invest in Northern Minerals. Northern Minerals does not comment on its engagements with individual shareholders. However, the Company has made clear that it will take necessary and appropriate action should it be concerned about any shareholder, as the board did by referring the Yuxiao shareholding to FIRB.”
Browns Range is touted as an important source of dysprosium and terbium, which are essential for modern weapons systems, and figures prominently in what has been described as a partnership between the government and Iluka to build Australia’s first fully integrated rare earths refinery at Eneabba in WA.
The Treasurer’s first intervention was to prevent Singapore-registered Yuxiao Fund boosting its stake in Northern Minerals to 19.9 per cent.
Yuxiao was subsequently ordered to divest shares, which it sold to Qogir Trading & Service and Hong Kong Ying Tak, and later took out a full-page advertisement in The Australian to declare it had fully withdrawn from the Australian investment market but remained positive about Chinese-Australian co-operation in critical minerals.
In 2023, then Northern Minerals executive chairman Nick Curtis raised the alarm about suspicious share trading in Northern Minerals and requested an FIRB investigation.
The government has funded the under construction Iluka refinery, intended to supply Western nations with rare earth oxides, to the tune of $1.65bn. Iluka has a stockpile of light rare earths left over from mineral sands mining and in 2022 struck a deal with Northern Minerals to help finance the development of Browns Range through a $15 million convertible note and $5 million share placement.
The deal paved the way for Iluka to eventually end up with a 19.9 per cent stake in Northern Minerals if it tipped in more funding and certain conditions were met.
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