Australian Government Sues China-Linked Rare Earth Investors

The production of rare earths has long been an environmentally messy business and is now becoming an industry at the centre of enormous geopolitical tension, as Beijing seeks to use its stranglehold on refining and production to leverage better trade deals with Washington.

Chinese investors have been scouring the world for critical mineral deposits for years, including in Australia, where a China-linked firm sought to take control of a rare earths mining company based in Perth two years ago, until officials in Canberra moved to block that from happening.

The fight for control of Northern Minerals has now taken a further twist, with the Federal Government announcing on Thursday it is suing a China-linked company and a former associate over an alleged breach of foreign investment laws in regard to related dealings.

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Northern Minerals has a project in Browns Range, southeast of Hall’s Creek town, in the Tanami region in northwest Australia. The firm said on its website in 2023 that this site was the first significant producer of dysprosium outside of China.

Northern Minerals said it planned to become a significant producer of dysprosium, which is a key component for magnets for electric vehicles – and now greatly in demand.

Indian Ocean International Shipping and Service Company was one of five foreign investors with ties to China subject to an order by Treasurer Jim Chalmers to divest shares on national interest grounds in June last year.

Chalmers said in a statement on Thursday he had lodged a legal action in the Federal Court and was seeking penalties, declarations and costs.

The national treasurer said this was the first such case ever taken in the country.

Alleged breach of foreign investment laws

“Foreign investors in Australia are required to follow Australian law,” Chalmers said. “We are doing what is necessary to protect the national interest and the integrity of our foreign investment framework.”

The statement said the case was the first to be brought by a Treasurer before the Federal Court for an alleged breach of foreign investment laws, but it did not give details of the current stake holdings.

It named Indian Ocean, but did not name the former associate.

Indian Ocean International Shipping and Service Company could not immediately be contacted for comment.

Australia has sought to build a rare earths supply chain to decrease China’s dominance over the elements used in products from smartphones to wind turbines and missiles and radar systems.

Northern Minerals, a supplier of rare earths to a refinery being built by Iluka Resources in Western Australia, became a flashpoint for the contest after Australia blocked Singapore-based Yuxiao Fund from doubling its stake in the company to almost 20% in 2023.

Yuxiao, controlled by Chinese businessman Wu Tao, along with four other entities, including Black Stone Resources of the British Virgin Islands and Indian Ocean International Shipping and Service Company based in the United Arab Emirates, were ordered in 2024 to sell shares worth 10.37% of Northern Minerals’ share capital within three months to unconnected associates.