Vancouver critical-mineral firms caught in strategic bind over Chinese investments

Derrick Penner - Yesterday -  Vancouver Sun


Ottawa’s decision to limit investments in so-called “critical minerals” by Chinese state-owned firms is short-sighted, says a Vancouver exploration company losing a stake from one such investor. Asia experts, however, said the increasingly aggressive stance by the federal government is overdue.


A worker looks over car batteries at a factory in Nanjing, China.

Of three companies being ordered to divest interests in Canadian exploration firms, two — Sinomine Rare Metals Resources and Zangge Mining Investment — held equity stakes in Vancouver-headquartered firms exploring deposits that hold lithium, a key component in rechargeable batteries, and either cesium or tantalum, rare-earth elements critical for electronic components.

Countries are increasingly treating such minerals as strategic assets, including Canada.

In one sense, federal Industry Minister Francois-Philippe Champagne’s decision “is a signal to other companies that you have to pay attention to geopolitical risks,” said Asia trade expert Yves Tiberghien, a professor in political science at the University of B.C.

But the chairman of Vancouver’s Power Metals questions how Champagne is going about it. Jonathan More said he doesn’t have a problem with Canada trying to secure its strategic interest because, “I’m Canadian.”

Ottawa, however, needs to consider how Canadian firms can replace the investments that the less risk-averse Chinese firms have been willing to make.

“Why aren’t they (cabinet ministers) there with their chequebooks,” More said. “Where’s the money supposed to come from?”

Last January, Sinomine invested $1.5 million in Power Metals to buy just over five per cent of the company, and with it a right to secure supplies of rare-earth elements from its Case Lake property in northeastern Ontario.

That ore would be destined for the only cesium processing plant in Canada, which Sinomine already owns in Manitoba. That plant is associated with the Tanco mine, which Sinomine purchased outright in 2019 without protest from Industry Canada.

“The government seems to have a grandiose plan of controlling this, but they’re kind of missing the point where they’re not helping the supply chain issue because (nothing else) is in place,” More said.

Losing Sinomine’s $1.5 million won’t have a huge impact on Power Metals, More said. The company still has enough resources to keep doing exploration work, but he worries about the potential chilling effect Ottawa’s decision will have on other foreign investors looking at Canadian firms across the base-metals sector.



Yves Tiberghien is a professor of political science at UBC.© Handout

Tiberghien acknowledged that Canada’s abrupt change in direction on Chinese investments in Canadian critical-mineral exploration — Sinomine struck its deal with Power Metals last January, and Zangge put $4.14 million into Vancouver-headquartered Ultra Lithium in February — will cause some collateral damage.

However, the rapidly changing geopolitical scene that has seen the U.S. distance itself from China in what is practically a new Cold War and countries other than China treating critical minerals as strategic assets can’t be ignored.

That, Tiberghien said, should tell companies, “You can’t just keep doing what you were doing before. It’s a new world out there” and conditions are dramatically different than they were even three years ago.

“Canada has been a liberal believer in markets, but those markets are not markets anymore,” Tiberghien said of critical minerals. “They are increasingly strategic spaces” where countries including China, the U.S., Japan and South Korea seek more direct control.

Critical minerals are key to the evolution toward green and digital technology that will transform the global economy over the next 20 years, Tiberghien argued.

“It’s a strategic battle,” Tiberghien said. “Those who lead will end up having jobs and security and prosperity. Those who fall behind will just be poor and pushed around by others. That’s the reality of industrial revolutions.”

depenner@postmedia.com