Australian mining dispute highlights global rare earths scramble

A protracted corporate dispute between an Australian mining company and Chinese investors has spotlighted the intensifying global scramble for critical minerals.

A protracted corporate struggle between an Australian mining company and Chinese investors has exposed the intensifying global battle for critical minerals as the United States and its allies seek to diminish Beijing’s control over an industry crucial to the green revolution, Caliber.Az reports, citing foreign media.

The conflict began last year when Northern Minerals, a small Australian miner with ambitions in the rare earths market, needed to raise funds. However, corporate filings and interviews reveal that when the company scrutinized who had purchased its newly issued $16 million in shares, executives grew concerned.

Earlier, the Australian government had blocked a Chinese investor, Wu Tao, who was already Northern Minerals’ largest shareholder, from increasing his stake to 19.9 per cent due to national security concerns. The company now suspected that Wu, a critical minerals magnate, had used proxies to circumvent the order and effectively double his holding.

"We felt that it was appropriate to refer the matter to the government," said Northern Minerals' current executive chairman, Adam Handley, in an interview.

These concerns led to a government investigation, culminating in a June order from the Australian treasurer requiring Wu's company, Yuxiao Fund, and four others to sell $15.5 million worth of shares by early September.

Wu has remained silent on the ruling and did not respond to multiple email requests for comment. When contacted by phone, he curtly said, "I’m very busy, and I don’t need this," before abruptly ending the call.

The case has made headlines in Australia, which last year exported about $100 billion worth of minerals, including iron ore and lithium, to China. However, China also controls a significant portion of the world's supply of rare earth minerals, which are essential for manufacturing products like cellphones and wind turbines, and has dominated their production and refinement for decades.

Countries like Australia and the United States are now striving to reduce their reliance on China for these critical minerals, especially as Beijing has shown a willingness to restrict shipments for political leverage. Northern Minerals is aiming to become one of the first suppliers of dysprosium and terbium—heavy rare earth elements crucial for electric vehicles and fighter jets—outside of China.

However, this goal comes with complications. "We want China as a customer for Australian critical minerals, but we don’t want China actively involved in the Australian critical minerals industry," said Benjamin Herscovitch, a researcher at the Australian National University in Canberra.

Despite their name, rare earths are not actually rare. However, the process of isolating these 17 metallic elements is lengthy and environmentally challenging, a task most countries have historically left to China.

This context makes Northern Minerals’ 2022 agreement with the larger rare earths miner, Iluka Resources, globally significant. The deal involves refining dysprosium and terbium at a $1.1 billion refinery currently under construction in remote Western Australia, backed by an $800 million Australian government loan. Once completed in late 2026, this will be the first fully integrated plant outside China capable of separating both heavy and light rare earths.

The new refinery will secure rare earth access for Australia and its allies, free from the risk of Beijing blocking supply, said Iluka CEO Tom O’Leary. "Western governments understand the existential risk of being completely dependent on China for rare earths," he emphasized.

Rare-earth magnets, essential for electric motors in green technologies like electric vehicles and wind turbines, are also critical for weapons systems, including missiles and fighter jets. Heavy rare earths—named for their greater atomic weight—are crucial for enabling these magnets to function at high temperatures.

In response to the global reliance on China, Lynas, a Perth-based rare earths producer and the largest outside China, is building a Texas refinery with a $258 million grant from the US Department of Defense. The company will also begin producing dysprosium and terbium at its Malaysian plant next year, a move that CEO Amanda Lacaze said would help ensure the United States isn’t "captive" to China for rare earths.

However, as these Western efforts ramp up, so do China’s countermeasures. Beijing has restructured its rare earths industry to tighten control over mining, processing, and exports, noted Marina Zhang, an associate professor at the University of Technology Sydney. This control has driven down prices, making it difficult for non-Chinese companies to launch new rare earth projects, according to O’Leary.

China also exerts influence through less direct means. Lynas’s Malaysian plant and planned Texas refinery have been targeted by pro-China social media misinformation campaigns, according to two studies. While Lacaze acknowledged it’s hard to determine whether Beijing orchestrated the campaigns, she noted it’s "rational" for China to try to maintain its grip on the rare earths market. "When in the history of the global economy has a monopolist willingly given up their market dominance?" she asked.

The Chinese Foreign, Industry, and Commerce ministries did not respond to requests for comment. However, analysts argue these incidents highlight just how crucial Beijing considers its control over the global rare earths industry.

“There is no doubt that China is determined to retain its dominance and maintain its near-monopoly over the rare earths industry. They will go to great lengths to undermine Western efforts to diversify sources and enhance supply chain security,” said Martijn Rasser, a former senior intelligence officer and analyst with the CIA, now managing director of Datenna, an intelligence firm specializing in China.