China-linked investors defy divestment order in Northern Minerals dispute

China-linked investors in Australian rare earths company Northern Minerals have not complied with a federal order to sell their stakes, according to a company update released five days after the deadline passed. The dispute centres on the Browns Range project in Western Australia's east Kimberley region, a heavy rare earths development seen as strategically important because of the minerals it contains. The latest disclosure adds a new stage to a long-running contest over foreign ownership and control of a critical minerals asset.

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Treasurer Jim Chalmers ordered six China-linked investors in May to divest their holdings by July 2 on national interest grounds. Northern Minerals told the Australian Securities Exchange on Tuesday that the investors still held a majority of the 1.68 billion shares they had been told to sell. The six individuals and companies together hold about 17% of the Perth-based company, which is developing Browns Range near Halls Creek.

The project is notable because it contains dysprosium and terbium, two heavy rare earths used in high-performance magnets. Those magnets are used in advanced military hardware such as fighter jets and missiles, as well as in electric vehicles and wind turbines. An industry expert described the government's three-year struggle with the shareholders as extraordinary, and said compliance may be difficult to secure.

The same expert said the federal government could seek to enforce the orders through the Federal Court. The case matters because heavy rare earths are a strategic input in advanced manufacturing and defence supply chains. Australia has been trying to build a larger role in critical minerals production as governments and companies look for alternatives to concentrated supply chains.

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In that context, control over Browns Range has become more than a corporate dispute, touching on national security, industrial policy and the pace of new mine development. The conflict has been unfolding for years. In 2023, the treasurer blocked a China-linked investment fund from increasing its stake in Northern Minerals, and later ordered five additional China-linked investors to reduce their holdings.

The latest deadline passed on July 2, but the company's disclosure suggests the order has still not been carried out. That leaves the government with the question of how far it is prepared to go to enforce divestment in a sector it regards as sensitive. What happens next is unclear, including whether the treasurer will pursue court action and whether the investors will eventually sell.

It is also not known how quickly any enforcement process could move or what effect the dispute may have on the Browns Range project itself. For now, the case remains a test of Australia's willingness to use national interest powers in the critical minerals sector and of how effective those powers are when investors resist.

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