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Canada orders 3 Chinese firms to divest from mining companies over security concerns

China's President Xi Jinping. (Alexei Nikolsky/Russian Presidential Press and Information Office/TASS/Abaca Press/TNS)
November 03, 2022

The Canadian government has ordered three Chinese firms to divest from Canadian mining companies after a security review determined their investments undermine Canada’s national security. The divestment order comes as China is seeking to replace the U.S. and its allies as the dominant global power.

On Thursday, Canadian Minister of Innovation, Science and Industry François-Philippe Champagne announced the divestment order against Sinomine Rare Metals Resources Co., Limited; Chengze Lithium International Limited and Zangge Mining Investment Co., Ltd. Canada ordered the divestment under the Investment Canada Act (ICA).

“While Canada continues to welcome foreign direct investment, we will act decisively when investments threaten our national security and our critical minerals supply chains, both at home and abroad,” Champagne said. “In accordance with the ICA, foreign investments are subject to review for national security concerns, and certain types of investment—such as those in the critical minerals sectors—receive enhanced scrutiny.”

Under the order, Sinomine must divest from Canada’s Power Metals Corp. Last year the Canadian mining company announced a deal with Sinomine in which the Chinese firm would provide equity financing for a new mine in northern Ontario in exchange for an offtake of some of the lithium, cesium and tantalum the mine produces.

The Canadian government order requires China’s Chengze Lithium International must divest from Lithium Chile Inc. The Wall Street Journal reported Chengze Lithium International Ltd. had purchased almost 30 million shares in the Alberta-based mining company, giving it a more than 19 percent stake in the company.

Zangge Mining Investment must divest from Ultra Lithium Inc. In June, the Canadian mining company announced Zangge Mining Investment invested $10 million in the Canadian company. The Chinese firm also paid $40 million to Ultra Lithium’s Argentine subsidiary, Ultra Argentina S.R.L., giving it a 65 percent ownership stake in that company.

China has controlled a major portion of the rare earth mineral supply. The U.S. has been trying to end its dependence on China for such materials, which are critical in making certain weapons systems.

While the U.S. and it’s North Atlantic Treaty Organization (NATO) allies, including Canada, have been wary of China’s rising global influence, Chinese firms have gained influence in critical industries throughout the west, including shipping and telecommunications.

Last week, Germany allowed a Chinese firm to take an approximately 25 percent ownership stake in one of the four major shipping terminals in the port city of Hamburg. The city serves as the largest port in Germany and the third largest in Europe. The sale was authorized after the Chinese shipping firm initially sought a 35 percent stake.

German Chancellor Olaf Scholz’ cabinet ultimately settled for allowing the Chinese company to take a 24.9 percent stake in the Hamburg port terminal. His cabinet determined that ownership stake would be an acceptable limit before the Chinese firm’s could become a source of harm to the terminal’s operations.