After greater than a decade of aggressive enlargement, China now stands tall because the world’s largest mining producer and financier by some margin. It’s the leading miner of aluminum, coal, gold, magnesium, tin, zinc, manganese, tungsten, phosphate, nitrogen, potash, and different important minerals.
Canada, which was once a number one drive within the mining sector regardless of its small demographic measurement and funding pool, is now on the bottom end of the worldwide prime 10 producers. Nonetheless, China is seeking to capitalize on the extent of Canada’s mining community nationally and world wide with a purpose to advance its pursuits. With Canadian mining firms determined for money and the Canadian authorities displaying little curiosity in investing cash of its personal within the sector (particularly compared to China), Chinese language corporations are benefiting from their management place to spend money on Canadian mining operations. Even considering the federal government’s current Investment Canada Act (ICA) and the Critical Minerals Strategy, China has made Canadian efforts look paltry by comparability.
As a part of Canada’s goals to cut back Chinese language financial affect in Canada, the Canadian authorities carried out the ICA in late 2023. The ICA provides the federal government the flexibility to evaluation and switch down any overseas investments if they’re deemed not useful to the Canadian financial system and society, whereas selling “optimistic overseas funding.” The national security component of the ICA is alleged for use to reject Chinese language mining funding in Canada.
The ICA is complemented by the current Vital Minerals Technique, which goals to decouple Canada’s mining provide chains from China and different adversary nations, whereas stimulating the Canadian and allied important mineral sector. Consistent with these methods, Canada ordered three Chinese language corporations to divest from their Canadian mining investments in November 2022, two of which have been based mostly in Hong Kong.
Nevertheless, early this yr, Zijin Mining purchased a 15 p.c stake in Canadian-owned Solaris, presenting a check to the ICA and Vital Minerals Technique. Most lately, Chengdu-based Shenghe Sources acquired a stake in Australian firm Vital Metals, which owns a uncommon earths mine within the Northwest Territories, a deal that included shopping for the mine’s total uncommon earths stockpile. China’s Simonine Useful resource Group additionally bought one among Canada’s solely two lithium mines in Manitoba in 2019, a transfer that was left unchallenged.
Jiangxi Copper, one of many largest Chinese language state-owned mining firms, additionally took over a majority stake in First Quantum Minerals, a Canadian firm, in November 2023, which up till lately operated a copper mine in Colón, Panama price over 5 percent of Panama’s complete gross home product, in addition to different massive mines in Latin America, Africa, and elsewhere.
The state-run China Investment Corporation can be the most important shareholder in Teck Sources and Ivanhoe Mines, each based mostly in Vancouver.
The ICA has but to make a dent in these investments.
These methods won’t actually work till there’s a severe effort to convey home and allied capital into the Canadian mining sector, which desperately wants it. The Canadian authorities and mining firms are caught in a tough place: whereas they could not agree with China’s ideological or geopolitical posture, China is the worldwide chief within the mining sector, and has the vitality and cash to maintain the home trade. Minister of Pure Sources Jonathan Wilkinson even went as far as to say that “after all Canada will proceed to have commerce with China, [and] a few of which will contain commerce in important minerals.”
China has developed a outstanding position as a financer within the nation, which has spiked since Xi Jinping’s rise to energy in 2012. Within the 12 years since, China has been probably the most aggressive financier of mining operations on the earth, having invested $1.3 trillion in over 20,000 initiatives in 165 middle- and low-income nations. The first instance of Chinese language mining funding in Canada got here in February 2012, when the agency Cameco, obtained unspecified however “considerable” Chinese language funding earlier than seeing file earnings within the first quarter of the identical yr. Later in September, Canada signed a Foreign Investment Promotion and Protection Agreement with China, which might increase Chinese language mining funding in Canada.
Now, China has hyperlinks to greater than two dozen Canadian mining firms with stakes in important minerals. This has not been with out its controversies. In 2016, a report from the CBC outlined that Canada was making “too-rosy investment pitches” to China within the mining sector, with Canada overhyping its mining sector and financial incentives to entice funding from China.
With a rising want for capital and confronted with few alternate options, nonetheless, Canadian mining firms are persevering with to just accept Chinese financing and investment. Whereas the worldwide demand for important minerals rising, many Canadian mining firms – and the Canadian authorities together with it – have been unable to fulfill that demand. Corporations, particularly smaller and medium-sized firms, are barely worthwhile and face difficulties attracting investment. Mining, in an more and more unpredictable geopolitical setting and one the place anti-mining protests are so widespread and disruptive, is a dangerous and dear enterprise.
China, nonetheless, with its almost limitless money and bold elite class, is blissful to fill the hole. In 2023, China’s metals and mining funding reached a record $19.4 billion, a 158 p.c improve from 2022, with China’s Uncommon Earth Parts mining sector liable for 60 percent of all production.
Usually, China accounted for about 28 p.c of all mining output in 2020, with that share solely more likely to improve. China is the world’s largest producer of electrical autos, batteries, photo voltaic panels, and wind generators, and its mining energy helps maintain this manufacturing.
Mining, particularly in important minerals, is immensely vital to Canada’s financial, vitality, geopolitical, and safety pursuits, however Canada has few alternate options. Regardless of the passing of the Inflation Reduction Act within the U.S., and significant mineral funding alternatives from the Division of Vitality and Division of Protection, funding will not be flowing on the ranges wanted to maneuver the dial. The Biden administration has carried out packages such because the China and Transformational Export Program by way of the U.S. Export-Import Financial institution to stem the bleeding, however China retains its comparative benefit on this sector and an absence of personal funding from the West is conspiring towards a significant disruption to its pole place.
There are nonetheless a couple of coverage alternate options Canada and its allies haven’t tried. Selling home funding by way of public financial measures might enable for larger capital circulation into Canadian mining. Choices might embody the federal authorities encouraging stock buy-backs, or offering low-cost loans for mining traders, just like the Inflation Reduction Act does for the U.S. It might set up strategic reserves of important minerals much like the petroleum reserves organized by way of the Worldwide Vitality Company.
It will even be useful to make the regulatory course of round mining, which on average takes years if not many years to finish, swifter, cheaper, and simpler to navigate. Doing so would make investments much less dangerous as nicely, given the shorter time horizons they might require earlier than the beginning of operations, which typically can imply fluctuating commodity costs (and with that, fluctuating revenue).
Encouraging different, extra pleasant overseas actors, just like the U.S. or Australia, to spend money on Canadian mining is also one other appreciable choice. If Canada might negotiate some form of mining settlement or funding deal past present free commerce agreements, it might increase bilateral mining cooperation. Reducing the regulatory bar of entry for overseas funding from allied nations just like the U.S. and Australia can be a big assist. Canadian mining executives themselves are asking for it.
Each the U.S. and Australia have already expressed concerns over China’s dominance within the mining and significant minerals sectors, and pushed again towards Chinese language acquisition of Western mining operations. But, the dearth of overseas capital from exterior China has made the shift difficult, and different nations might want to step up if they need a bigger position in the way forward for the mining sector – particularly with international demand for important minerals expected to increase. This sort of public backing and multilateral cooperation might simply be the important thing to rising vitality independence.
This text was originally published by the Macdonald-Laurier Institute and is reprinted with permission.
