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Ottawa is ordering Chinese state-owned companies to immediately divest their interests in three Canadian critical minerals companies, as Canada doubles down on its efforts to get tougher on China, after the Federal government faced an avalanche of criticism earlier in the year for allowing too much investment from the Asian superpower into the domestic resource sector.
The Federal government announced on Wednesday that Sinomine (Hong Kong) Rare Metals Resources Co., Ltd, Chengze Lithium International Ltd. and Zangge Mining Investment (Chengdu) Co., Ltd. must sell their stakes in Power Metals Corp., Lithium Chile Inc., and Ultra Lithium Inc. respectively.
The government said it made its decision after consulting with critical minerals experts, and the security and intelligence community.
Last Friday, Ottawa said it would only allow transactions involving investments by state-owned firms into Canadian critical-minerals companies to be approved on an “exceptional basis,” a development that Wesley Wark, senior fellow at the Centre for International Governance Innovation told the Globe and Mail was the most dramatic tightening of Canadian takeover rules in a decade.
The new rules applied not just to outright takeovers of Canadian companies, but investments of any size, including smaller noncontrolling stakes across every facet of the resource industry, from exploration and development to mining and refining.
Last week’s announcement, and the crackdown on specific investments unveiled on Wednesday, comes after years of a mostly laissez-faire approach from the Federal government around Chinese investment into Canada’s critical minerals sector.
While Ottawa has the authority to block Chinese investments in Canadian critical-minerals assets if it feels there is a threat to national security, it hasn’t always followed through with action.
Three years ago, the federal government allowed the acquisition of the Tanco mine in Manitoba by China’s Sinomine. At the time, Tanco was one of the world’s few sources of the critical mineral cesium, a key input in atomic clocks and radiation detectors. Earlier this year, Sinomine started produced lithium at the mine and shipping it back to China for use in its domestic EV industry.
In January, Ottawa allowed the acquisition of Neo Lithium Corp., a Canadian lithium development firm, by Chinese-state controlled firm Zijin Mining Group Co. Ltd. without an in-depth security review. That takeover precipitated parliamentary hearings and put federal Industry Minister François-Philippe Champagne on the defensive.
In June, Jonathan Wilkinson, federal Natural Resources Minister, signalled in an interview with The Globe and Mail that Ottawa was getting ready to crack down on the deluge of Chinese investments into Canadian critical minerals.
