Regulator to Probe Chinese Firm’s Covert Attempt to Control Rare Earth Miner

Worker with car batteries in Nanjing, China, on March 12, 2021. STR/AFP via Getty Images

Australia’s foreign investment regulator has been called in to probe the proposed appointment of a Chinese national to the board of a rare earth miner over concerns it could run foul of the country’s strategic interests.

Wu Tao was nominated as a prospective board member to Northern Minerals, which runs the Browns Range mine in Western Australia, and aims to become one of the world’s largest producers of dysprosium outside of China.

Dysprosium is a rare earth mineral used in microwaves and nuclear control rods.

The production of rare earth and critical minerals has become a major concern for democratic governments amid increasing competition and aggression from the Chinese Communist Party (CCP), which is estimated to control around 70 percent of global supply chains.

Concerns centre on the CCP potentially cutting off the supply of such minerals globally, triggering mass shortages and crippling the manufacturing of important goods. Critical minerals and rare earths are used across a wide array of technologies including smartphones, jet fighters, rechargeable batteries, EVs, and semiconductors.

The Deal in Question

On Oct. 30, directors at Northern Minerals delayed its annual general meeting and notified the Foreign Investment Review Board (FIRB) to investigate the proposed board membership of Mr. Wu.

Mr. Wu was nominated as one of three candidates to join the board, and is also the “ultimate controller” of the Yuxiao Fund, according to Northern Mineral’s investor update.

Yuxiao owns 9.81 percent of Northern Minerals, however, on Feb. 15, the federal Treasurer Jim Chalmers blocked an attempt by the fund to increase its stake in the company by an additional 9.92 percent.

The treasurer’s order also limits Yuxiao from ever owning a stake greater than 9.98 percent.

“I made that decision based on the advice of the Foreign Investment Review Board and consistent with other decisions taken by other governments in the past,” Mr. Chalmers said. “Beyond that, I don’t intend to comment.”

In 2020, former Treasurer Josh Frydenberg blocked an earlier $20 million bid from Chinese-based Baogong Group Investment in the same miner, citing concerns over preserving Australia’s national interest.

This time, Northern Minerals was wary Mr. Wu’s ascension could place Yuxiao in a “position to exert a direct influence” on the “central management and control of the company.”

“The board concluded that, in the circumstances, it would be appropriate for Yuxiao Fund to apply to the Foreign Investment Review Board (FIRB) to seek approval for Mr. Wu’s appointment.

“As at the date of this announcement, the company has not received any confirmation from Mr. Wu that Yuxiao Fund intends to seek such approval,” according to the update (pdf).

“The company stresses that no views have yet been formed on whether any of the above matters do, in fact, give rise to any breaches of the Prohibition Order [from Treasurer Chalmers] or of any Australian law.”

The incident comes as Prime Minister Anthony Albanese prepares to visit Chinese leader Xi Jinping in the coming week.

Mr. Albanese’s visit comes amid a “thawing” of relations between Canberra and Beijing.

Since the Labor government won power in 2022, Beijing has removed tariffs on Australian barley, removed a block on Chinese tourists from travelling Down Under, met with Australian ministers for the first time in years, and released Chinese-Australian reporter Cheng Lei from illegal detention.

Most recently, the Department of the Prime Minister and Cabinet decided against cancelling a 99-year lease on the Port of Darwin in northern Australia, citing advice from several government departments that the Chinese-linked Landbridge—which holds the lease—posed no major security risk.

Former Defence Minister Kevin Andrews called the move a “grave mistake,” noting the federal government did have the authority to terminate the lease.

“It is well established that the CCP regards all companies and institutions in China with both a civil and military purpose. The fact that this decision has been released in the weeks before the prime minister visits Beijing raises legitimate questions,” he wrote in The Epoch Times.