China dominates global production and supply of rare earths, and Western governments, including Australia’s, are scrambling to build local refining capacity and protect their supply chains.

The Albanese government’s May budget allocated $7 billion to a critical minerals production tax incentive to underpin 10 per cent of processing and refining costs for 31 critical minerals.

Chalmers’ order on Monday requires Tao’s fund and four of his associates to significantly reduce their shareholdings in Northern Minerals, and is the first divestment notice the treasurer has made after more than two years in the job.

“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,” Chalmers said.

“Australia operates a robust and non-discriminatory foreign investment framework, and will take further action if required to protect our national interest in relation to this matter,” he said.

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Tao was previously blocked by the treasurer in February last year from increasing his holding in Northern Minerals to 19.9 per cent, acting on FIRB advice.

The Chinese businessman is also seeking election to the board of Northern Minerals at its annual general meeting on June 6, a desire that may be frustrated by other shareholders after the divestment order.

Curtis asked the FIRB in October last year to probe concerning purchases of Northern’s shares around the time Tao’s Yuxiao signed a co-operation agreement with China Northern and Shanghai-listed Shenghe Resources in front of a host of Communist Party officials, the Financial Review has previously reported.

Northern Minerals’ board said in a statement to the ASX that it co-operated fully with the FIRB’s investigation but “was not – nor should have been – involved in determining the final outcome of FIRB’s deliberations or the treasurer’s order made today”.

The order has no impact on Northern Minerals’ strategy to develop its 100 per cent-owned, globally significant Browns Range heavy rare earths project in Western Australia and supply xenotime concentrate to ASX-listed Iluka Resources’ under-construction rare earths refinery, it said.

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