Rare earth resources Photo: VCG

The Australian government has moved to block the shareholder rights of three China-linked investors in a rare-earth miner, following earlier orders issued in May that forced them to sell their stock – a move that expert criticized as Canberra wielding "national security" as a blunt political instrument to arbitrarily exclude Chinese capital, while undermining its own credibility as a reliable investment destination.

On Tuesday, West Australian rare earth miner Northern Minerals said Treasurer Jim Chalmers had issued orders preventing three investors on its share register from voting or exercising any other rights at future meetings, including the company's postponed annual general meeting, local outlet the Sydney Morning Herald reported.

Northern Minerals said the government had reason to believe that the three investors – Hong Kong Ying Tank, Real International Resources, and Qogir Trading & Service Co.– were among six shareholders that had been ordered to divest their stakes in Northern Minerals in May but had not cooperated.

The latest move comes after Treasurer Chalmers in May ordered six China-linked shareholders to divest their holdings in Northern Minerals, citing so-called security concerns.

A spokesperson for Chalmers claimed that the decision was about protecting Australia's "national interest" and "ensuring compliance with its foreign investment framework," according to an Australian Broadcasting Corp report on May 18.
 
“The core problem is that the Australian government has never publicly specified what concrete, real and verifiable security risks these Chinese investors pose,” Chen Hong, director of the Asia Pacific Studies Centre at East China Normal University, told the Global Times on Wednesday, noting that essentially, it is turning "national security" into a highly flexible political tool, carrying out explicitly nationality-based capital exclusion under the guise of regulation.

From a commercial perspective, Chen said, such practices will significantly damage Australia's institutional credibility regarding foreign investment, prompting Chinese companies and even other international investors to reassess the political risks of investing in Australia.

Northern Minerals' Browns Range project in Western Australia's East Kimberley region sits on Australia's best-known orebodies of dysprosium and terbium, two heavy rare earth elements needed in powerful heat-resistant magnets. The project is in its early stages, according to the Sydney Morning Herald.

For Northern Minerals, forced capital withdrawal may lead to increased legal disputes and financing uncertainties, delay project development, and signal to the market that Australia's so-called welcome to foreign investment comes with political strings attached, Chen noted.

Chen further pointed out that drawing lines along political blocs and forcibly excluding Chinese capital and industrial cooperation will not immediately generate a safe and efficient alternative supply chain; instead, it will only lead to duplicate construction, rising costs, project delays and market fragmentation. 

China's Foreign Ministry said that China opposes the overgeneralization of national security and interference in normal investment, in response to questions related to Australia's order in May for China-linked investments to divest from Northern Minerals.

Australia should respect the legitimate rights and interests of Chinese investors and provide a fair, transparent and non-discriminatory business environment for foreign investment, Chinese Foreign Ministry spokesperson Guo Jiakun said at a routine press conference on May 18.