Late yesterday, the Minister of Innovation, Science and Industry issued updated Guidelines on the National Security Review of Investments (Guidelines).
In a statement accompanying the Guidelines, the Minister emphasized the importance of foreign investment in Canada: “As we work with businesses to help them recover from the effects of the COVID-19 pandemic, Canadian companies may look to global capital to help their growth. Foreign direct investment allows many of Canada’s cutting-edge, intellectual property-intensive firms to scale up and reach global customers.”
Nevertheless, the Minister highlighted in the revised Guidelines four areas where the Government sees heightened risk:
- sensitive personal data,
- specified sensitive technology areas,
- critical minerals and
- investments by state-owned or state-influenced foreign investors.
This effort to increase transparency will be welcome to foreign investors, even if the message of elevated scrutiny of certain foreign investments may not be.
Critical minerals and critical mineral supply chains
We read on a daily basis about the importance of supply chains relating to vaccine procurement and concerns about self-sufficiency in domestic production. The Canadian government is also concerned about supply chains of critical minerals, in order to ensure a steady supply of minerals and metals for a lower carbon economy, as well as rare earth metals used in high tech sectors such as aerospace, manufacturing and defence. The revised Guidelines state that the Government will take into account the potential impact of a foreign investment on critical minerals and their supply chains, referring to the Government’s Critical Mineral List.
This List notes that “critical minerals are the building blocks for the clean and digitized economy”…. Essential for renewable energy and clean technology applications (batteries, permanent magnets, solar panels and wind turbines), they are also required inputs for advanced manufacturing supply chains, including defence and security technologies, consumer electronics, agriculture, medical applications and critical infrastructure. Economies that quickly secure a position in shifting supply chains will be well situated for long-term economic growth and prosperity.
There are 31 minerals listed that are “are critical for the sustainable economic success of Canada and our allies” and to “position Canada as the leading mining nation”. They include nickel, manganese, cobalt, potash, rare earth elements, uranium and lithium, among others. The reference to “our allies” is also significant as the Canadian government is cooperating with the US on a joint action plan to secure North American access to critical minerals.
Location, location, location…Of course, for national security purposes, it is not only the mineral that can raise national security concerns, but also where the mine is located. As noted in our previous article, the federal Cabinet blocked Chinese provincial SOE, Shandong Gold Mining Co. Ltd., from acquiring TMAC Resources, a junior gold mining company in Nunavut (northern Canada) on national security grounds. Although the Canadian government did not provide reasons for its decision (and gold is not a critical mineral), key concerns appear to have been TMAC’s location on an inlet to the Northwest Passage which serves as a shipping route between the Atlantic and Pacific Oceans – and potentially raises Canadian sovereignty issues – and TMAC’s proximity to one of a chain of Canadian early warning radar stations. Press reports also indicate that the US government had pressured Canada to reject the transaction. Click here to read other key take aways.
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