Canada Kicks China Out of Critical Metals

Last week, Canada ordered three Chinese companies to divest their investments in Canadian critical minerals. The three companies are Sinomine (Hong Kong) Rare Metals Resources Co Ltd, Chengze Lithium International Ltd, also based in Hong Kong, and Zangge Mining Investment (Chengdu) Co Ltd.

Sinomine Rare Metals Resources was ordered to sell its stake in Power Metals Corp., which has exploration projects for lithium, cesium, and tantalum in northern Ontario. Zangge Mining Investment was ordered to sell its stake in Ultra Lithium Inc. of Vancouver, which has lithium and gold projects in Canada and Argentina. Chengze Lithium International Ltd. Is required divest its interests in Lithium Chile Inc., a company in Calgary with lithium projects underway in Chile.

The government ordered the divestiture after a “rigorous scrutiny” of foreign firms by Canada’s national security and intelligence community, Industry Minister Francois-Philippe Champagne said in a statement.

Champagne further commented:

“While Canada continues to welcome foreign direct investment, we will act decisively when investments threaten our national security and our critical minerals supply chains, both at home and abroad.”

Champagne’s not playing.

The Chinese government sees this move from Canada as a violation of market principles and called on Canada to reverse its decision.

Foreign Ministry spokesman, Zhao Lijian said:

“Canada stretched the concept of national security and placed barriers to normal investment and trade cooperation between Chinese and Canadian companies,” “We urge Canada to stop the undue suppression of Chinese companies and instead provide a fair, just, and non-discriminatory environment for their operation.”

Lijian Zhao made his bones by trolling the U.S. on Twitter, and isn’t shy about responding to Canada either.

Revenge of the Maple Leaf

According to the International Comparative Legal Guides, in China a foreign entity can own mining rights. However, under, the 2021 Special Administrative Measures for Foreign Investment Access, foreign investors are barred from investing, directly or indirectly, in prospecting or extracting tungsten, rare earth and radioactive minerals.

So, this can be seen as Canada sticking up for itself in the realm of trade and geopolitics. The global context for Western nations significantly changed in consideration of the Russian/Ukraine conflict, as attention has been drawn to the further potential disruption of markets and access to rare earths, essential to economic development and key industries.

This is a turn for the Liberal government as Francois-Phillipe’s ministry came under scrutiny for allowing the purchase of Canadian company Neo-Lithium by a Chinese firm, Zijin Mining Group for $960 million earlier this year.  Lithium is on the Canadian government’s list of 31 critical minerals – we’ve covered lithium as an essential green metal and key to achieve the electrification aspirations of global industry and governments looking to reduce carbon emissions.

Canada is starting to take a more defensive approach to its resources in light of the Russian/Ukraine conflict, rising demand & inflation

Mining/Metals gets some Love

Since 2020, the Canadian government has taken initiatives to increase their competitiveness and development in the mining sector. This includes a Yukon Resources Gateway project ($165 million), a Manitoba Mineral Development Fund ($20 million), and a minerals strategy to assist Alberta’s resource industry in recovering from the pandemic.

Earlier this year, Canada, the United States, Britain, and other Western countries established a partnership to secure their supply of critical metals, in the face of growing global demand.  These nations have finally figured out that rare earths and critical metals…are actually rare and critical to their economy – that the key to progress moving forward will be access to capital and a strong manufacturing base for industry and tech.

Lithium

Lithium carbonate prices in China are at a record high: CNY 592,500 per tonne this month, 118% YTD as demand continues to increase as supply tightens. Demand for electric vehicles is driving the trend, with an 83% increase in new energy passenger vehicle sales in China in September.

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The opinions provided in this article are those of the author and do not constitute investment advice. Readers should assume that the author and/or employees of Capital 10X hold positions in the company or companies mentioned in the article. For more information, please see our Content Disclaimer.

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