Cash-Hungry Canadian Miners Test Grey Area of Anti-China M&A Rules

Nearly two years after Canada moved to restrict foreign investment in the country’s mining sector, minerals explorers and developers are testing the limits of those rules. The Canadian government cracked down on mining deals involving foreign state-owned entities in 2022 in a move widely seen as targeting China’s influence in the global critical minerals supply chain, but which threatens to deprive smaller miners and developers of a key source of financing. Canada’s federal government has tightened rules even further since 2022, with measures announced in July that will only allow foreign takeovers of Canadian mining companies involved in critical minerals in “the most exceptional of circumstances.” “While the government continues to welcome foreign direct investment, those in the critical minerals sectors receive enhanced scrutiny,” Canada’s Innovation Department said Friday in an emailed statement. “The government must examine each investment on a case-by-case basis, to ensure the merits of each investment and to ensure that Canada remains open to desirable foreign direct investment.” Canada’s earliest moves under the foreign restriction rules were in November 2022, when it forced three Chinese firms to divest from a trio of Canadian junior lithium explorers whose assets were mostly in Latin America. “The general understanding is that the government’s not likely to approve an investment in critical minerals from a foreign state-owned entity that does not share similar interests and values as Canada,” he said.