Alberta miner replaces Chinese investor that Ottawa barred from owning Canadian assets

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Lithium Chile Inc., one of three Canadian miners affected by Ottawa’s snap decision to block Chinese investment in critical minerals, said the order has been satisfied, although it regrets losing an “incredible shareholder” that supplied valuable expertise.

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Chengze Lithium International Ltd. had purchased a 19.4 per cent stake in Lithium Chile, making it one of the Calgary-based company’s largest shareholders. Chengze sold its shares to Gator Capital Ltd., a Toronto-based firm that focuses on investment consulting and asset management. The transaction was completed for about $34.5 million, or 91 cents per share.

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“The order has been satisfied,” Michelle DeCecco, Lithium Chile’s chief operating officer, said in an emailed statement on Feb. 16. “While we regret the situation has resulted in us losing an incredible shareholder with a valued expertise in lithium brine, we welcome a shareholder who clearly sees the value of our company, paying a premium to market for our shares.”

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In November, Prime Minister Justin Trudeau’s government ordered three Chinese companies, including Chengze, to divest their investments in Lithium Chile and two other Canadian junior lithium miners.

The government justified the surprise move 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 and are currently in high demand as nations look to meet their climate goals. However, analysts also said the order was part of a larger effort by the United States, bigger European economies and Canada to shift their industries’ supply chains away from China, which dominates the electric vehicle 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. The company’s chief executive, Steve Cochrane, thanked Chengze for its support in a press release and said that the new investment “recognizes the inherent value” in Lithium Chile’s assets.

Vancouver-based Power Metals, one of the other affected miners, found a replacement for its Chinese investor, Sinomine Rare Metals Resources Co., through Australia’s Winsome Resources Ltd. in December.

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

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Industry Minister François-Philippe Champagne said last year that 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.

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

Trudeau said at an event on Dec. 5 that he wants to make sure Canada is “in control” of its critical minerals so that the country’s allies can rely on the nation at a time when the demand for these minerals have increased primarily due to the rise in sales of electric vehicles globally, as the world looks to shift away from fossil fuels.

• Email: nkarim@postmedia.com | Twitter: naimonthefield