A Chinese company is buying from and investing in a rare earth mining project in the N.W.T. — which, for years, had been marketed as a way for Canada to reduce its reliance on China for a material that’s crucial in types of low-carbon technology.
Vital Metals, an Australian company that owns the Nechalacho mine project, announced on Sunday that Shenghe Resources had become a “cornerstone investor” — having purchased a 9.9 per cent stake in the company for $5.9 million in Australian currency. Vital said it would also sell Nechalacho’s “stockpiled rare earth material” to Shenghe Resources for $2.6 million.
Bill Braden, a former N.W.T. MLA who for two years worked for Vital’s Canadian subsidiary, Cheetah Resources, as a communications assistant for Nechalacho, calls it a “betrayal.”
“They have abandoned what was the core ethos, I guess, of this whole thing,” he said.
“Here was a world class Canadian deposit that could be a serious player in breaking Chinese dominance of the rare earth market in the western world. And now sadly, so sadly for me, a Canadian resource is now simply part of the Chinese supply chain.”
Members of the Yellowknives Dene First Nation look at the first bastnaesite concentrate produced on July 21, 2021 at the Cheetah Resources’ Nechalacho project near Yellowknife. (Cheetah Resources/billbradenphoto/CP)
According to Natural Resources Canada, 60 per cent of the world’s supply of rare earth is produced in China. The Nechalacho project, where Vital started mining in 2021, offered an alternative. The company had said it would extract metals and minerals in the N.W.T., send it to Saskatchewan for processing, and then sell it to European, Canadian and American separation facilities.
Vital Metals opened a processing plant in Saskatoon in September 2022. The facility was still under construction when Prime Minister Justin Trudeau toured it in January. A few months later, Vital Metals paused construction, before dropping the plant and placing a separate Canadian subsidiary that had been building it into bankruptcy.
‘The Chinese have got money’
Tom Hoefer, the executive director of the Nunavut and NWT Chamber of Mines, told CBC News the move is confusing for some — but that Vital Metals has found a way to keep advancing an “exciting project.”
“The reality is the Chinese have got money. And the other reality is that companies that are exploring and trying to develop projects are having a very difficult time raising money from the West,” he said.
The stockpile sale is expected to be done by early 2024. According to a media statement from Vital Metals, Shenghe has “no preferential rights over future production from Nechalacho” — meaning they haven’t also struck a deal for any more of the ore mined there.
Prime Minister Justin Trudeau, right, speaks with Vincent Laniece, with Vital Metals, during a tour of the Vital Metals rare earths element processing plant in Saskatoon, in January of 2023. (Liam Richards/’The Canadian Press)
Shenghe could, however, acquire up to 18.1 per cent of Vital Metals in the future, the Australian company said back in October when the investment was announced. Hoefer said he is “not that concerned” about China having that size of stake in a company that is doing extraction in the N.W.T.
“Canada hasn’t said anything at this point, which one might presume then that this isn’t the problem for Canada at this percentage,” he pointed out.
Canada facing calls for a review
Braden is calling on the federal government to investigate the investment. The House of Commons Standing Committee on Industry and Technology voted in favour of asking for a review of the investment under the Canadian Investment Act as an issue of national security.
CBC News reached out to Canada’s minister of Innovation, Science and Economic Development about whether there will be such a review. In an emailed statement around noon Tuesday, a department spokesperson said the Canadian government is aware of the “proposed transaction” and confidentiality provisions under the Investment Canada Act mean it can’t comment on reviews.
“The Investment Canada Act provides for a national security review of any foreign investment into Canada, regardless of its value,” the statement reads. “The government has not hesitated and will not hesitate to take action on transactions that would be injurious to Canada’s national security.”
Heavy machinery clears brush at the Nechalacho mine project in April 2021. (Liny Lamberink/CBC)
Caitlin Cleveland, the N.W.T.’s minister of Industry, Tourism and Investment, said in an emailed statement Monday night the Canadian government could review the financing structure and agreement between Vital and Shenghe, but she was “unaware if this is being pursued at this time.”
“Generally, the [Government of the Northwest Territories] is supportive of the advancement of critical minerals projects in the N.W.T.,” she wrote. “Nechalacho is one of those N.W.T. critical minerals projects, and has the opportunity to contribute rare earth elements to global supply chains.”
Cleveland said the territorial government could not comment on Vital Metals’ decision to take investment from or sell material to a Chinese company.
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.
The crypto market has recently experienced a significant downturn, mirroring broader risk asset sell-offs. Over the past week, Bitcoin’s price dropped by 24%, reaching $53,000, while Ethereum plummeted nearly a third to $2,340. Major altcoins also suffered, with Cardano down 27.7%, Solana 36.2%, Dogecoin 34.6%, XRP 23.1%, Shiba Inu 30.1%, and BNB 25.7%.
The severe downturn in the crypto market appears to be part of a broader flight to safety, triggered by disappointing economic data. A worse-than-expected unemployment report on Friday marked the beginning of a technical recession, as defined by the Sahm Rule. This rule identifies a recession when the three-month average unemployment rate rises by at least half a percentage point from its lowest point in the past year.
Friday’s figures met this threshold, signaling an abrupt economic downshift. Consequently, investors sought safer assets, leading to declines in major stock indices: the S&P 500 dropped 2%, the Nasdaq 2.5%, and the Dow 1.5%. This trend continued into Monday with further sell-offs overseas.
The crypto market’s rapid decline raises questions about its role as either a speculative asset or a hedge against inflation and recession. Despite hopes that crypto could act as a risk hedge, the recent crash suggests it remains a speculative investment.
Since the downturn, the crypto market has seen its largest three-day sell-off in nearly a year, losing over $500 billion in market value. According to CoinGlass data, this bloodbath wiped out more than $1 billion in leveraged positions within the last 24 hours, including $365 million in Bitcoin and $348 million in Ether.
Khushboo Khullar of Lightning Ventures, speaking to Bloomberg, argued that the crypto sell-off is part of a broader liquidity panic as traders rush to cover margin calls. Khullar views this as a temporary sell-off, presenting a potential buying opportunity.
Josh Gilbert, an eToro market analyst, supports Khullar’s perspective, suggesting that the expected Federal Reserve rate cuts could benefit crypto assets. “Crypto assets have sold off, but many investors will see an opportunity. We see Federal Reserve rate cuts, which are now likely to come sharper than expected, as hugely positive for crypto assets,” Gilbert told Coindesk.
Despite the recent volatility, crypto continues to make strides toward mainstream acceptance. Notably, Morgan Stanley will allow its advisors to offer Bitcoin ETFs starting Wednesday. This follows more than half a year after the introduction of the first Bitcoin ETF. The investment bank will enable over 15,000 of its financial advisors to sell BlackRock’s IBIT and Fidelity’s FBTC. This move is seen as a significant step toward the “mainstreamization” of crypto, given the lengthy regulatory and company processes in major investment banks.
The recent crypto market downturn highlights its volatility and the broader economic concerns affecting all risk assets. While some analysts see the current situation as a temporary sell-off and a buying opportunity, others caution against the speculative nature of crypto. As the market evolves, its role as a mainstream alternative asset continues to grow, marked by increasing institutional acceptance and new investment opportunities.
