Canadian government clears China’s acquisition of Canadian lithium miner

In January 2022, the Canadian government authorized a Chinese state-owned investor, Zijin Mining Group, to acquire Canadian lithium miner Neo Lithium Corp (“Neo Lithium”) for approximately $960 million. While the decision follows two significant recent developments, the January 2020 finalization of a Canada-US plan to secure supply chains for critical minerals; and the release in March 2021 of updated national security review guidelines that list critical minerals, including lithium, as well as investments by state-owned or state-influenced actors such as key areas of concern for the Canadian government, this is a remarkable development in Canadian foreign affairs. investment policy.

In recent years, Canada has invoked national security concerns by deciding to block several high-profile deals involving Chinese state investors and sensitive Canadian industries. This includes Shandong Gold Mining’s 2020 bid to acquire TMAC Resources Inc., which owned a gold mine in the Canadian Arctic, and China Communications Construction Company International Holding Limited’s 2018 bid to acquire Aecon Group Inc. ., one of the largest infrastructure construction companies in Canada. At the end of 2021, Canada also demanded that China Mobile divest itself of its Canadian subsidiary, CMLink, for national security reasons.

The government’s decision to allow the acquisition of Neo Lithium to proceed is notable for a number of reasons.

First, despite recent policy developments that have created an increased potential for difficulty in obtaining required approvals, this indicates that Canada is not closed to state investors in certain scenarios, even in critical economic sectors, and that the policies are not intended to prohibit otherwise non-problematic investments.

Second, it underscores the fact that the national security process is extremely fact-based and a number of factors will be considered, none of which are decisive in themselves. Although the Canadian government releases very little public information regarding the national security review process and the factors considered in specific cases, recent comments by the federal Minister of Innovation, Science and Industry François-Philippe Champagne are instructive. The minister said the review determined that Neo Lithium is “definitely not a Canadian company” because its assets are in Argentina, its directors are in the UK and it has only three Canadian employees.

Third, although still at high levels, there appears to be a significant reduction in diplomatic tensions and rhetoric between Canada and China following the release of two Canadian citizens from Chinese prison and the return of the Chinese national. Meng Wanzhou in China in late 2021 after an agreement was contacted by US law enforcement to end criminal charges against him. Importantly, tensions with China were cited as a factor in rejecting the TMAC Resources transaction, and so the state of diplomatic relations between Canada and investor states can be expected to continue. to play an important role in the national security review process.

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