Canada: Chinese Investors Can Retain Stakes in Canadian Mining Firms

Canada will not compel state-owned Chinese investors to divest their shares in three major mining firms as it could cause policy ambiguity, Reuters reported on Wednesday.    

Canada requested three Chinese firms to divest their shares in Toronto-listed lithium explorers in November, citing national security concerns.    

China retaliated by claiming that the Canadian government was using national security concerns as an excuse and that the order to divest violated international trade and market regulations.    

The move was also criticized by the mining industry and raised uncertainty about other Chinese investments in Canada's mining sector.    

"If you start looking backward at investments, it will create all kinds of uncertainty about whether an investment is ever really an investment," Natural Resources Minister Jonathan Wilkinson told Reuters on the sidelines of the Prospectors and Developers Association of Canada (PDAC) conference in Toronto this week.  

The Minister also voiced Canada’s concern about Chinese state-owned enterprises exerting "control" over Canadian mining companies through long-term off-take agreements, which secure exclusive long-term supply of metals at certain prices.    

Chinese state-owned enterprises are the largest single shareholder in three of Canada's major mining companies - Teck Resources, Ivanhoe Mines Limited, and First Quantum Minerals Limited.    

China's state-owned CITIC Metal Group owns 26% in Ivanhoe Mines, the sovereign wealth fund China Investment Corp owns a 10.3% stake in Teck, while China's largest copper producer Jiangxi Copper Corp Ltd owns 18.3% in First Quantum Minerals, Reuters reported based on Refinitiv data.  

To diversify their supply chain in battery metals, Canada and its allies are seeking to decouple from China.    

As part of the effort, Canada plans to introduce a revised Investment Canada Act, which will either reject or impose conditions on foreign investments that the government deems a risk to national security.  

The Act doesn’t endanger Canada’s trade with China, Wilkinson explained.

"Of course, Canada will continue to have trade with China, some of that may involve trade in critical minerals."