Critics of the recent move cite the fact that in 2019, the federal government allowed the same Chinese investor, Sinomine, to buy the Tanco mine in Manitoba, the only lithium mine in Canada.George Penner/Handout
This past summer, Power Metals Corp. PWM-X chief executive officer Johnathan More fielded questions from the federal government about the roughly 5-per-cent equity position Chinese state-owned Sinomine Rare Metals Resources Co. held in his tiny exploration company. What struck him was how naive some of the queries were.
“They were coming at us saying, ‘Oh, they’re buying your company, they’re taking you over?’” he said.
“I’m like, ‘no.’ This is how uneducated the government is.”
Patiently, Mr. More explained that Sinomine owned a tiny, non-controlling stake, worth a mere $1.5-million. He told the government the same thing anyone with an internet connection and the most basic grounding in finance could ascertain in a couple of minutes: Power Metals is a very early-stage exploration company, drilling holes in the ground, and there is no guarantee it will ever become a critical minerals producer. (According to the Colorado School of Mines, only about one in 750 exploration projects becomes a mine.)
At the end of the correspondence with Ottawa, Mr. More was pretty sure that the matter was closed and that he’d never hear from anyone in the government again.
In the announcement, Mr. Champagne gave almost no information on why Ottawa targeted Power Metals and two other small exploration companies, other than the vague statement that the government came to the decision after a national security review of a number of investments in Canadian critical minerals companies, and the review involved “rigorous scrutiny by Canada’s national security and intelligence community.”
Mr. More said he doesn’t believe politicians understand the issue. “I don’t think they even understand how a supply chain works,” he said.
Mr. Champagne declined multiple requests for an interview over the past month.
Mr. More was particularly incensed because Justin Trudeau’s Liberal government in 2019 allowed the same Chinese investor, Sinomine, to buy the Tanco mine in Manitoba. Tanco is the only lithium mine in Canada, and Sinomine currently sends the critical mineral back to China for use in the country’s electric-vehicle industry, the very scenario that Canada purports to be trying to prevent.
Power Metals wasn’t the only small critical minerals explorer that was blindsided last month. Mr. Champagne also ordered Chinese investors to divest themselves from Ultra Lithium Inc. and Lithium Chile Inc.
The decision to target Lithium Chile, which has lithium projects in Chile and Argentina, was particularly puzzling. Earlier in the year, Mr. Champagne justified his department’s decision to allow the sale of Neo Lithium Corp., a Canadian lithium development firm, to China’s Zijin Mining Group Co. Ltd. on grounds that Neo Lithium was only a Canadian company in name.
“The operations of the company are in Argentina, and all but a handful of its employees are based in Argentina,” Mr. Champagne said in testimony to a parliamentary committee in January. Since Neo Lithium’s project in Argentina was located far away from Canada, it wasn’t something Canada’s EV battery supply chain could benefit from, he argued.
Lithium Chile CEO Steven Cochrane wrote in an e-mail that after Mr. Champagne’s order that it rid itself of its Chinese investor, the company was “caught completely by surprise.” Furthermore, Mr. Cochrane said, when Chengze Lithium International Ltd. took its stake in his company, the government told Lithium Chile that it was “compliant with all the rules.”
The Liberals in their decision last month also left completely untouched ginormous Canadian companies with huge critical minerals mines in operation that have accepted tens of billions of dollars in investment from China over the past decade. In turn, there’s potential for influence by the Communist Party of China. These companies include Ivanhoe Mines Ltd. IVN-T, Teck Resources Ltd. TECK-B-T Ltd. and First Quantum Minerals Ltd. FM-T
Also, if Ottawa’s objective was to zero in exclusively on small Canadian critical minerals companies with Chinese investors, then Vancouver-based Nickel North Exploration Corp. NNX-X should have been targeted. It lists Sinotech Hong Kong Corp. as its top investor. In fact, Sinotech owns about half the equity in the development firm, and has funnelled in around $6-million over the past decade.
However, Nickel North’s CEO, Tony Guo, a Chinese national, said he hasn’t heard anything from the government about any potential forced divestment from Sinotech.
Mr. Guo also pointed out that a representative with the Ministry of Natural Resources attended a ceremony celebrating the investment from China in Nickel North in 2012.
“Canada was promoting itself to try to attract investors from China,” Mr. Guo said.
It would appear that Mr. Guo can rest easy because the federal government doesn’t have the ability to scrutinize the investment even if it wanted.
Laurie Bouchard, spokeswoman for Mr. Champagne, wrote in an e-mail to The Globe and Mail that the orders for divestitures “were the result of reviews that were in front of our national security experts at that time.” She added that reviews “cannot be conducted retroactively.”
It is unclear whether Ottawa has ever thought about changing the Investment Canada Act to allow it to conduct security reviews retroactively. It’s a direction other more forward-thinking resource nations are headed.
Australia has been far more aggressive on Chinese investment into its resource sector, and the country updated its rules last year in this regard. It introduced a new “last resort” power, under which the government can review previously approved transactions if national security risks emerge at a later date and, if necessary, impose new restrictions and limitations on investments.
When it comes to decisions around national security, the Canadian federal government’s continued lack of transparency is troubling, said Wesley Wark, senior fellow at the Centre for International Governance Innovation.
“There’s no transparency requirements imposed on the minister or the Governor in Council to provide some minimal explanation for either foreign direct investment that is approved when it is controversial, or FDI that is blocked, or where there’s a divestiture order,” he said.
The process is “embedded in this unnecessary secrecy,” he said.
TORONTO – Strength in the base metal and technology sectors helped Canada’s main stock index gain almost 100 points on Friday, while U.S. stock markets climbed to their best week of the year.
“It’s been almost a complete opposite or retracement of what we saw last week,” said Philip Petursson, chief investment strategist at IG Wealth Management.
In New York, the Dow Jones industrial average was up 297.01 points at 41,393.78. The S&P 500 index was up 30.26 points at 5,626.02, while the Nasdaq composite was up 114.30 points at 17,683.98.
The S&P/TSX composite index closed up 93.51 points at 23,568.65.
While last week saw a “healthy” pullback on weaker economic data, this week investors appeared to be buying the dip and hoping the central bank “comes to the rescue,” said Petursson.
Next week, the U.S. Federal Reserve is widely expected to cut its key interest rate for the first time in several years after it significantly hiked it to fight inflation.
But the magnitude of that first cut has been the subject of debate, and the market appears split on whether the cut will be a quarter of a percentage point or a larger half-point reduction.
Petursson thinks it’s clear the smaller cut is coming. Economic data recently hasn’t been great, but it hasn’t been that bad either, he said — and inflation may have come down significantly, but it’s not defeated just yet.
“I think they’re going to be very steady,” he said, with one small cut at each of their three decisions scheduled for the rest of 2024, and more into 2025.
“I don’t think there’s a sense of urgency on the part of the Fed that they have to do something immediately.
A larger cut could also send the wrong message to the markets, added Petursson: that the Fed made a mistake in waiting this long to cut, or that it’s seeing concerning signs in the economy.
It would also be “counter to what they’ve signaled,” he said.
More important than the cut — other than the new tone it sets — will be what Fed chair Jerome Powell has to say, according to Petursson.
“That’s going to be more important than the size of the cut itself,” he said.
In Canada, where the central bank has already cut three times, Petursson expects two more before the year is through.
“Here, the labour situation is worse than what we see in the United States,” he said.
The Canadian dollar traded for 73.61 cents US compared with 73.58 cents US on Thursday.
The October crude oil contract was down 32 cents at US$68.65 per barrel and the October natural gas contract was down five cents at US$2.31 per mmBTU.
The December gold contract was up US$30.10 at US$2,610.70 an ounce and the December copper contract was up four cents US$4.24 a pound.
— With files from The Associated Press
This report by The Canadian Press was first published Sept. 13, 2024.
TORONTO – Canada’s main stock index was down more than 200 points in late-morning trading, weighed down by losses in the technology, base metal and energy sectors, while U.S. stock markets also fell.
The S&P/TSX composite index was down 239.24 points at 22,749.04.
In New York, the Dow Jones industrial average was down 312.36 points at 40,443.39. The S&P 500 index was down 80.94 points at 5,422.47, while the Nasdaq composite was down 380.17 points at 16,747.49.
The Canadian dollar traded for 73.80 cents US compared with 74.00 cents US on Thursday.
The October crude oil contract was down US$1.07 at US$68.08 per barrel and the October natural gas contract was up less than a penny at US$2.26 per mmBTU.
The December gold contract was down US$2.10 at US$2,541.00 an ounce and the December copper contract was down four cents at US$4.10 a pound.
This report by The Canadian Press was first published Sept. 6, 2024.
TORONTO – Canada’s main stock index was up more than 150 points in late-morning trading, helped by strength in technology, financial and energy stocks, while U.S. stock markets also pushed higher.
The S&P/TSX composite index was up 171.41 points at 23,298.39.
In New York, the Dow Jones industrial average was up 278.37 points at 41,369.79. The S&P 500 index was up 38.17 points at 5,630.35, while the Nasdaq composite was up 177.15 points at 17,733.18.
The Canadian dollar traded for 74.19 cents US compared with 74.23 cents US on Wednesday.
The October crude oil contract was up US$1.75 at US$76.27 per barrel and the October natural gas contract was up less than a penny at US$2.10 per mmBTU.
The December gold contract was up US$18.70 at US$2,556.50 an ounce and the December copper contract was down less than a penny at US$4.22 a pound.
This report by The Canadian Press was first published Aug. 29, 2024.
