The Canadian government has “ordered” three Chinese firms to divest their investments in Canada-based critical minerals miners, mostly developing resources outside the country, on national security grounds. The decision follows the introduction of tougher rules on foreign investment in critical mineral industries in October.
“While Canada continues to welcome foreign direct investment (FDI), we will act decisively when investments threaten our national security and our critical minerals supply chains, both at home and abroad,” Francois-Philippe Champagne, Canada’s minister of innovation, science and industry, said in a statement on November 2.
“The federal government is determined to work with Canadian businesses to attract FDI from partners that share our interests and values.”
The federal government is determined to work with Canadian businesses to attract foreign direct investments from partners that share our interests and values.
Questioned over the Canadian government’s announcement, China’s foreign ministry spokesperson, Zhao Lijian, said on November 3 that Canada “overstretched the concept of national security, and placed arbitrary curbs on normal trade and investment cooperation between China and Canadian companies.”
“This is against the principle of market economy, and international economic and trading rules the Canadian side has been talking about ... We call for a fair, just and non-discriminatory environment for Chinese companies doing business in Canada.”
This is against the principle of market economy, and international economic and trading rules.
Chinese mining companies are stepping up efforts to increase their access to lithium deposits in a bid to meet the growing global demand for batteries — the three firms ordered by the Canadian government to divest their interests in local firms are no exception.
Sinomine Rare Metals Resources, a Hong-Kong based subsidiary of Beijing-based Sinomine Resource Group, sealed a C$1.5m ($1.1m) equity financing deal with Power Metals in late 2021, and in early 2022 closed an offtake agreement on all lithium, caesium and tantalum produced from the company’s Case Lake mine under development.
“While we are surprised by Canada’s stance towards Chinese investment into Canada’s critical minerals industry, it clearly shows that they see the opportunity and assets of Power Metals as too valuable for such foreign investment,” Johnathan More, chairman and CEO of Power Metals, said in a statement on November 3.
Chengze Lithium, a fully owned subsidiary of Chengxin Lithium, one of China’s largest lithium producers, was ordered to divest the 19.86% stake in Canada-based Lithium Chile it acquired at the beginning of the year.
“The assets operated by the company are not Canadian assets, nor is the company’s significant lithium resource,” Lithium Chile, whose deposits are located in Chile and Argentina, noted in a statement on November 7.
Similarly, Zangge Mining committed a total of $50m for a 65% stake in Ultra Argentina, the subsidiary of Canada-based Ultra Lithium developing the Laguna Verde Project lithium mine in Argentina, in June.
“The board of directors and management of the company are very surprised at Canada’s policy against Chinese investment in Canada’s lithium projects, and believe that the announcement has been detrimental to the company’s many Canadian shareholders,” Ultra Mining said in a statement on November 4.
Chinese companies have invested more than $4bn in overseas lithium projects since 2021, with more than $1bn of this for Canadian companies, according to Benchmark Mineral Intelligence.
“Those three projects are still under early stage explorations, which means so far we have limited knowledge about how much lithium those projects can actually deliver in the future,” says Susan Zou, senior analyst at Rystad Energy.
“This also means, even if the divestiture order is executed in the end, it is not likely to impact the operations of those three Chinese companies in the near term. Similarly, it won’t affect the global lithium supply chain in the near term as well, but the divestiture order might post uncertainties to the development schedule of those three lithium projects subject to how quickly the divestiture can be completed.”