Within days of Canada outlining new investment stipulations for state-owned entities aimed at protecting the country’s critical minerals sector, the Canadian government last week told three Chinese resource companies to divest their interests in Canadian critical mineral firms.

Basing the decision on “facts and evidence and on the advice of critical minerals subject matter experts, Canada’s security and intelligence community, and other government partners,” Canada’s Minister of Innovation, Science and Industry declared in a statement:

“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. In accordance with the [Investment Canada Act], 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.

Therefore, we reviewed a number of investments in Canadian companies engaged in the critical minerals sector, including lithium. These companies were reviewed via the multi-step national security review process, which involves rigorous scrutiny by Canada’s national security and intelligence community. As a result of that process, the Government of Canada has ordered the divestiture of the following investments by foreign investors in Canadian critical mineral companies: 

• Sinomine (Hong Kong) Rare Metals Resources Co., Limited is required to divest itself of its investment in Power Metals Corp.
• Chengze Lithium International Limited is required to divest itself of its investment in Lithium Chile Inc.
• Zangge Mining Investment (Chengdu) Co., Ltd. is required to divest itself of its investment in Ultra Lithium Inc.”

As Reuters columnist Andy Home observes, the new policy on critical mineral investment is both “wide ranging and far-reaching:”

“It’s not just China’s state-owned players that will come in for extra scrutiny, but also any private investors ‘assessed as being closely tied to, subject to influence from, or who could be compelled to comply with extrajudicial direction from foreign governments.’”

What’s more, he argues, “the policy covers not just mining but all stages of the minerals processing chain.”

The ramifications of Canada’s move will stretch beyond our neighbors’ borders. For one, it hardens the already drawn “geopolitical battle-lines in the metals sector” between the West and adversary nations, i.e. China.

It also places additional pressure on all segments of the already strained  U.S. critical minerals supply chain.

The recently passed congressional Inflation Reduction Act contained sourcing requirements for EV credits.  Observers have outlined that, while sending an appropriate message, the requirements also represent an “almost insurmountable challenge” as “considering it takes seven years to build a mine and refining plant but only 24 months to build a battery plant, the best part of this decade is needed to establish an entirely new industry in the United States.”  

The global push towards net zero carbon emissions, which has received fresh impetus with the COP 27 climate summit commencing today in Sharm El Sheik, will further up the ante.

While we are still days and maybe weeks away from leaving the Congressional midterm election with all its theatrics in the rear view mirror, policymakers and other stakeholders would be well-advised to shift focus from politics to policy, and act swiftly and decisively to bolster North American supply chains.