HANOI - Police in Vietnam have arrested six people accused of violating mining regulations, including the chairman of a company at the forefront of a drive to create a rare earth industry that could challenge China's dominance of the sector.

Vietnam's government is planning to auction new mining concessions for rare earths later this year, and officials from at least one company, Vietnam Rare Earth JSC (VTRE), that had been due to bid were among those arrested.

VTRE's chairman, Luu Anh Tuan, was accused of forging value added tax receipts in trading rare earths with Thai Duong Group, which operates a mine in the northern Vietnamese province of Yen Bai, the Ministry of Public Security said on Friday.

Calls to Tuan went unanswered on Friday. VTRE's office in Hanoi has been shut for days, one person at the building said.

VTRE has partnered with Australian mining companies Australian Strategic Materials (ASM) and Blackstone Minerals LTD, which were not named in the Vietnamese authorities' investigation.

Blackstone said in September that it had agreed to partner with VTRE to win concessions at the country's biggest mine, Dong Pao in Lai Chau province. A Blackstone executive had told Reuters its investment in the project would amount to about $100 million (S$137 million) should it win the concession.

ASM signed a binding agreement in April with VTRE for the purchase of 100 tons of processed rare earths this year, and committed to negotiating a longer-term supply deal.

Neither Blackstone or ASM responded to a request for comment on whether their agreements with VTRE would be affected by the arrest of its chairman.

Blackstone shares fell more than 8per cent on Friday, while ASM shares value remained stable. The reason for the fall in Blackstone shares was unclear.

Vietnam has the second-largest deposits of the critical minerals - used in making electric cars and wind turbines - after China, according to United States Geological Survey estimates.

Last month, Reuters reported details of the Southeast Asian nation's ambitious plans to boost its rare earth industry, raising annual output to 60,000 tons of rare earths oxides by the end of this decade from 4,300 tons in 2022.

Illegal sales

The chairman of Thai Duong Group, Doan Van Huan, was also arrested, accused of making 632 billion dong from illegal sales of ore extracted from the mine his company operated in Yen Bai province.

Police temporarily seized 13,715 tons of rare earths ores in a raid on Thai Duong's premises, the ministry statement said.

Calls to Thai Duong Group went unanswered on Friday.

The government statement did not clarify what made the sales illegal, but a person with direct knowledge of the matter said that the Yen Bai mine raw ores had been exported to China, as the domestic refining costs for those ores were unprofitable.

Under Vietnamese rules, export of raw ores is largely restricted, as the country wants to boost its refining capacity.

The authorities have also intensified a clampdown on illegal rare earth mining from neglected or abandoned pits in recent months.

Source: Reuters