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China’s Play for Lithium in Canada — A Stronger Focus on National Security in Critical Mineral Resource Policy Warranted

As the United States continues to look for ways to shore up and secure its critical mineral supply chains, a business deal involving China is raising eyebrows for some of our neighbors to the North.

An October 2021 announcement by Chinese state-owned enterprise Zijin Mining Group Co. Ltd that it would purchase Canadian lithium miner Neo Lithium had opened up a 45-day window during which the Canadian federal government could have conducted a review of the takeover.

The Canadian Conservative Party is now lamenting that no such review took place. Citing national security concerns, Conservative members of parliament Michelle Rempel Garner and Ed Fast said in a publicly released statement:

Canada is falling behind in developing its critical mineral industries, and allowing the foreign takeover of companies like Neo Lithium without due diligence could further weaken our strategic interest in developing a domestic supply of lithium and other critical minerals.(…)

Canada’s Conservatives are calling on the Liberals to immediately conduct a national security review of the takeover under the Investment Canada Act and to explain why a national security review was not completed in the first place.”

Foreign takeovers of Canadian companies are subject to an initial security screening by the government.  If the initial screening concludes that the takeover constituted a threat to Canada’s national security, it would trigger a more formal review under Section 25.3 of the Investment Canada Act, and the deal could be blocked.

While Neo Lithium’s project — the 3Q mine — is located in Argentina, it could play an important role in supplying Canada’s lithium needs at a time when the country is not extracting the material within its own borders.

The development ties into the broader North American context of the United States and Canada having formalized a joint action plan on critical minerals in 2020 which included commitments by both governments to strengthen North American battery material supply chains against the backdrop of China’s ever-tightening grip on global supplies.

A stronger focus on critical mineral resource security through the prism of national security is certainly warranted, not just for our Canadian friends, but also from a U.S. perspective.

As Tsvetana Paraskova notes in a piece for Oilprice.com“while the Administration was reviewing supply chain issues and vulnerabilities to its demand for critical minerals, China is moving in on Africa and South America to strike alliances and lend money to mineral resource-rich African countries, while Russia is thought to be providing shadow ‘security services’ in some African nations with a mercenary organization with links to the Kremlin.” 

Followers of ARPN know all too well that as the green energy transition accelerates, we will be facing significant critical mineral resource shortfalls.  For the United States (and for our close allies), the time to act is now. As Paraskova concludes, “(…) otherwise, America’s clean energy goals and hi-tech and automotive supply chains could depend on China.”