Reuters | February 27, 2024
The Toronto Stock Exchange. (Stock image)
A year after Canada tightened foreign investment rules for the critical minerals sector, Chinese money has continued to pour into Toronto-listed miners, according to proprietary research conducted by the University of Alberta.
The inbound flow is raising hopes among some junior miners that it will be easier to find Chinese funding.
Canada had forced three Chinese investors to sell their stakes in Canadian critical mineral companies in 2022. Some of these companies did not have their mines in Canada.
In October 2022, the government added an extra layer of scrutiny for inbound deals in critical minerals.
The changes did not specify which country’s investments would be scrutinized, but the government says it wants to secure the critical minerals sector, which is strategic to Canada’s national security.
Still, Canada’s critical miners received at least a dozen investments worth C$2.2 billion ($1.6 billion) in 2023 from new and existing investors in China and Hong Kong, a huge increase over C$62 million in 2022, data compiled by the University of Alberta’s The China Institute shows.
“What you are seeing is the reality, that there is no blockade of Chinese investments in Canada… it is a perception issue,” said Dean McPherson, head of mining, TMX Group Ltd.
“Chinese investors are not shy to risk, they are willing to stick in and ride it out (in Canada),” Mcpherson added.
Daniel Lincoln, a researcher with The China Institute, told Reuters Canada may find it difficult to regulate all Chinese mining acquisitions notwithstanding the provisions in the Investment Canada Act, especially when both buyer and seller are keen for the transaction.
In a latest test of Canada’s new rules, China’s state-owned Zijin Mining Group last month offered to buy a 15% stake in Solaris Resources Inc for C$130 million.
While Canada lists copper as a critical mineral, the deal is likely to be approved since the funds will be used to develop Solaris’ copper-gold project in Ecuador, two sources familiar with the deal told Reuters.
Solaris and Zijin did not respond to an email query by Reuters.
A spokesperson for the Ministry for Innovation, Science and Industry declined to comment on the Zijin deal, but said the government must examine each investment on its merit to ensure Canada remains open to necessary foreign direct investment.
Copper assets in demand
Chinese investors have been among the most active in Canada’s mining industry, plowing C$21 billion between 1993 and 2023, according to data from The China Institute.
Last year, copper companies were the most targeted by Chinese investors. MMG Africa Ventures, a unit of state-backed China Minmetals Corp, bought a copper mine from Vancouver-based Cuprous Capital Ltd for C$1.7 billion, and Hong Kong-based Greenwater invested C$13 million in Gowest Gold, the data shows.
Jiangxi Copper Co Ltd increased its stake in First Quantum Minerals Ltd to 18.5% from 18.3% and the Chinese company also bought $20 million worth of senior notes in the Canadian company last year, regulatory filings show.
Some smaller miners and explorers have been lobbying the Canadian government to allow more Chinese investments, citing difficulty in raising capital.
On Sunday, Chinese miner Yintai Gold agreed to buy Vancouver-based Osino Resources for C$368 million. Osino and Yintai did not respond to a Reuters query about if they are seeking Canadian government approval for the deal. Gold is not considered a critical metal by Canada.
Michelle DeCecco, chief operating officer of Lithium Chile, one of the three companies that Canada ordered to get rid of its Chinese investor, told Reuters there was no softening in Ottawa’s stance because of which companies are finding alternative ways to secure Chinese funding.
Soon after SRG Mining Inc received a C$16.9 million investment proposal from C-ONE, backed by Chinese entrepreneur Yue Min, the Montreal-based graphite miner announced plans to change the country where it is incorporated. On Monday, it said it would incorporate in Abu Dhabi Global Markets while maintaining its Canadian stock market listing.
SRG Mining did not respond to an email query by Reuters.
“Unfortunately, it is often to take their companies out of Canada; away from Five Eyes,” DeCecco said, referring to the intelligence sharing network comprising of the United States, Britain, Canada, Australia and New Zealand.
($1 = 1.3522 Canadian dollars)
(By Divya Rajagopal and Julie Zhu; Editing by Denny Thomas and David Gregorio)
SRG Mining’s move to UAE would avoid national security review on Chinese investment in Canada
SRG Mining (TSXV:SRG) said on Monday it is redomiciling to the Abu Dhabi Global Market in the United Arab Emirates (UAE).
The redomiciliation, SRG said, will provide the company with expanded “strategic optionality” as the UAE has a double taxation treaty and a bilateral investment treaty with the Republic of Guinea, West Africa, where SRG’s main asset, the Lola Graphite project, is located.
The move will also avoid a national security review into its financing deal with China’s Carbon ONE New Energy Group (C-ONE), the Globe and Mail reported.The Canadian government has scrutinized Chinese investment in the country’s junior mining sector, and in 2022 asked three Chinese companies to sell their stakes in Toronto-listed lithium explorers after a national security review, a move that raised questions about the future of other Chinese investments in the Canadian mining sector.
Canada’s Energy and Natural Resources Minister Jonathan Wilkinson told Reuters last year that the Canadian government would not force Chinese state investors to divest their stakes in large mining companies, including Teck Resources, Ivanhoe Mines and First Quantum Minerals, to avoid policy uncertainty.
C-ONE, a private anode materials company based in China, announced in July 2023 it planned to invest C$16.9 million ($12.7 million) into SRG in exchange for 19.4% of SRG’s share capital, matching La Mancha’s stake in the company upon exercise of its anti-dilution right. The deal established C-ONE as one of SRG’s largest shareholders.
The funds will be used to advance SRG’s large-scale mine development project in the Republic of Guinea ─ the Lola graphite project ─ as well as the development of an anode material plant, the location of which is yet to be determined.
The company said at the time the transaction is subject to registration with Chinese regulatory agencies as well as the Canadian Government, pursuant to a voluntary notification filing pursuant to the Investment Canada Act.
The company said it has met with other strategic partners who have expressed interest in becoming a Tier One supplier to the Western battery end markets and has been advancing discussions with multiple parties who have expressed interest in providing financing to advance SRG towards first production.
Located approximately 1,000 km southeast of Conakry, the capital of Guinea, the Lola deposit boasts a large mineral reserve of 42 million tonnes at a grade of 4.17% graphitic carbon (Cg).
Over an estimated mine life of 29 years, it is expected to produce 54,600 tonnes of natural flake graphite annually.
SRG is currently updating the project’s feasibility study to confirm the capital and operating costs for a target initial production of 100,000 tonnes per annum, double from the initial 50,000 tpa envisioned in the 2019 feasibility study.
SRG said it aims to develop a fully integrated source of battery anode material to supply the European lithium-ion and fuel cell markets.
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