© Reuters. File Photo: Visitors gather at the booth at the Prospectors and Developers Association of Canada (PDAC) annual conference in Toronto, Ontario, Canada, March 1, 2020. REUTERS/Chris Helgren/File Photo
By Divya Rajagopal
TORONTO (Reuters) – Junior mining companies hoping to produce lithium, nickel and other green energy metals could be restricted from financing mines and related facilities due to Canada’s crackdown on some foreign investors I am concerned that there is
Last fall, Ottawa proposed strengthening the Canadian Investment Act (ICA) to give ministers powers to block or roll back investments in critical minerals if they determine that such investments threaten national security. The changes, which essentially increase government control over companies listed on the Toronto Stock Exchange, are expected to be finalized this spring.
This tension will be a top concern at the annual meeting of the Canadian Association of Prospectors and Developers (PDAC) in Toronto this week, one of the world’s largest gatherings of mining companies and their funders.
Nearly half of the world’s mining companies are listed in Toronto, and the city remains a prime destination for junior mining companies to raise capital, ahead of competing exchanges in Sydney, New York and London. increase.
“ICA’s review process is lengthy and unpredictable, creating uncertainty for potential investors and preventing junior miners from attracting investment,” said Stephen Payne, head of the energy and natural resources team at consultancy BDO Advisory. can make it more difficult to
The change is widely seen as a defensive move against China, which has invested $7 billion in Canada’s base metals sector over the past two decades, according to S&P Market Intelligence. Last fall, Canadian authorities ordered a Chinese company to sell stakes in three Toronto-listed lithium companies. Two of the companies are developing mines outside of Canada.
“The impact of these orders has likely spooked investors and forced capital and mining entrepreneurs into other jurisdictions,” said an attorney at one of the companies forced out by Chinese investors. Paul Fornazari said.
Canada’s Department of Industry, which is spearheading the rule change, has called critical minerals “key to our country’s future prosperity.”
A spokeswoman for Industry Minister François-Philippe Champagne said: “We are determined to work with Canadian companies to attract foreign direct investment from partners who share our interests and values.”
But investors and analysts say a return to government crackdowns could hit Canada hard as mining powers a large part of the country’s economy.
Dean McPherson, head of global mining at the Toronto Stock Exchange, said: “It is clear that the impact of the decision to limit the primary means of capital flow will need to be complemented by similarly sized and timely capital. No doubt,’ he said.
Ottawa last year launched a plan to invest C$3.8 billion ($2.79 billion) to boost Canada’s own vital raw materials sector and simplify mining permits.
Pierre Gratton, president of the Canadian Mining Association, an industry group, said: “Governments need to be mindful that they may create gaps that need to be filled.”
($1 = 1.3603 Canadian dollars)