Canada is set to take a far more protectionist trade stance against China, as it teams up with the United States and other Western countries in a concerted effort to secure supplies of critical minerals that are key to a lower carbon future.
Since the early 2000s, China has directed its state-owned companies to invest abroad to secure long-term supplies of critical minerals and it has invested billions in Canada as part of that program. For the most part, Ottawa has taken a laissez-faire approach, allowing Chinese acquisitions of Canadian critical minerals companies, permitting Chinese companies to take large stakes in critical minerals mines, and allowing Chinese companies to hoover up offtake agreements that allow them to control the metals produced by Canadian companies.
But, Jonathan Wilkinson, federal Natural Resources Minister, signalled in an interview that Ottawa is getting ready to crack down on the deluge of Chinese investments into Canadian critical minerals.
“We will need to be very thoughtful going forward about what we are willing to allow,” he said.
“It is not just true of ownership, but I think we also have to be looking at things like long-term offtake agreements. Canada needs to ensure that it is protecting itself in an area that is clearly strategic, and ensuring that those supply chains will be robust for our allies.”
Last year, Canada deemed 31 minerals both crucial to the country’s economic security, and necessary as the world moves away from fossil fuels into cleaner energy sources. Those minerals include lithium, battery grade nickel and cobalt, as well as rare earth metals used in the high tech, defence and alternative energy sectors.
China dominates the critical minerals and rare earths space, with a particular stranglehold on battery metals such as lithium and cobalt. While Ottawa has authority to block Chinese investments in Canadian critical minerals assets, if it feels there is threat to national security, it hasn’t always followed through with action.
Earlier this year, Canada allowed the sale of Canadian lithium development company Neo Lithium Corp. to Chinese state-owned Zijin Mining Group Co. Ltd. without conducting an in-depth security review. In 2019, Ottawa approved the sale of the Tanco lithium mine in Manitoba to Sinomine Resource Group Co., Ltd. of China, again with no full security review.
Mr. Wilkinson conceded that Canada and other Western countries have misjudged China over the years, thinking it would become more co-operative in trade, when the opposite actually happened. In the recent past, China has not hesitated to use trade as a weapon against Canada. After the 2018 arrest of Huawei chief financial officer Meng Wanzhou at Vancouver International Airport, Canada lost $4.5-billion in exports to China the following year.
“The idea that somehow China would become more engaged and more respectful of the rules of the international community, that has not happened,” Mr. Wilkinson said.
“The Chinese regime has become increasingly clear that they have a different perspective on how they will operate. And I think that’s changed the way in which we need to view our relationships and what we are willing to allow. And so I do think that it is appropriate for us to pause and reflect on whether we will allow those kinds of transactions going forward,” he said referring to the sale of the Tanco lithium mine.
Canada’s tougher talk on China comes amid a North America-wide bid to bolster weak supply chains of critical minerals.
The Biden administration’s point man on securing supplies of rare earth minerals told The Globe and Mail that more and more Western countries are teaming up as part of Washington’s co-ordinated push to counter Beijing’s dominance.
Jose W. Fernandez, under secretary of state for economic growth, energy and the environment, said the U.S. has concluded a rare earth mineral strategy partnership with a group of countries including Canada, Australia, France, Finland, Sweden, Germany, Japan, Britain and South Korea.
“It is designed to deal with the supply chain vulnerabilities that many countries have. That is, the critical minerals that we need to achieve for our clean energy future,” he said in an interview.
One of the key parts of the partnership is for countries to share information on critical and rare earth deposits and to find Western investors to develop the mining and processing facilities.
The goal is also to share financing with government development banks as well as the private sector, he added.
The Canadian government meantime is soliciting feedback from the public to help guide its soon-to-be unveiled critical minerals strategy. On Tuesday, Ottawa released a discussion paper that provides early insight into where support is needed, and the steps the industry needs to follow to ensure responsible investment. The paper outlines the need to focus on battery minerals in particular.
At the moment, Canada is an also-ran in battery metals. There are no Canadian-owned lithium mines, or lithium refineries in production. However, Nemaska Lithium, which is part owned by the Quebec government, is developing a lithium mine and processing plant in Bécancour, Que., and hopes to be in production in 2025. Brazilian mining giant Vale Ltd. is also closing in on making a decision on the construction of a battery grade nickel refinery in Bécancour.
Anglo-Swiss mining conglomerate Glencore PLC produces small amounts of cobalt in Canada as a by-product of nickel mining. Electra Battery Minerals plans to reopen a shuttered cobalt refinery near the town of North Cobalt, Ont., late this year. Electra plans to process cobalt imported from the Democratic Republic of the Congo.
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