Northern Minerals Ltd (NTU) on Tuesday said Australia's...

Northern Minerals Ltd (NTU) on Tuesday said Australia's government has blocked the heavy rare earths producer's largest shareholder, China's Yuxiao Fund, from increasing its investment on grounds of national interest.

Yuxiao Fund sought Foreign Investment Review Board approval in August to raise its ownership to 19.9% from 9.92%. A government register showed Treasurer Jim Chalmers signed a prevention order on Feb. 15.

The fund is an investment vehicle of Yuxiao Wu who also owns miners in Mozambique supplying lower-grade rare earths to China, Northern Minerals Executive Chairman Nick Curtis told Reuters.

"There is a special category of assets for any government to protect its national interest," Curtis said.

Wu invested in Northern Minerals for financial reasons, not to supply China, and voted in favour of an exclusive supply deal with Australia's Iluka Resources Ltd (ILU) last year, Curtis said.

Northern Minerals said it plans to become the first significant world producer of dysprosium outside of China. Dysprosium is a key component used in magnets for electric vehicles.

Yuxiao Fund and the Australian Treasurer's office did not immediately respond to requests for comment.