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Zijin Mining Group plans to take a 15-per-cent stake in Canadian critical minerals development company Solaris Resources Inc., becoming the latest China-based mining giant to test Canada’s critical minerals national security policy limits.
The $130-million investment by Zijin into Vancouver-based Solaris SLS-T is subject to a national security review by the federal Canadian government.
Proposed investments by China-based resource giants into Canadian critical minerals companies are once again ramping up, despite a crackdown by Ottawa in late 2022 that made it almost impossible for such transactions to occur. Industry Minister François-Philippe Champagne then said that he would only allow investments by foreign state-owned companies, which included China-based firms, under exceptional circumstances.
Vancouver-based Solaris plans to use the funds to advance its Warintza copper project in Ecuador, which it says is “one of the last remaining greenfield copper districts at low elevation and adjacent to infrastructure available globally.” If the deal closes, Zijin would be entitled to a seat on the board, thus giving it influence over the strategic direction of the Canadian mining company. Copper, alongside nickel, lithium and graphite is used in electric vehicle batteries and other lower carbon energy sources.
The move by Mr. Champagne against China in 2022 was prompted by a lax approach to oversight over foreign ownerships of the Canadian critical minerals sector in the years that came before that. Earlier that year, he allowed Canadian lithium development firm Neo Lithium Corp. to be acquired by Zijin, the same China-based firm proposing the investment into Solaris, to proceed without conducting a Section 25.3 review under the Investment Canada Act. The Zijin acquisition of Neo Lithium precipitated parliamentary hearings and put Mr. Champagne on the defensive for months.
A few years before that, Ottawa allowed China’s Sinomine to buy the Tanco lithium mine in Manitoba. Sinomine currently exports lithium mined in Canada to China for use in its EV industry. The Globe and Mail reported last year that Sinomine is planning a major expansion of Tanco to harness rare earth element cesium.
The federal government finally took an aggressive stance against China in 2022 because the superpower has used its dominance in critical minerals to exert economic pain on the West. China dominates the supply chains for many critical minerals, including lithium, cobalt and graphite. In October, China announced restrictions on exports of graphite out of the country in a move aimed at Western automakers.
As part of his tougher mandate against China in 2022. Mr. Champagne ordered Canadian companies Power Metals Corp., Lithium Chile Inc. and Ultra Lithium Inc. to divest themselves from their Chinese investors.
But a recent Globe investigation revealed that over the past six months, several proposed investments by China-based firms into Canadian critical minerals companies were in the works.
Montreal-based graphite development company SRG Mining Inc. in July announced a $16.9-million deal to sell a 19.4-per-cent stake to private-held China-based Carbon ONE New Energy Group Co. Ltd. (C-ONE).
In October, Vital Metals Ltd. announced a sale of up to 18.1 per cent to a subsidiary of China-based Shenghe Resources Holding Co. Ltd. in a deal worth about $13.3-million.Vital owns Canada’s only operating rare earths mine: the Nechalacho project in the Northwest Territories. After The Globe reported on the transaction, the Conservative Party of Canada called on Ottawa to reject the deal.
Even though Vital is based in Australia, Ottawa has jurisdiction under the Investment Canada Act to reject the deal under national security grounds, because Vital’s critical minerals assets are located in Canada.
Zijin over the years has become a power player in the Canadian mining sector. Apart from its purchase of Neo Lithium, it has also been a long-time joint venture partner with Barrick Gold Corp. in its Porgera gold mine in Papua New Guinea.
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