China Has Encroached On Canada S Critical Minerals Industry With Almost No Hindrance From Ottawa

Three years ago, Sinomine Resource Group Co., a Chinese company, quietly bought the Tanco mine in Manitoba. At the time, Tanco was one of the world’s few sources of the critical mineral cesium, a key input to atomic clocks and radiation detectors. The Mine had previously produced lithium, a battery metal used in electric cars. Although Tanco was owned by an American chemical company, Cabot Corp., Canada’s federal government had the power to block the takeover on national security grounds. But far from blocking the deal, Ottawa doesn’t seem to have given it a second look. Earlier this year, under its new Chinese ownership, the Tanco mine began producing lithium and shipping it back to China, where it feeds into the country’s massive domestic electric car industry. Tanco is now the only lithium mine operating in Canada and Sinomine has plans to expand production in the coming years. “It is known to have the highest quality lithium in the world. The grade is so high that nobody had the technology to process it,” said mining investor and shareholder activist Peter Clausi. “And fools let it go.” Mining is one of the most capital intensive industries on the planet, so historically it made sense for Canadian miners to turn to China as a source of funding. But in recent years, China has emerged as a clear threat to national security. Although Ottawa has made it clear that it does not want to be beholden to a hostile foreign power for critical minerals like lithium, there has so far been little action by the federal government to prevent that. Parliamentary hearing witnesses call for more Chinese control over Canada’s critical minerals after state-owned Zijin Mining buys Canada’s Neo Lithium Mr. Clausi is one of several mining industry watchers who have watched in horror as China has encroached on Canada’s critical minerals industry over the past 15 years with little to no hindrance. “Where was the criticism?” Bruce Downing said, who co-invented a method of his mining cesium. Lauren Quist, who works in the natural resources industry and is a longtime resident of the small forest town of Hearst, Ontario, is also shocked. “A lot of people I talk to here in Northern Ontario are aware of our vulnerability to Chinese companies buying real estate, and especially mining,” he said. Ms. Quist noted that Sinomine secured an offtake agreement earlier this year securing all the lithium, cesium and tantalum produced from Power Metals Corp.’s Case Lake critical minerals property near Kirkland Lake, Ont. . “It’s the next thing to ownership, without all the messy titles,” he said. Xinwangda Electric Vehicle Battery Co. Ltd manufactures lithium batteries for electric cars and other uses in Nanjing, China. China is among the world’s biggest lithium miners, controlling about two-thirds of the world’s refining process.STR/AFP/Getty Images Messy headlines have been plentiful this year after the federal government approved the sale of Canadian lithium developer Neo Lithium Corp. to Chinese state-owned Zijin Mining Group Ltd. The government’s decision not to order advanced security screening drew fierce criticism, culminating in parliamentary hearings that put Industry Minister Francois-Philippe Champan on the defensive. At those hearings, Mr. Champagne justified the deal by saying that Canada was unlikely to benefit from the lithium produced by the Neo project because it was so far away, in Argentina. But right now, experts say, Canada can’t afford to turn its nose up at lithium projects because that country is a bit player in the industry. China, meanwhile, is among the world’s biggest miners of the silvery-white, ultra-light metal, controlling about two-thirds of the world’s refining process. Chinese lithium manufacturer Ganfeng Lithium Co. Ltd. is the largest shareholder of Canada’s largest publicly traded lithium miner, Lithium Americas Corp., and has a significant stake in the Cauchari-Olaroz lithium project in Argentina. Canada has a similar status for cobalt. That country produces only small amounts of the vital battery metal input, while China controls about 70 percent of the market. China is even more dominant in graphite, with an 80 percent lock in the market. And While Canada is a major miner of nickel, another battery metal, it lacks refineries that can process it for the battery industry. Industry Minister Francois-Philippe Champagne said the takeover of a Canadian lithium mining company by a Chinese state-owned company earlier this year was subject to a thorough national security review – contrary to what some experts and conservative politicians have claimed. PATRICK DOYLE/The Canadian Press “How can Canada build a supply chain for lithium, or any other critical mineral for that matter, when it allows the acquisition of assets of Canadian companies by a country seeking to establish its dominance in this sector?” Jeffrey Kucharski, an adjunct professor at Royal Roads University and former deputy deputy minister of Alberta’s Department of Energy, said during parliamentary hearings earlier this year. But it is not only the critical minerals sector where China is firmly committed. Many of Canada’s largest gold and base metal mining companies – including Barrick Gold Corp., Teck Resources Ltd., First Quantum Minerals Ltd. and Ivanhoe Mines Corp. – have significant Chinese ownership, joint ventures with Chinese companies and, in most cases, Chinese representation on their boards. “The entry of Chinese interests into the Canadian scene is a big deal,” said Bob van Leeuwen, president of van Leeuwen Engineering Ltd. who has helped with university research into 3D printing with titanium. “What China is trying to do is ensure the supply of everything it needs around the world.” Chinese bots spread misinformation about Canadian rare-earth company in targeted attack, claims say After decades of laissez faire, Ottawa appears to have woken up to the possibility that Chinese interference in Canada’s mining sector could give Beijing powerful negotiating leverage. “Everyone is looking at what happened to Germany in terms of its dependence on Russia for oil and gas,” Jonathan Wilkinson, the federal natural resources minister, said in an interview in June. “Nobody wants to be in that position vis-à-vis China and Russia for critical minerals.” Ottawa, he said, “will have to be very careful going forward about what we are willing to allow.” He said both acquisitions and takeover deals would be subject to greater scrutiny. “Canada needs to make sure it protects itself in an area that is clearly strategic,” he said. Visitors attend the Prospectors and Developers Association of Canada exhibition on March 2, 2020. Fred Lum/The Globe and Mail But the evidence shows that, until recently, critical minerals were not on politicians’ radars. Just in the last 18 months Canada has begun to move with all kinds of urgency. The government came up with an official list of critical minerals last year and this year committed billions of dollars in funding to kick-start the industry. “The real problem is that until very recently nobody cared about critical minerals,” said Jack Lifton, a US-based consultant on critical minerals and rare earths. metal industry. “They were exotic and there were no shortages.” Canada is now at a fragile point, experts say, because of a lack of foresight, insufficient planning and questionable judgment to allow foreign investment in domestic assets. Instead, China’s entry into the Canadian critical minerals sector came about through a carefully planned strategy, implemented over decades. Since the early 2000s, China has led its state-owned enterprises to invest abroad as a way to secure long-term supplies of oil, natural gas and critical minerals. A key objective of the ‘Made in China 2025’ policy is to wean itself off its dependence on other countries by buying as many foreign assets as possible. Over the past 20 years, China has invested about $90 billion in Canada alone as part of this program. Beijing supports its state-owned enterprises by providing subsidies, access to cheap capital and tax breaks that are orders of magnitude greater than those offered by Western governments. This disparity in government support is a major reason Canada has lost its foothold in critical mineral industries it used to lead. In the 1990s, Canada had a thriving magnesium industry consolidated by Noranda Inc. The company was known as an innovator, particularly in the automotive sector. But in the early 2000s China flooded the world market with cheap magnesium, forcing Noranda out of the industry. Guy Saint-Jacques, Canada’s former ambassador to China, says there is no level playing field for foreign companies in China. JASON FRANSON/The Canadian Press While Canada has mostly welcomed inbound Chinese investment, there has been little or no reciprocity. “There is no level playing field for foreign companies in China, and many sectors remain closed to them or access is similarly limited,” Guy Saint-Jacques, Canada’s former ambassador to China, told a Canadian parliamentary hearing earlier this year. “China does not play by the rules of international trade.” China regularly uses its dominant position in critical minerals to exert leverage over other countries. In 2010, it temporarily halted exports of rare earth metals to Japan as the two Asian countries allied over disputed territories. The ensuing metal supply shortfall caused short-term price increases. In the year since the 2018 arrest of Huawei CFO Meng Wanzhou at Vancouver airport, Canada has lost…