Chinese Mining Company Secures 15 Percent Stake in Canadian ‘Critical Minerals’ Firm Solaris Resources

Workers drain away polluted water near the Zijin copper mine in Shanghang on July 13, 2010. Zijin Mining Group is acquiring a 15 percent stake for $130 million in the Canadian critical minerals development firm Solaris Resources Inc. through private placement on Jan. 11, 2024. STR/AFP via Getty Images

A Chinese mining company is acquiring a 15 percent stake in the Canadian critical minerals development firm Solaris Resources Inc. This move marks the latest challenge presented by Chinese mining giants to Canada’s national security policy on critical minerals.

Solaris revealed a subscription agreement with China-based Zijin Mining Group Jan. 11. The deal involves a roughly $130 million private placement of Solaris common shares at a subscription price of $4.55 per share by a Zijin affiliate. A private placement is a sale of stock shares or bonds to selected investors and institutions rather than on the open market.

As per the agreement, Zijin can nominate a member to the board of directors at Solaris as long as it holds a minimum 5 percent of the outstanding common shares. The agreement also entitles Zijin to participation rights to purchase additional securities under certain circumstances to maintain its proportionate interest in the company.

Zijin, based in Fujian Province, is largely owned by a Chinese municipal-level state-owned investment company, Minxi Xinghang. The agreement with Solaris represents its recent effort to establish a presence in a Canadian mining company. In 2021, Zijin sought to acquire all outstanding common shares of the Canadian lithium development firm Neo Lithium Corp. for $960 million.

National Security Threats

Innovation Minister Francois-Philippe Champagne faced criticism for not reviewing the potential national security impacts of Zijin’s acquisition of Neo Lithium. Foreign takeovers of Canadian companies undergo initial screening, with potential security threats facing a more thorough review under section 25.3 of the Investment Canada Act. Zijin’s purchase skipped this review, prompting parliamentary hearings and leading the government to introduce tougher policies.

In November 2022, Mr. Champagne directed three Chinese resource companies to divest their stakes in Canadian lithium firms. This included Sinomine Rare Metal Resources Co. Ltd. divesting its investment in Power Metals Corp., Chengze Lithium International Ltd. divesting its investment in Lithium Chile Inc., and Zangge Mining Investment Co. Ltd. divesting its investment in Ultra Lithium Inc.

Mr. Champagne presented a bill later that year to amend the Investment Canada Act and address “changing threats that can arise from foreign investment.” The proposed changes include granting the minister additional authority to extend the national security review of investments and imposing more robust penalties for non-compliance. The bill passed second reading in the Senate last month.

Critical minerals and metals, including lithium, cadmium, nickel, and cobalt, are key components in various green energy applications, ranging from wind turbines and electric cars to solar panels and rechargeable batteries. China currently dominates the global critical minerals supply chain, holding an 80 percent market share in some cases.

Canada and its allies, including the United States, are working toward reducing dependence on China and establishing independent access to resources. In late 2022, the U.S. military looked to provide funding through a national security program to Canadian mining projects seeking American public funds.

Resurge of Chinese Investment

Despite Ottawa’s toughened stance on foreign investment, Chinese mining giants have renewed efforts to establish a foothold in the Canadian mining and critical mineral sector in recent months.

Conservative MPs Rick Perkins, the shadow minister for innovation, and Shuvaloy Majumdar issued a joint Dec. 8 statement on the social media platform X, urging Mr. Champagne to conduct a security review of the proposed acquisition of shares in the Canadian rare earth development firm Vital Metals by Shenghe Resources, a Chinese company partially owned by the Chinese state.

“China’s acquisitions are once again threatening Canada’s economic security,” reads the statement.

“Conservatives demand that the Minister of Innovation, Science, Industry invoke the powers of the Investment Canada Act under section 25.3 immediately to review this deal to the maximum allowable timeline so we can protect Canadian resources and jobs from the control of the Chinese Communist Party.”

Shenghe announced its plan Oct. 23, 2023, to enter into a subscription agreement with Vital Metals, seeking to acquire up to 18.2 percent of all issued shares of the Canadian company. Vital Metals runs Canada’s only rare earths mine: the Nechalacho project in the Northwest Territories.

In July 2023, Montreal-based SRG Mining Inc. sold a 19.4 percent stake for $16.9 million to China’s Carbon ONE New Energy Group, marking another instance of a Chinese mining company entering the Canadian industry. SRG Mining operates a graphite project in the Republic of Guinea.