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Canadian gov’t seeks ‘like-minded’ partners for critical minerals investment

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The Canadian government announced changes to the investment act today tightening rules around investments by foreign countries in critical metal projects.

Investments must show a net benefit, according to the government’s guidance.

“Canada must build strategic resilience in the North American critical minerals supply chain with like-minded partners at home, within North America, and around the world,” wrote Innovation, Science and Economic Development Canada in a news release.

“Starting today, significant transactions by foreign state-owned enterprises in Canada’s critical minerals sectors will only be approved as of likely net benefit on an exceptional basis. As well, should a foreign state-owned company participate in these types of transactions, it could constitute reasonable grounds to believe that the investment could be injurious to Canada’s national security, regardless of the value of the transaction.”

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In 2020 the Canadian government rejected a Chinese company’s purchase of TMAC Resources’ Hope Bay gold mining project in Nunavut. Purchase price was $230 million. The deal was already approved by TMAC shareholders.

According to reporting by CBC, a spokesperson for Innovation, Science and Economic Development Canada commented on the TMAC deal and wrote that “all foreign investments are subject to national security review. Reviews are conducted on a case-by-case basis as part of a rigorous and evidence-based process. Due to the confidentiality provisions of the Investment Canada Act, the government cannot comment further.”

Agnico Eagle eventually bought the project.

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Government of Canada announces investment in three Waterloo Region tech businesses – ITBusiness.ca

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Today, the Federal Economic Development Agency for Southern Ontario (FedDev Ontario) announced an investment of more than $10 million in three Kitchener-Waterloo tech companies.

Miovision Technologies is a Kitchener-based company that lets cities and towns reduce traffic congestion and vehicle emissions while improving public safety through intelligent transportation solutions. With the $7.4-million repayable investment through the Jobs and Growth Fund, Miovision will develop TrafficLink and Scout, its traffic monitoring hardware and software. It also plans to increase its network by up to 100,000 intersections in North America over the next four years, and will further its transition into “Smart City” technologies, expanding its presence globally and adding 58 jobs,

Advanced Electrophoresis Solutions Ltd. is a Cambridge medical technology manufacturer specializing in the development of testing instruments for pharmaceutical companies to analyze protein structures and interactions. The repayable investment of over $1.7 million, through the Business Scale-up and Productivity stream, will allow the company to increase the production of ready-to-use customized testing instruments, and grow its sales and marketing team. Advanced Electrophoresis Solutions is looking to expand its presence in Asia and Europe while also creating 11 additional jobs within Waterloo.

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Huron Digital Pathology is a St. Jacobs-based medical equipment company that develops digital imaging solutions in the pathology field for the clinical, research and education markets. With the $1-million repayable investment through the Business Scale-up and Productivity stream, the company can increase the production of its digital pathology scanners. It hopes to revolutionize disease diagnosis by being the first company to bring to market an Artificial Intelligence (AI) enabled image search engine for use in the pathology field. Huron Digital Pathology is looking to increase its productivity. with the goal of producing over 100 scanners every year and creating 11 skilled jobs.

“Tech companies, like the three highlighted today, are what builds Waterloo region’s growing resumé of research and innovation. Canadian tech companies work tirelessly to bring new products and processes to markets that will benefit our regional economy and Canadians,” said The Honourable Filomena Tassi, Minister responsible for the Federal Economic Development Agency for Southern Ontario. “The Government of Canada is committed to supporting businesses as they adopt new digital solutions, enhance global competitiveness and create local jobs that will contribute to a growing economy that works for everyone.”

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After FTX, is crypto as an investment dead?

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But following a series of failures in the industry, including the collapse of Bahamas-based FTX Trading Ltd. in November, bitcoin and ether prices are now down by about 75% from their all-time highs a year earlier — and financial advisors and crypto experts are divided as to the industry’s fate.

Many crypto skeptics see the collapse of FTX as confirming their worst suspicions.

“[Cryptocurrency] is highly speculative, highly volatile and it’s something you steer away from until we see signs of maturity in that sector,” said Andrew Pyle, investment advisor with CIBC Wood Gundy in Peterborough, Ont.

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While the blockchain technology that underpins cryptocurrency is likely to offer investment opportunities in the future, the sector has no place today in the portfolios of the “vast majority” of clients, said Pyle, who has never recommended crypto investments.

The fallout from FTX’s collapse means “you’re looking at a number of years before you get broader public trust in cryptocurrencies,” said Mark Noble, executive vice-president of ETF strategy with Horizons ETFs Management (Canada) Inc.

“That said, I don’t think the crypto ecosystem goes away,” Noble said, suggesting that blockchain innovations will continue during what could be a long “crypto winter” of little investor interest. Horizons ETFs offers both long and short bitcoin funds.

Institutional investors who believe in the transformative potential of blockchain technology are likely to “double down” on investments, said Michael Zagari, an investment advisor in Montreal with Burlington, Ont.-based Mandeville Private Client Inc.

“Just because one investment [FTX] didn’t work doesn’t mean they’re going to stop there,” said Zagari, who suggests there will be “a lot of deals to be had” but believes the industry will remain volatile for the next 12–18 months.

He recommends allocating no more than 10% of a portfolio to cryptocurrency or crypto-related investments for risk-tolerant clients with at least a 10-year horizon, as part of their equity exposure.

FTX’s bankruptcy has caused other crypto exchanges to suspend withdrawals, with some struggling to continue operating.

And “there are going to be more shoes to drop. We just don’t how many or how big,” said Alex Tapscott, managing director of the digital asset group with Ninepoint Partners LP, during a Nov. 24 webinar.

Characterizing himself as “short-term bearish, long-term bullish” on cryptocurrency, Tapscott suggested that the Ontario Teachers’ Pension Plan Board and the Caisse de dépôt et placement du Québec exposed themselves to “huge concentration risk” by each investing in a single crypto firm rather taking positions in established cryptocurrencies. (See “Highs and lows,” below.)

Brian Mosoff, CEO of Toronto-based Ether Capital Corp., also said bitcoin and ether will endure through this crash, even if some exchanges don’t. “Nothing has changed [in terms of the technology],” Mosoff said. Bitcoin and ether “still do exactly what they set out to do: the fundamentals are the same; the value proposition is the same.”

Retail investors seem to agree. While crypto ETF assets under management dropped by $4.1 billion between Jan. 1 and Nov. 30, only $66 million of the decline was due to outflows, according to data from National Bank Financial Markets (NBFM).

“It seems like the crypto ETF users in Canada are sticking to their allocations,” said Daniel Straus, director of ETF research and financial products research with NBFM, in an email to Investment Executive. “Bitcoin and ether are both extremely risky and speculative, but the anemic outflows from Canadian crypto ETFs suggest their investors may be treating them like ‘moonshot’ long-term bets.”

Mike Tropeano, senior director of wealth consulting with Broadridge Financial Solutions Inc. in Boston, said he expects global regulators to “be much harsher” on the crypto industry after the collapse of FTX. What will follow over the next few years is “a thinning of the herd,” a flight to safety to the most established names, and more innovation.

“The information is still flowing daily, [not only] with regard to FTX but [also] with the overall market,” Tropeano said. “Anyone who is looking to play a role in the market — the [financial] advisor especially — requires a lot of diligence to stay on top of what is happening.”

Mosoff suggested some “advisors are probably relaxing a little bit,” knowing that clients are less likely to be asking about investing in cryptocurrency “until the next cycle starts.” But he said that cycle will come, and advisors should use the crypto winter to educate themselves.

While the fall of FTX and BlockFi Lending LLC have shaken the market, the depth of the crypto winter may depend on how the industry’s established behemoths weather the storm, said Daniel Gonzalez, research analyst and consultant in Toronto with California-based Javelin Strategy & Research: “If a Coinbase, crypto.com or Binance were to go down the drain, I think that would end crypto adoption for retail investors for a while.”

In many ways, the advisor’s role now isn’t different from what it was when cryptocurrencies were trading at their peaks.

“There’s absolutely a role for advisors to play here, and it’s to be the voice of reason [in terms of allocation to cryptocurrency],” Mosoff said. “But I don’t think that’s saying, ‘I’m going to rule out an asset class entirely.’”

That said, cryptocurrency has not proven to be an inflation hedge or a diversifier, said Jason Heath, managing director of Objective Financial Partners Inc. in Markham, Ont. Furthermore, “higher interest rates and a likely recession are sure to hinder speculative investments like cryptocurrency in 2023.”

Pyle said expecting retail investors to understand is unreasonable “if institutional investors, traders, analysts, portfolio managers, hedge fund managers and even regulators can’t understand this space.”

An advisor’s “paramount responsibility is to protect your clients’ wealth,” Pyle added. “Protect it from inflation, protect it from running out and protect it de facto from things that most people don’t understand.”

Highs and lows in the crypto space

2021

Feb. 18: Toronto-based Purpose Investments Inc. launches world’s first bitcoin ETF.

October: Ontario Teachers’ Pension Plan Board (OTPP) invests US$75 million in FTX Trading Ltd. through its Teachers’ Venture Growth platform.

Oct. 12: Caisse de dépôt et placement du Québec invests US$150 million in New Jersey-based Celsius Network LLC, a crypto lender.

Nov. 10: Bitcoin hits its all-time intraday high of US$68,789.63.

Nov. 16: Ether hits its all-time intraday high of US$4,891.70.

2022

January: The OTPP invests another US$20 million in FTX.

Jan. 10: Fidelity Investments Canada ULC announces it will add 1%–3% exposure to bitcoin in its asset-allocation ETFs. (The target allocations remain the same as of press time.)

Feb. 14: New Jersey-based BlockFi Lending LLC agrees to pay the U.S. Securities and Exchange Commission US$100 million in penalties and pursue registration of its crypto lending product.

March 31: Canadian cryptocurrency ETFs amass $6.1 billion in assets under management, according to data from National Bank Financial.

May: TerraUSD stablecoin and Luna, a linked token, crash.

June 18: Bitcoin plunges below US$25,000. It was trading above US$50,000 in early May.

July 6: Voyager Digital Ltd., a New York-based crypto broker, files for Chapter 11 bankruptcy.

July 13: Celsius Network files for Chapter 11 bankruptcy.

Aug. 17: Caisse de dépôt et placement du Québec announces it is writing down its entire investment in Celsius Network.

Nov. 11: FTX files for Chapter 11 bankruptcy.

Nov. 17: OTPP announces it will write down its entire investment in FTX.

Nov. 21: U.S. senators Elizabeth Warren, Dick Durbin and Tina Smith send a letter to FMR LLC (Fidelity Investments) asking the firm to reconsider a decision to allow 401(k) plans to offer access to bitcoin.

Nov. 27: Bitfront, a U.S. crypto exchange, announces it will cease operations in March 2023. The platform stated the decision “is unrelated to recent issues related to certain exchanges that have been accused of misconduct.”

Nov. 28: BlockFi files for Chapter 11 bankruptcy, citing exposure to FTX.

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Credit Suisse’s investment bank draws interest from Saudi crown prince, WSJ reports

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Dec 4 (Reuters) – Investors including Saudi Arabia’s crown prince and a U.S. private-equity firm run by a former Barclays CEO have shown interest in investing $1 billion or more in Credit Suisse’s (CSGN.S) new investment banking unit, the Wall Street Journal reported on Sunday.

Crown Prince Mohammed bin Salman is considering an investment of around $500 million to back the new unit CS First Boston (CSFB) and its CEO-designate Michael Klein, the report said, adding that bank has not yet received a formal proposal from any Saudi entity.

Additional financial backing could come from U.S. investors including former Barclays chief Bob Diamond’s Atlas Merchant Capital, the report said, citing people familiar with the matter.

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Credit Suisse did not immediately respond to a request for comment.

Seeking to restore vigor to a business that has been languishing, Credit Suisse in October said that it will reshape its investment bank by resurrecting the First Boston brand. The bank tapped board member Klein to lead CSFB.

Saudi National Bank (SNB), controlled by the government of Saudi Arabia, had earlier pledged to invest up to 1.5 billion Swiss francs ($1.60 billion) in Credit Suisse itself for a stake of up to 9.9%, and said it may back the standalone CSFB which will operate as an independent capital markets and advisory bank headquartered in New York.

Credit Suisse’s history with the First Boston brand dates to 1978 when the pair linked up to operate in the London bond market. They later merged to create CS First Boston, but a tough period followed after famed bankers departed and the firm ran into regulatory troubles.

Some bankers and investors have expressed scepticism over its ability to regain its past glory in a shrinking market.

($1 = 0.9373 Swiss francs)

Reporting by Kanjyik Ghosh and Akriti Sharma in Bengaluru; Editing by Cynthia Osterman

 

Our Standards: The Thomson Reuters Trust Principles.

 

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