Ottawa did not review the potential national security impacts of a Chinese state-owned company’s plan to purchase Canadian lithium company Neo Lithium Corp.
On Oct. 10, 2021, Zijin Mining Group Ltd. announced its plan to acquire all of Neo Lithium’s outstanding common shares for $960 million. Neo Lithium’s shareholders approved the arrangement with Zijin Mining at a special meeting on Dec. 10, 2021.
Zijin Mining’s purchase of Neo Lithium did not undergo such review by Ottawa.
“The law states they have 45 days after announcement to start a review if they believe there is a specific concern,” Carlos Vicens, a spokesperson with Neo Lithium, told The Globe and Mail in an email. “The timeline passed in early December and no review was done.”
Sophy Lambert-Racine, a spokesperson with the Ministry of Innovation, Science and Economic Development—the federal agency responsible for the administration of the Investment Canada Act—said foreign investments in Canadian companies are reviewed on a case-by-case basis.
“This process is undertaken in consultation with Canada’s national security and intelligence agencies,” Lambert-Racine told The Globe in an email, adding that Ottawa is committed to defend the country’s national and economic security, “which includes strong consideration for critical mineral assets.”
Lithium is the lightest known metal with the greatest electrochemical potential, and is therefore critical to electric vehicles and other consumer electronics, according to the Neo Lithium website. Global lithium consumption is estimated to increase between 3 to 5 times over the next decade due to the increased use of electric vehicles.
Wesley Wark, senior fellow at the Ontario-based Centre for International Governance Innovation, told The Globe that he expected Ottawa to scrutinize the Zijin Mining deal, due to fears for disruption of critical mineral supply in North America and the potential loss of intellectual property to China.
“I would imagine that this would go to [a formal security review] because it’s an early test case with the new strategy that the government is developing on critical minerals,” Wark said, adding that Ottawa “would look very negatively” to a Chinese acquisition of a Canadian critical minerals company.
The Chinese state-owned Zijin Mining, which saw a net profit of roughly US$ 1.76 billion in the first three quarters of 2021, said it is “rapidly positioning itself among the global Tier 1 miners.”
Prior to Neo Lithium, Zijin Mining had acquired two other Canadian mining companies. In December 2018, it gained 100 percent ownership of the Vancouver-based Nevsun Resources Ltd, and in 2020, it bought 68.7 percent of Continental Gold Inc.
Neo Lithium is currently developing a mine in the “Lithium Triangle” in northwest Argentina. The “3Q project” is the world’s top three lithium brine projects in terms of grade, the seventh-largest in term of size, according to Neo Lithium President and CEO Waldo Perez.