Canberra has taken a significant step in reshaping its critical minerals strategy, ordering six investors with ties to China to divest their holdings in Northern Minerals, an Australian rare earths developer. Treasurer Jim Chalmers announced the decision on May 18, giving the investors until July 2 to sell their combined 17.58% stake in the company, which is advancing the Browns Range project in Western Australia.
Three days later, the federal government committed to purchasing 500 tonnes of rare earths from Arafura Rare Earths' Nolans mine in the Northern Territory, a project that will now proceed with state backing. The moves underscore Australia's ambition to become a critical minerals powerhouse while navigating its deep economic ties with China and security alignment with the United States.
Shifting Investment Scrutiny
The divestment order signals a broader shift in Australia's foreign investment screening. Rather than vetting transactions individually, Canberra is now conducting ongoing surveillance of foreign ownership and influence, particularly in sectors deemed strategically important. The Treasury and the Foreign Investment Review Board advised the decision, which Chalmers said was about protecting the national interest.
This is not the first time the government has acted against Chinese-linked investors in Northern Minerals. In 2023, Chalmers blocked a China-linked fund from expanding its stake. In 2024, he ordered five foreign investors to sell shares, leading to Federal Court action in 2025 after one investor ignored the order. The message is clear: minority stakes are no longer automatically considered low-risk, and the government is scrutinizing beneficial ownership, related-party transfers, and voting rights.
Browns Range is strategically important because it contains heavy rare earths—dysprosium and terbium—essential for high-performance magnets used in electric vehicles, offshore wind turbines, and advanced defense systems. It is one of the few high-grade heavy rare earth deposits outside China, and Northern Minerals estimates it could supply about 8% of global demand once in production.
Building Capability, Not Just Security
However, blocking Chinese investment does not automatically create industrial capability. Lynas Rare Earths, based in Perth, became the first non-Chinese operator to separate dysprosium and terbium at industrial scale in 2025, but its processes rely heavily on Chinese specialized equipment and chemical inputs. Japan's ULVAC is building a rare earth furnace factory to reduce dependence on China, highlighting the broader allied effort to diversify supply chains.
Australia's Critical Minerals Strategy aims to move beyond being the "world's quarry" by developing domestic processing to generate jobs and boost local industry. But supply-chain security cannot be achieved through ownership changes alone. Beijing's expanding export controls on rare earth minerals, processing chemicals, and refining equipment further entrench its leverage.
The US-led alliance faces deeper fissures than appear on the surface. Washington prioritizes secure mineral inputs for defense manufacturing, while industrialized allies in East Asia and Europe want certainty of supply but are reluctant to abandon low-cost, high-purity Chinese inputs. Resource dominance reshapes US strategy toward China, but for Australia, the balancing act is particularly delicate.
Ordering out Chinese investors after transactions have occurred risks unsettling other foreign investors considering Australia. As a country with deep ties to both China and the US, Canberra must protect its own interests without putting either major power offside. The coming months will test whether Australia can build and run expensive rare earths projects without Chinese participation—and whether its strategy of "credentialed commodities" can succeed in a market still dominated by Beijing.
