Australia’s awkward relationship with China took a turn for worse earlier today when the country’s Treasurer Jim Chalmers removed the voting rights of three Chinese investors in an Australian rare earth mining company.
The unprecedented action is the latest and most aggressive move by Chalmers who has been trying for three years to force the Chinese investors to sell their interests in Northern Minerals on national security grounds.
Hong Kong Ying Tak, Real International Resources, and Qogir Trading & Service have amassed a 17.6% interest in Northern which is developing the Browns Range rare earth project in the remote Kimberley region of Western Australia.
A potentially rich source high value metals such as dysprosium and terbium used in a range of modern military and civil technologies Browns Range is expected to become a competitor with Chinese producers who dominate global supply.
Northern has been working with U.S. interests to fund the mine and indirectly with Japanese interests to process and market the finished product, a combination which has annoyed the Chinese Government which has been using rare earths as a trade weapon.
Defied Sell Orders
Chalmers said in a statement filed at the Australian Stock Exchange that the three Chinese companies had defied earlier orders under Australia’s Foreign Acquisitions and Takeovers Act to sell their Northern shares.
Because no Northern shares appear to been sold, he has now stripped the owners of most rights except the right to sell.
“We expect foreign companies investing in Australia to comply with Australia’s laws,” Chalmers said.
“We’ll do what’s necessary to protect the national interest and the integrity of our foreign investment framework.”
China is likely to respond loudly to the removal of voting rights held by the three companies having previously defended their position.
In May, after Chalmers refreshed an order for the disposal of shares in Northern, a Chinese Foreign Ministry spokesman said Australia should respect the legitimate rights and interests of Chinese investors and provide a non-discriminatory environment for foreign investors.
Second Rare Earth Case Brewing
The Northen case is an example of China trying to prevent the expansion of competition against its dominate position in the global rare earth industry, with a second Australian dispute also starting to develop.
Control of the Yangibana rare earth project, also located in Western Australia, could soon change hands with its 60% owner, iron ore billionaire Andrew Forrest, reportedly seeking to sell.
Chinese interests are a logical buyer of Forrest’s stake in Hastings, possibly setting up a second showdown with Chalmers under Australian national interest law.