Australia blocks Chinese investment in rare earth firm citing national interest -executive (updated)

Northern Minerals

28/02/2023 06:30

(Updates with context on Australia-China relationship)
    By Kirsty Needham
       SYDNEY, Feb 28 (Reuters) - Northern Minerals Ltd
 NTU.AX  on Tuesday said Australia's government has blocked the
heavy rare earths producer's largest shareholder, China's Yuxiao
Fund, from increasing its investment on grounds of national
interest.
    Yuxiao Fund sought Foreign Investment Review Board approval
in August to raise its ownership to 19.9% from 9.92%. A
government register showed Treasurer Jim Chalmers signed a
prevention order on Feb. 15.
    The Singapore-registered fund is an investment vehicle of
Chinese national Yuxiao Wu, who also owns miners in Mozambique
supplying lower-grade rare earths to China, Northern Minerals
Executive Chairman Nick Curtis told Reuters.
    "There is a special category of assets for any government to
protect its national interest," Curtis said.
    The Yuxiao Fund could not be reached for comment. The
Australian Treasurer's office, which would be responsible for
blocking such an investment based on the advice of the review
board, declined to comment.
    China has criticised Australia for previously blocking
Chinese investment on national security grounds, saying this
contributed to a years-long diplomatic freeze.
    Relations between the two countries are improving after
years of strained ties, although Chinese "trade blockages" on
Australian exports remain in place.
    In November, Chalmers said Australia, which is the world's
top lithium supplier and a major producer of rare earths, would
become more selective about who it lets invest in its critical
minerals industry. 
    When asked about Chinese investment in the sector, Prime
Minister Anthony Albanese said last week his government would
consider the merits of any deal, but favoured using rare earths
and other critical minerals to make batteries in Australia.
    Wu invested in Northern Minerals for financial reasons, not
to supply China, and voted in favour of an exclusive supply deal
with Australia's Iluka Resources Ltd  ILU.AX  last year, Curtis
said.
    Northern Minerals said it planned to become the first
significant world producer of dysprosium outside China, which
controls 94% of supply. Dysprosium is a key component for
magnets for electric vehicles.
    "Our material is needed for the magnet supply chain," said
Curtis, adding this was the likely reason the increased
investment by a Chinese investor was blocked.
    Northern Minerals second-largest shareholder is also
Chinese, although Chinese citizens or high net worth Australian
citizens of Chinese background hold less than 30% of shares, he
said.
    The vice president of the Australia China Business Council, 
Adam Handley, became a director in December.


 (Reporting by Kirsty Needham; Editing by Christopher Cushing,
Robert Birsel)
 ((Kirsty.Needham@thomsonreuters.com;))