Chinese money still chasing Canadian critical mining deals despite Ottawa's scrutiny

Gowest Gold

27/02/2024 11:00

By Divya Rajagopal
       TORONTO, Feb 27 (Reuters) - 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
 X.TO .
    "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  601899.SS  last month offered to buy a 15%
stake in Solaris Resources Inc  SLS.TO  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  GWA.V , the
data shows.
    Jiangxi Copper Co Ltd  600362.SS  increased its stake in
First Quantum Minerals Ltd  FM.TO  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  000975.SZ  agreed to
buy Vancouver-based Osino Resources  OSI.V  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
 LITH.V , 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  SRG.V  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)

 (Additional reporting by Julie Zhu in Hong Kong
Reporting by Divya Rajagopal
Editing by Denny Thomas and David Gregorio)
 ((divya.rajagopal@thomsonreuters.com;))