Australia's Treasurer Jim Chalmers has taken landmark legal action against a Chinese-linked investor in ASX-linked rare earth miner Northern Minerals (ASX: NTU) for allegedly ignoring a Commonwealth order requiring it to divest its holdings in the stock due to national interest concerns.
In an unprecedented move taken by an Australian treasurer, Chalmers has taken action in the Federal Court of Australia against Indian Ocean International Shipping and Service Company Ltd and an unnamed former associate for not complying with Australia’s foreign investment law.
The government is now seeking penalties, declarations and costs from the UAE-based Indian Ocean International Shipping and Service Company, one of five foreign investors with links to China previously ordered by Chalmers to divest shares in June last year.
“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 five groups, which were reportedly linked to China - ordered by Chalmers in June 2024 to sell around 611 million Northern Mineral shares, contained associates of an investor known as Yuxiao – British Virgin Islands-registered Black Stone Resources, United Arab Emirates-based Indian Ocean International Shipping and Service Company along with investors Ximei Liu and Xi Wang.
The forced sell-down of around 10.4% of the company’s registered value was worth $24 million, as of September 2, 2024.
It’s understood that Chalmers has already stopped the Singapore-based Yuxiao Fund – closely aligned with major Chinese groups including China Northern and Shenghe Resources – from increasing its stake in the miner to 19.9% from 9.81%.
What prompted Chalmers to become the first treasurer to bring a case against a foreign investor - for allegedly breaching foreign investment laws – are the efforts Australia is making to prevent Australia’s rare earths sector from perceived external control.
The government’s response also forms part of a broader recalibration of its foreign investment rules.
This is expected to lead to a tightening of opaque investment structures and the influence of foreign state-linked entities in critical sectors.
Northern Minerals is deemed strategically important in decreasing Australia’s reliance on China's rare earths, which are vital components in defence, renewable energy, and electronics manufacturing.
As a result, the company’s strategic value has become something of a lightning rod for foreign investment attention, especially given China’s 87% global share of processed rare earths.
Northern Minerals’ Browns Range project in Western Australia will supply Australia’s first fully integrated rare earths refinery which is being built by Iluka Resources (ASX: ILU) with a $1.25 billion government loan.
Northern Minerals is one of the few non-Chinese producers of dysprosium and terbium, both used in high-performance magnets.
