New rules from Ottawa bolstering the Investment Canada Act (ICA) to give government ministers power to block or unwind foreign investment in critical minerals are expected to be top of mind at this week’s annual Prospectors and Developers Association of Canada conference in Toronto.Len Wagg/HALC
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 US$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 François-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 $3.8-billion (US$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.