Ottawa move to block China investment ‘short-sighted:’ Lithium Chile

Lithium Chile says policy could potentially affect other foreign investment in Canada

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Ottawa’s decision to block Chinese investment in Calgary-based Lithium Chile Inc. was “short-sighted” and “disappointing,” a top executive from the company said on the same day the miner welcomed investment from a Canadian firm that bought the shares in question.

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Michelle DeCecco, chief operating officer of the junior lithium miner, said she was glad that a new firm had invested a “significant amount of money at a premium to the market price,” but Ottawa’s policy to discourage investment from China could “potentially affect” other foreign investment in Canada as well.

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“I think it’s short-sighted for our government to take a stance on who can invest in our company when our assets are 100-per-cent owned and operated outside of our country,” she said.

“We have a lot to learn from Chinese technology, but we also have a lot to learn about friendship … eliminating these friendships or going back in time can be a critical mistake for Canadians, for our mining companies and investment into our future.”

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In November, Prime Minister Justin Trudeau’s government ordered three Chinese companies — including Chengze Lithium International Ltd., which had purchased a 19.4-per-cent stake in Lithium Chile — to divest their investments in three Canadian junior lithium miners.

The government justified the decision by saying it was important to ensure Canada remained in control of critical minerals such as lithium, nickel and copper, which are used in electric vehicles (EVs) and are currently in high demand as countries look to meet their climate goals.

Analysts said the order was also part of a larger effort by the United States, bigger European economies and Canada to shift supply chains away from China, which dominates the EV industry, and towards friendlier nations.

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Lithium Chile does not own any Canadian assets. It runs its properties through South American subsidiaries in Chile and Argentina and is currently developing them into producing mines.

DeCecco said Lithium Chile’s partnership with Chengze was more to do with its experience in lithium extraction than gaining financial benefit.

“We do have some of the best leaders in mining in Canada. Having said that, this particular technique of lithium brine extraction is somewhat new, however, the Chinese have focused on it for far more years than us Canadians,” she said. “We have our own masters in the craft of lithium extraction, it was just an additional benefit to have that experience.”

Chengze sold its shares to Gator Capital Ltd., a Toronto-based investment consulting and asset management firm, for about $34.5 million, or 91 cents per share. DeCecco said Gator’s investment was “fair” from a financial standpoint.

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In January, Toronto-based TMX Group Inc., which runs the S&P/TSX composite index and TSX Venture Exchange — collectively home to about half the world’s publicly listed miners — said Ottawa’s decision to order the three Chinese companies to divest their stakes created “concern and uncertainty” among miners listed on the indexes.

Industry Minister François-Philippe Champagne last year said the order was the result of a “multi-step national security review process” taken under section 25.4(1) of the Investment Canada Act (ICA), which gives the government the power to require non-Canadians “to divest themselves of control of” a Canadian business if it believes the investment could be injurious to national security.

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In a bid to further strengthen foreign investment rules, Champagne tabled legislation in December that would give the industry ministry more time and authority to assess foreign transactions that might compromise national security, while also making penalties for violating the ICA more severe.

Trudeau at an event on Dec. 5 said he wants to make sure Canada is “in control” of its critical minerals so that the country’s allies can rely on the nation to supply those raw materials.

DeCecco, however, said the “global community” needs to work together to utilize its “strengths and expertise” to help meet climate goals.

“We are all fighting for the same thing, and in this case, lithium, we are stronger together,” she said.

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