Some of those who moaned after the FIRB blocked an attempt by a Chinese shareholder to lift its stake in rare earths miner Northern Minerals should take a look at Canada, where foreign investment in the resources sector – especially from China – is facing greater scrutiny.
The Albanese government blocked a Chinese businessman increasing his stake in the rare earths miner from 9.9% to 19.9%.
Treasurer Jim Chalmers stopped the Singapore-based Yuxiao Fund, controlled by Chinese businessman, Wu Tao, from increasing its stake in Northern Minerals after Iluka Resources lifted its stake to 19.9% via an equity injection/rare earths offtake agreement with Northern.
The move brought criticism from some sections of the small miners’ sector but support from others as it was the second move by FIRB in 14 years to block Chinese attempts to build big shareholders in the rare earths sector. The previous was the blocking in 2009 of moves by a Chinese company to build a 51% plus stake in Lynas Rare Earths before it had started developing its huge Mount Weld project in WA.
In Canada the federal government is tightening controls on battery and renewable miners such as lithium, nickel, copper and other green energy metals. Chinese companies already have a big stake in the Australian lithium sector, as do American and Chilean companies.
Late in 2022, they proposed bolstering the Investment Canada Act (ICA) to give government ministers power to block or unwind critical minerals investments if they believe such deals threaten national security.
The changes would essentially give the government greater control over companies listed on the Toronto Stock Exchange and are expected to be finalised by midyear.
Reuters reported from the annual Prospectors and Developers Association of Canada (PDAC) conference in Toronto last week, that the government’s move is worrying junior operators.
Nearly half of the world’s mining companies are listed in Toronto and the stock exchange has long been a preferred destination for junior mining companies to raise funds, above rival exchanges in Sydney, New York and London.
The ASX though is home to some of the world’s biggest miners, ahead of London and New York and Toronto.
Australia’s strength is also in small miners like DeGrey, Chalice, Alkane, Magmatic, Blue Cobalt and others who have been looking for years and now have a huge prospect on their books. Pilbara Minerals is one tiddler that worked for years and years before getting bigger in lithium and then a huge payoff.
“The ICA review process could be lengthy and unpredictable, leading to uncertainty for potential investors and may make it more difficult for junior miners to attract investments,” said Stephen Payne, who runs the energy and natural resources team at consultancy BDO Advisory, told Reuters.
The changes are widely seen as a defensive measure against China, which has invested $US7 billion in Canada’s base metals sector in the past 20 years, according to S&P Market Intelligence.
According to Bloomberg China has built up stakes in more than two dozen Canadian mining companies, including some of the industry’s biggest names.
Citic Metal Africa and Zijin Mining Group, two firms closely linked to the Chinese government, hold a combined 39.5% stake in Ivanhoe Mines. Jiangxi Copper Co. owns 18.3% of Vancouver-based copper producer First Quantum Minerals Ltd.
On Sunday Ivanhoe’s founder, Robert Friedland criticised the Canadian government at a forum of miners. Friedland also founded Turquoise Hill which sold its rich copper gold prospect in Mongolia to Rio Tinto.
“We’re going to be deprived of all this Chinese capital in all these junior mining companies,” the billionaire told a miners’ meeting in Toronto on Sunday. “It’s really getting harder out there to be a miner.”
Friedland’s comments show that at least publicly he doesn’t understand that it’s not the Canadian government or people like him, or even China setting the rules in renewables, it is the US and the $US369 billion pot of money in 2022’s Inflation Reduction Act and it’s a case of ‘he who has the gold sets the rules.’
Canadian officials last fall ordered Chinese companies to sell stakes in three Toronto-listed lithium companies, two of which are developing mines outside Canada.
Tesla has been sniffing round the Toronto-listed Sigma Lithium. Would that deal be blocked by the Canadian government?
Canada’s Industry Ministry, which is spearheading the rules change, called critical minerals “key to the future prosperity of our country.”
However, the government’s crackdown could rebound and hurt Canada as the mining industry underpins a large part of the country’s economy, investors and analysts say.
“No doubt the implications of a decision to restrict a major avenue of capital flow needs to be supplemented by capital that is similar in size and timely,” said Dean McPherson, head of global mining at the Toronto Stock Exchange.
The Trudeau government last year had launched plans to invest $C3.8 billion ($US2.8 billion) to boost Canada’s own critical materials sector and streamline mine permitting.
“The government has to be mindful that they’re potentially creating a gap that has to be filled,” said Pierre Gratton, president of the Mining Association of Canada, an industry trade group told Reuters.
The industry complaints are nonsense – there’s only a handful of markets where Chinese investment especially is unfettered. And while Australia has controls, Chinese involvement here in mining is quite high.
They don’t realise that the Inflation Reduction Act explicitly favours companies based in the US or in countries with free trade agreements with the US – like Canada, Australia, Mexico and Chile.
Chinese shareholdings are a no-no and would restrict these companies if they happen to find an economic deposit of a key green mineral in Canada.
As the recent joint venture announced between Ford and China’s CATL, the world’s biggest battery maker, there’s nothing blocking Chinese investment in green minerals or projects in America, so long as the US has control.
