Preview: Miners grow anxious as Canada tightens foreign investment rules

Lithium Chile

06/03/2023 12:00

(Repeats to additional subscribers)
    By Divya Rajagopal
       TORONTO, March 5 (Reuters) - Junior mining companies
hoping to produce lithium, nickel and other green energy metals
are worried that Canada's crackdown on some overseas investors
may limit their ability to raise funds for mines and related
facilities.
    Ottawa last fall proposed bolstering its Investment Canada
Act (ICA) to give government ministers power to block or unwind 
critical minerals investments if they believe such deals
threaten national security. The changes would essentially give 
the government greater control over companies listed on the
Toronto Stock Exchange and are expected to be finalized this
spring.
    That tension will be top of mind at this week's annual
Prospectors and Developers Association of Canada (PDAC)
conference in Toronto, one of the world's largest gatherings of
mining companies and their financiers.
    Nearly half of the world's mining companies are listed in 
Toronto and the city has long been a premier destination for
junior mining companies to raise funds, above even rival
exchanges in Sydney, New York and London. 
    "The ICA review process could be lengthy and unpredictable,
leading to uncertainty for potential investors and may make it
more difficult for junior miners to attract investments," said
Stephen Payne, who runs the energy and natural resources team at
consultancy BDO Advisory.
    The changes are widely seen as a defensive measure against
China, which has invested $7 billion in Canada's base metals
sector in the past 20 years, according to S&P Market
Intelligence. Canadian officials last fall ordered Chinese
companies to sell stakes in three Toronto-listed lithium
companies, two of which are developing mines outside Canada.  
    "The effect of these orders was to spook investors and
likely drive capital and mining entrepreneurs to other
jurisdictions," said Paul Fornazzari, an attorney for one of the
companies forced to shed its Chinese investors.    
    Canada's Industry Ministry, which is spearheading the rules
change, called critical minerals "key to the future prosperity
of our country."    
    "We are determined to work with Canadian businesses to
attract foreign direct investments from partners that share our
interests and values," said a spokesperson for Industry Minister
Francois Philippe Champagne.    
    However, the government's crackdown could rebound and hurt
Canada as the mining industry underpins a large part of the
country's economy, investors and analysts say.
    "No doubt the implications of a decision to restrict a major
avenue of capital flow needs to be supplemented by capital that
is similar in size and timely," said Dean McPherson, head of
global mining at the Toronto Stock Exchange.    
    Ottawa last year had launched plans to invest C$3.8 billion 
($2.79 billion) to boost Canada's own critical materials sector
and streamline mine permitting.
    "The government has to be mindful that they're potentially
creating a gap that has to be filled," said Pierre Gratton,
president of the Mining Association of Canada, an industry trade
group.
    
($1 = 1.3603 Canadian dollars)

 (Reporting by Divya Rajagopal; Editing by Josie Kao)
 ((divya.rajagopal@thomsonreuters.com;))