Canada’s government will buy stockpiled rare earth materials from Vital Metals Ltd. in a deal that prevents the company from selling its production to a Chinese buyer. 

The small Australian firm, which mines rare earths in Canada’s Northwest Territories, will sell its stockpiled rare earth material to the Saskatchewan Research Council for $3 million. The arrangement, facilitated by Canada’s federal government, keeps Vital from moving forward on a plan it started in December to sell that same stockpile to China’s Shenghe Resources Holding Co. for $2.4 million.

Canada recognizes the rare earths mine as a “strategic asset that contributes to the country’s prosperity and critical mineral goals,” Vital Metals said Monday. 

The intervention is part of a wider push to block Chinese firms from delving further into Canada’s critical minerals sector. Prime Minister Justin Trudeau’s government has warned it will closely scrutinize transactions between domestic mining companies and Chinese government-linked firms and only approve deals “on an exceptional basis.” In 2022, it ordered three Chinese investors to sell their stakes in a trio of Canadian lithium firms.

In May, Canadian copper miner Solaris Resources Inc. dropped a financing deal with a Chinese firm after the arrangement was subject to a lengthy national security review from the federal government. 

Vital’s stockpiled material will go toward a rare earths processing facility being built by the Saskatchewan Research Council, which has made similar purchases. The government-run council previously signed an agreement to import rare earth carbonate from Hung Thinh Group, a Vietnamese minerals producer.