Federal Government means business over critical metals, blocks Chinese investment in Northern Minerals

Australia’s federal treasurer Josh Frydenberg has banned a Chinese rare earth giant investing $20 million in Northern Minerals’ (ASX: NTU) advanced Australian project that is set to break China’s monopoly over critical minerals dysprosium and terbium.

Northern Minerals has been told by Baogang Group Investments this week that it had received an order from Mr Frydenberg prohibiting their investment in the miner.

Baogang is a subsidiary of a Chinese state-owned corporation with operations including the vast Baotou rare earth mine based in Inner Mongolia, which is China’s largest rare earth producer.

This investment prohibition sends a signal to the world that Australia is serious about its announced intention to work closely with the United States to help Washington source new supplies of critical metals and reduce American dependence on China.

Northern Minerals operates the Browns Range mine located near Halls Creek in the east Kimberley.

The project has a pilot plant that has been separating rare earths and produced small quantities of dysprosium. That plant is now on care and maintenance due to the COVID-19 emergency.

Dysprosium is vital to the magnets used in electric vehicles. Terbium is used on phosphors needed for television and computer screens and fluorescent lamps.

China now produces 98% of global dysprosium, and more than 85% of the 17 rare earths as a group.

Government working with US over rare earths

Australia’s Federal Government last year announced it was looking to secure supplies of critical minerals.

Former federal resources minister Matt Canavan led a delegation to Washington late last year to work with the US Government and Defence Department to ensure that the American military had sources outside China for the minerals needed in so many of its applications and equipment.

When the US President Donald Trump’s administration set this policy in train last year, its list of priority metals began with dysprosium and terbium.

Australian federal defence minister Linda Reynolds in December underlined the government’s intentions in a speech to the New World Metals Conference.

“I believe this is a pivotal moment in the history of critical minerals and rare earths in the industry, both here and also globally,” she said.

While seeing it as an opportunity to boost Australian industry, such a program was also vital to Australia’s defence capabilities and those of its allies.

Senator Reynolds left no one in doubt as to what country concerned her.

“The key vulnerability to this industry is the dominance of a single nation across the production and supply chains,” she said.

“That is our critical vulnerability — a single nation dominates that supply chain.”

Northern Minerals now seeks other investors

Northern Minerals managing director George Bauk told Small Caps that the company had not been involved in discussions with the federal government.

Baogang itself had made application to the Foreign Investment Review Board. The Baogang plan when announced last August had been for a placement at $0.062 per share.

Northern Minerals has now entered into a number of subscription agreements with “sophisticated investors” to raise $22 million at $0.02 per share, with the $9 million first tranche to be completed this week.

Mr Bauk said the pilot plant had been producing enough dysprosium to meet initial US demand.