News: ILU UPDATE 1-Australia orders Chinese investors to sell down stake in rare earths miner

(Adds detail, no comments in paragraph 6, 11-14)

Australian Treasurer Jim Chalmers has ordered several China-linked investors to dispose of shares in rare earths miner Northern Minerals (NTU) on national interest grounds, a spokesperson said on Monday.

Northern Minerals is developing the Browns Range heavy rare earths project in Western Australia, at a time when the sector has become increasingly strategic for its uses in green energy and defence.

A disposal order issued by Chalmers on Sunday said Yuxiao Fund had 60 days to dispose of 80 million shares it bought in September. Yuxiao Fund is the Singapore-registered private investment vehicle of Chinese national Wu Yuxiao, Reuters has previously reported.

The fund had sought Foreign Investment Review Board (FIRB) approval to raise its ownership to 19.9% in 2022, from 9.81% of Northern Minerals, but was declined last year.

Northern Minerals, which had no immediate comment, has said the fund was controlled by Wu Tao, the chairman of mainland China-based Jinan Yuxiao Group.

Other foreign shareholders ordered to dispose of shares within 60 days include Ximei Liu, Xi Wang, and Black Stone Resources, the notice said.

"The Treasurer has issued orders that Yuxiao Fund Pte Ltd and four associates reduce their shareholdings in Northern Minerals," a spokesperson for Chalmers said in a statement on Monday.

"The decision, based on advice from the Foreign Investment Review Board, is designed to protect our national interest and ensure compliance with our foreign investment framework."

Browns Range has been cited as a potential source of feed for Iluka Resources' (ILU) Eneabba rare earths refinery under construction in Western Australia, which already has a A$1 billion($665.10 million) funding pledge from the Australian government and is waiting on a decision for more.

Australia has said it is looking for friendly nations to build out its critical minerals industry as the West diversifies away from dominant producer China.

Last week Northern Minerals Chairman Nick Curtis exited the company's board. Curtis declined to comment. Shares in Northern Minerals were little changed at A$0.035. The company's annual general meeting is on June 6.

Canberra screens foreign investment in key sectors for national security, including critical minerals, and has blocked some Chinese deals which has irked Beijing. Australia is preparing for a visit by Chinese Premier Li Qiang later this month.

Chinese Foreign Minister Wang Yi said on a visit in March that he hoped Australia would ensure its market environment was not discriminatory to Chinese business.

Chalmers' spokesperson said Australia's foreign investment framework did not discriminate against any nation.

($1 = 1.5035 Australian dollars)