May was a pivotal month for Australia’s bid to become a major player in critical minerals while managing its ties with both China and the United States.
On May 18, Treasurer Jim Chalmers ordered six investors with links to China to divest their holdings in Northern Minerals, the developer of the Browns Range rare‑earths project in Western Australia. A few days later, on May 21, Arafura Rare Earths confirmed its Nolans project in the Northern Territory would proceed after the federal government agreed to buy 500 tonnes from the mine for Australia’s Critical Minerals Strategic Reserve.
Both moves matter for different but related reasons. The divestment order signals a shift in how Australia treats foreign investment in strategic sectors: away from assessing single transactions in isolation toward ongoing scrutiny of foreign influence and ownership. The Arafura decision shows Canberra, in step with Washington, is prepared to underwrite domestic supply to build local capability.
But excluding Chinese capital creates trade‑offs. For the United States, reducing Chinese involvement in sensitive supply chains is a clear national‑security goal. For Australia, the question is whether it can finance, build and operate costly processing facilities and supply chains without Chinese partners, given China’s dominant role in downstream processing and specialized inputs.
Browns Range is especially strategic because it contains heavy rare earths such as dysprosium and terbium. These metals are critical for high‑performance permanent magnets used in electric vehicles, offshore wind turbines and advanced defence systems. Northern Minerals’ deposit is one of the few high‑grade heavy rare‑earth assets outside China; the company estimates the mine could meet roughly 8% of global demand once operational.
The six China‑linked investors targeted in the May order hold about 17.6% of Northern Minerals and must sell by July 2. Chalmers said the decision reflected advice from Treasury and the Foreign Investment Review Board and was made to protect the national interest, although he did not detail the specific concerns. Australia’s FIRB advises the treasurer on whether foreign investments are consistent with national interests, and divestment orders are a legal tool that has been used before.
This incident is the latest in a pattern of increasingly strict intervention. In 2023 the treasurer blocked a China‑linked fund from increasing its stake in Northern Minerals; in 2024 he ordered five foreign investors to dispose of holdings, and a 2025 Federal Court case followed after one investor failed to comply. Those actions show Canberra is now looking beyond legal share registers to the reality of influence: who beneficially owns assets, whether investors might shift holdings to related parties when asked to sell, and who effectively controls voting rights and board influence. In short, minority stakes are no longer automatically regarded as low‑risk.
At the same time, competition over critical minerals between the US and China is intensifying. The US and its allies are coordinating to reduce dependence on Chinese processing, which still dominates the market. But allied countries are divided in practice: governments want secure, trusted inputs for defence and industry, yet manufacturers often still rely on lower‑cost, high‑purity Chinese products.
Australia’s policy aims go beyond security. Its Critical Minerals Strategy seeks to capture more processing and value‑adding domestically to create jobs and develop an industrial base rather than remaining a raw materials exporter. That ambition is politically popular, but difficult to deliver: ownership changes do not automatically build processing capacity.
The experience of Lynas, a Perth‑listed firm that in 2025 became the first non‑Chinese company to separate dysprosium and terbium at scale, illustrates the challenge. While Lynas broke China’s technical monopoly on heavy rare‑earth separation, its operations continue to depend heavily on specialized equipment and chemical inputs from China. Beijing’s expanding export controls on rare‑earth minerals, processing chemicals and refining gear increase its leverage and complicate efforts to build fully independent supply chains.
If Australia’s security rules are applied too broadly, they risk raising project costs and deterring foreign capital. Forcing Chinese investors out after deals are done can unsettle other international investors and add uncertainty to capital‑raising for complex, capital‑intensive projects.
Australia sits between two major powers with which it has deep economic and strategic ties. It must weigh the benefit of reducing foreign influence in strategic minerals against the practical difficulty of building processing and industrial capability without access to the full range of equipment, inputs and expertise that currently flows from China. Ensuring supply‑chain security will require more than ownership screens: it needs investment, technology, supportive industrial policy and international partnerships that can substitute for, or reduce reliance on, Chinese inputs.
Marina Yue Zhang is an associate professor of technology and innovation at the University of Technology Sydney. This article is adapted from a piece first published in The Conversation.
