The Canadian government has recently signalled that it will use
it national security powers to scrutinize foreign investments in
businesses involved in critical mineral production and
This is an important change, given the number of mining
companies listed on Canadian stock exchanges, including many that
have little nexus to Canada except for the listing.
The Canadian government’s current views on the significance
of critical minerals have been developed in two recent and
important policy statements:
- A Critical Minerals List, released on March 11,
which includes 31 minerals considered critical for the sustainable
economic success of Canada and its allies1. The list is
largely consistent with a similar U.S. government list of 35
critical mineral resources.
- Updated guidelines on the national security review of foreign
investments, which were released on March 24. The guidelines
identify areas that could raise national security concerns, and now
include acquisitions of Canadian businesses involved in producing
Critical minerals are viewed as those that are: essential to the
economy of Canada and its allies; and whose supply may be at risk
due to geological scarcity, geopolitical issues, trade policy or
other factors2. A
key concern is with market dominance by suppliers that are state
owned enterprises and the risk of politically motivated supply
disruption. Canada is not alone in expressing concerns of this
Investment Canada Act reviews
Under the Investment Canada Act (ICA), the
government has discretion to review virtually any foreign
investment on the grounds it could be “injurious to
Canada’s national security.” The review jurisdiction is
broad and covers mining businesses with part of their operations in
Canada, even if mines themselves are located overseas.
To date, national security reviews have tended to focus on
Chinese investments involving sensitive technology, critical
infrastructure or personal data. Mining has not been an area of
significant concern under the ICA.
Acquisitions of Canadian-listed mining companies, even by
Chinese investors, have generally been viewed as non-problematic.
For example, Zijin Mining’s acquisition of Nevsun Resources,
Continental Gold and Guyana Goldfields in 2018, 2019 and 2020 and
Endeavour Mining’s acquisition of SEMAFO in 2020 were all
approved under the ICA. Nevsun was involved in critical mineral,
copper, although its acquisition pre-dates the identification of
copper as a critical mineral in March 2021.
The only mining transaction blocked on national security grounds
was Shangdong Gold’s proposed acquisition of TMAC in 2020. But
that investment was likely blocked because of TMAC’s strategic
location and other factors, not its gold mining operations. (Gold
is not on the critical minerals list.)
Other mining-rich countries have also started to scrutinize more
closely Chinese investments in the mining industry. Notably, the
Australian government blocked two proposed investments by Chinese
entities related to critical minerals in 20204.
The vast majority of mining investments will continue to receive
ordinary course approvals under the ICA. However, this new policy
highlights that some investments are likely to face significant
The highest-risk investments will involve proposed Chinese
acquisitions of Canadian mining companies involved in the
production of critical minerals in Canada.
Lower-risk investments will involve proposed Chinese
acquisitions of Canadian-listed mining companies not involved in
critical minerals, where their assets are located outside Canada,
and/or where target businesses are not material producers of
Non-Chinese investors should generally expect approvals to be
processed in the ordinary course. Indeed, an added consequence of a
more restrictive policy on Chinese investments will likely be
opportunities for non-Chinese investors and possibly in the
development of new and existing mineral projects in Canada.
Finally, when considering potential investments where national
security issues are expected to arise, investors and Canadian
businesses alike should engage counsel and government relations
advisors as early as possible in the transaction planning process
given the complex and evolving nature of the national security
review regime under the ICA.
1 The list comprises the following minerals: aluminum,
antimony, bismuth, cesium, chromium, cobalt, copper, fluorspar,
gallium, germanium, graphite, helium, indium, lithium, magnesium,
manganese, molybdenum, nickel, niobium, platinum group metals,
potash, rare earth elements, scandium, tantalum, tellurium, tin,
titanium, tungsten, uranium, vanadium, zinc.
2 A Canada-U.S. Joint Action Plan on Critical Minerals
Collaboration, released in January 2020, which aims to
facilitate development of secure supply chains for critical
minerals that are key to strategic industries such as defence,
aerospace and communications. Canada is considered to be
well-placed to supply the U.S. with many of the critical minerals
due to historically strong political and economic ties; a stable
political, economic and regulatory environment; an extensive
mineral endowment; and a robust metals and mining sector. Of the 35
critical metals identified by the U.S., Canada is a sizable
supplier of 13 of such minerals, including being the largest
supplier of potash, indium, aluminum and tellurium to the U.S. and
the second-largest supplier of niobium, tungsten and magnesium.
Canada also supplies approximately one quarter of the uranium needs
of the U.S.
3 Most notably the U.S., European Union, Japan, South
Korea and Australia.
4 These investments were: (1) Chinese state-owned steel
producer, Baogang Group Investment’s proposed A$20m investment
in Northern Minerals Limited; and (2) Chinese lithium chemical
producer, Yibin Tianyi Lithium Industry Co Ltd.’s proposed
A$14.1m investment in AVZ Minerals Limited.
The content of this article is intended to provide a general
guide to the subject matter. Specialist advice should be sought
about your specific circumstances.
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