Canada has for the first time blocked a sale of stockpiled rare earth elements mined in its far north to a firm in China, which dominates the sector, a senior government source said Tuesday.

But more such interventions could follow as Ottawa "cracks down on Chinese investment in Canada's mining sector," the official told AFP on condition of anonymity as they were not authorized to speak publicly on the matter.

Australia's Vital Metals was planning to sell the minerals to China's Shenghe Resources, but Resources Minister Jonathan Wilkinson "stepped in to facilitate a deal so that the materials could stay in Canada," the source said.

The stockpile was sold instead for Can$3 million (US$2.2 million) to the Saskatchewan Research Council, which is constructing processing facilities.

Canada views critical minerals as a matter of national security and a key part of its strategy to decarbonize its economy.

Rare earth elements and other critical minerals such as lithium, cadmium, nickel and cobalt are essential components in electric vehicle batteries, wind turbines and other technologies.

Investment and export restrictions were imposed targeting primarily China, which dominates the critical minerals sector, while billions of dollars in government incentives have aimed to hasten local mining and the construction of new battery plants, for example.

In a statement, Wilkinson's office said Canada is "taking steps to develop secure domestic critical minerals value chains to reduce foreign reliance."

"When it comes to financing questions from mining companies operating in Canada, the answer cannot simply be investment from Chinese state-owned industries," it said.

Industry Minister François-Philippe Champagne in 2022 ordered three Chinese resource companies to sell their stakes in Canadian critical mineral firms, after tightening investment rules.

Earlier this year, Montreal-based SRG Mining touted a plan to redomicile to the United Arab Emirates to avoid Canadian scrutiny of a deal to sell a nearly 20 percent stake of the company to a Chinese firm.

But it backed off the deal with Carbon One New Energy Group in March after a warning by Champagne not to seek to skirt the Canadian rules.

Vital Metals' stockpile from its Nechalacho mine in the Northwest Territories was to have been processed at a planned facility of its own in Saskatchewan, but construction of the plant was halted after the company's Canadian unit filed for bankruptcy.