Australian Treasurer Jim Chalmers on Sunday ordered a Chinese investment fund to sell off shares of Northern Minerals, a Sydney-based rare earths mining company considered vital to Australian national interests.
“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,” a spokesman for Chalmers said on Monday.
“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,” the spokesman added.
Chalmers issued a disposal order — an instruction to sell stocks — to an investment company called the Yuxiao Fund. The fund was given 60 days to sell the 80 million shares of Northern Minerals it purchased in September. The shares represent about 10.4 percent of Northern Minerals’ total capital.
Treasurer of Australia Jim Chalmers (Tracey Nearmy/Getty Images)
The Yuxiao Fund, registered in Singapore, is controlled by a Chinese investor named Yuxiao Wu and a businessman named Wu Tao. The fund is associated with several other conglomerates and two other Chinese nationals named Xi Wang and Ximei Liu, all of whom were also ordered to dispose of their shares in Northern Minerals.
The Yuxiao Fund has been pushing very hard to gain control of Northern Minerals, which is developing heavy rare earths mining projects in Western Australia. The company’s Browns Range mines will supply a massive rare earths refinery under construction in Western Australia that has already received $665 million in funding pledges from the Australian government and could be given even more.
China has a crushing grip on the rare earths industry, whose products are vital to green energy products like electric vehicle batteries and solar panels. The Chinese Communist Party has placed a high priority on preserving its near-monopoly on rare earths supplies.
The U.S. government has also increased funding for rare earths projects to break China’s stranglehold and develop a “mine-to-magnet” domestic supply chain, as the Department of Defense (DOD) pithily calls it. This initiative is explicitly intended to develop “resilient supply chains” to replace “overseas, single-points-of-failure” chains for defense-critical products.
Chalmers has previously blocked Yuxiao from attempting to double its position in Northern Minerals to nearly 20 percent, but Sunday was the first time he ordered the disposal of shares that have already been purchased.
In November, Northern Minerals rejected an attempt by Yuxiao to gain access to its accounting ledgers and marketing contracts. The company also accused Yuxiao and its associates of plotting to remove its executive chairman, Nick Curtis, who was resisting the Chinese takeover attempt.
Curtis filed a complaint with Australia’s Foreign Investment Review Board (FIRB), asking it to investigate Yuxiao for using associates and proxies to buy up stock and surreptitiously establish a heavy stake in Northern Minerals, even though Chalmers had expressly limited Yuxiao to owning no more than 9.98 percent.
Curtis resigned as executive chairman of Northern Minerals on May 27, becoming a “strategic advisor” instead. He evidently stepped down because Yuxiao used its current 9.8-percent stake in the company to convene a shareholders’ meeting, where it would push for Curtis to be sacked. The shareholder meeting, originally scheduled for June 6, was canceled after Curtis stepped down.
Curtis’s replacement was Adam Handley, former non-executive director of the company — and former president of the Australia China Business Council, where he specialized in developing relationships between Australian businessmen and “North Asian investors.”
These maneuvers were apparently the last straw for Chalmers, who performed the regulatory equivalent of kicking over the game table and sending Monopoly pieces flying in all directions by ordering the foreign interests jockeying for control of Northern Minerals to sell their shares. Chalmers had been threatening to take such dramatic action ever since Curtis requested the FIRB investigation in November.
Some Australian mining executives are skeptical that the government can keep China from financing and ultimately controlling the rare earths industry. Arcadium Lithium chairman Peter Coleman told the Australian Financial Review in May that Chinese investment is indispensable for major critical minerals projects, even though the U.S. has threatened to cut off its own subsidies for Australian rare earths if Chinese money flows in.
