· In short: Jim Chalmers has ordered five international companies linked to China to divest their shares in an Australian heavy rare earths project.

· It comes after after suspicions of share trading amongst Chinese-linked shareholders were referred to the Foreign Investment Review Board.

· What's next? Northern Minerals aims to become the first substantial producer of dysprosium in Australia.

The federal treasurer has ordered five international companies linked to China to divest their shares in a strategically crucial Australian heavy rare earths project, following advice from the Foreign Investment Review Board (FIRB).

Jim Chalmers told Yuxiao Fund — and four other international companies linked to China — to divest their shares in Northern Minerals Limited which operates the Browns Range mine in Western Australia's east Kimberley.

The company wants to become the first substantial producer of dysprosium — a key component used in electric vehicles — outside of China.

In a statement, the treasurer said he ordered the five companies to sell their shares, totalling 10.4 per cent of the issued capital of Northern Minerals Limited "to protect our national interest."

"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," the statement said.

Fund's reported connections to China

The treasurer last year signed an order blocking Singapore-registered Yuxiao Fund from nearly doubling its stake in Northern Minerals Limited after the FIRB recommended the application be turned down.

Last year, Reuters reported Northern Minerals then-executive chairman Nick Curtis said the Singapore-registered fund was an investment vehicle for Chinese national Yuxiao Wu.

Reuters reported that Yuxiao Wu owned miners in Mozambique which supplied lower-grade rare earths to China.

Rare earths are also a critical part of modern military technology and are used in communication equipment, stealth technology and precision-guided weapons.

The ABC has been unable to reach Yuxiao Fund. Northern Minerals did not respond to the ABC's request for comment.

The Northern Minerals board of directors issued a statement to the ASX.

"The Treasurer has concluded that the acquisition of the relevant shares was inconsistent with the requirements of the Foreign Acquisitions and Takeovers Act 1975 and the previous prohibition order made by the Treasurer," the statement said.

The company is soon expected to release the findings of a feasibility study showing the cost of building a dysprosium processing plant is likely to be up to $300 million.