Miners jittery as Canada tightens foreign investment rules By Reuters

By Divya Rajagopal

TORONTO (Reuters) – Junior mining companies hoping to produce lithium, nickel and other green energy metals are concerned that Canada’s crackdown on some foreign investors could limit their ability to raise funds for mines and related facilities.

Last fall, Ottawa proposed to strengthen its Investment Canada Act (ICA) to give government ministers the power to block or cancel critical mineral investments if they believe such deals threaten national security. The changes would essentially give the government more control over companies listed on the Toronto Stock Exchange and are expected to end this spring.

That tension will be top of mind at this week’s Prospectors and Developers Association of Canada (PDAC) annual conference in Toronto, one of the world’s largest gatherings of mining companies and their financiers.

Nearly half of the world’s mining companies are listed in Toronto and the city has long been a top destination for junior mining companies to raise funds, even ahead of rival exchanges in Sydney, New York and London.

“The ICA review process could be lengthy and unpredictable, creating uncertainty for potential investors and making it difficult for junior miners to attract investment,” said Stephen Payne, who heads the energy and natural resources team at consultancy BDO Advisory. .

The changes are widely seen as a defensive move against China, which has invested $7 billion in Canada’s base metals sector over the past 20 years, according to S&P Market Intelligence. Last fall, Canadian officials ordered Chinese companies to sell stakes in three Toronto-listed lithium companies, two of which are developing mines outside of Canada.

“The effect of these orders was to scare off investors and probably drive capital and mining entrepreneurs to other jurisdictions,” said Paul Fornazzari, a lawyer for one of the companies forced to dump its Chinese investors.

Industry Canada, which is spearheading the rule change, called critical minerals “key to our country’s future prosperity.”

“We are determined to work with Canadian companies to attract foreign direct investment from partners who share our interests and values,” said a spokesman for Industry Minister Francois Philippe Champagne.

However, the government crackdown could pick up and hurt Canada as the mining industry underpins a large part of the country’s economy, investors and analysts say.

“Certainly the implications of a decision to restrict a major avenue of capital flow need to be supplemented by capital of a similar size and timely,” said Dean McPherson, head of global mining at the Toronto Stock Exchange.

Last year, Ottawa had launched plans to invest C$3.8 billion ($2.79 billion) to boost Canada’s critical materials sector and expedite mining permits.

“The government needs to realize that it is potentially creating a gap that needs to be filled,” said Pierre Gratton, president of the Mining Association of Canada, an industry trade group.

($1 = 1.3603 Canadian dollars)