Authorities seized 13,715 tonnes of ore and arrested six individuals, including the chairman of a domestic rare earth mining company, over alleged violations of mining regulations.
Luu Anh Tuan, chairman of Vietnam Rare Earth JSC (VTRE), has been accused of forging value-added tax receipts related to his company's projects in Dong Pao, an area in northern Vietnam that is estimated to contain 7 million tonnes of ore grading 5% rare earth oxides (REO).
Local newspaper VNexpress reported that investigators allege Tuan and deputy chief executive Nguyen Van Chinh earned VND632 billion (US$25.77 million) from the illegal mining of 11,000 tons of rare earth and 152,000 tons of iron ore
The arrests of Tuan, Chinh and four others have thrown a shadow over the government's plan to auction new mining concessions later this year at Dong Pao, which is potentially one of the largest rare earth mines in the world. VTRE was expected to be a key bidder.
The crackdown also dents Hanoi's recent efforts to capitalise on the country's mineral wealth. Vietnam has an estimated 22m t of reserves of rare earths, second only to China, according to the United States Geological Survey (USGS).
Vietnam plans to increase its output to two million tons per year by 2030. Last year its output rose to 4,300 tons, from just 400 tons in 2021, according to the USGS.
The country in July approved the National Mineral Master Plan, which outlines the country's strategy for developing its mineral resources, including critical minerals. The plan identifies several critical minerals including rare earth elements, tungsten, and graphite.
Other initiatives underway include the establishment of a national rare earth research and development center, of financial incentives for companies to invest in critical minerals projects and a streamlining of the permitting process for critical minerals projects.
US President Joe Biden also used a visit to the Southeast Asian country to secure cooperation on helping Hanoi to quantify and develop its rare earth resources.
Troubled past
The corruption scandal has also been felt in Australia. Blackstone Minerals, which was reportedly considering a US$100 million investment in the Dong Pao project earlier this year, confirmed on Monday that it "is not part of and has no involvement in any investigation relating to Mr Tuan".
"The Company confirms that it remains committed and will continue to prepare for a potential auction of concessions in Dong Pao, when the Vietnamese Government decides to proceed. Blackstone has the requisite skills, capability and local footprint to be competitive in an auction process", read the company statement.
Blackstone Minerals' Managing Director, Scott Williamson, commented:"Vietnam has the potential to be a significant contributor to the global rare earth supply chain and Blackstone remains committed to helping Vietnam realise this ambition."
Blackstone Minerals and Australian Strategic Materials in July signed a non-binding agreement with VTRE for securing rare-earth element opportunities in Vietnam. ASM's share price fell 7% on Monday following the news of the arrests.
Despite the government's plans to develop a domestic critical minerals industry, internal and external investors face a legacy of corruption and environmental in the fledgling Vietnamese mining industry, and Dong Pao is an apt example.
The Dong Pao mine has been operated by a number of different companies in recent years and researchers found evidence in 2021 of serious environmental issues - including radiation contamination - among nearby populations.
