Major western economies—including the US, Canada, Australia, and the EU—increasingly acknowledge the importance of securing critical minerals supply chains. That’s not least because the clean energy transition will reshape the global geopolitical map, shifting the centers of power from fossil fuel giants to countries with superior abilities in mining and processing critical minerals.
That’s why, when the Canadian government reveals its federal budget today (April 7), a key line item will be an investment of at least $2 billion Canadian dollars to boost production of these components that are key to energy transition technologies like electric vehicles.
Yet a Chinese state-owned company’s recent acquisition of a Canadian lithium miner illustrates how western nations have a lot of catching up to do—not only in terms of production and processing capacities, but also their strategic thinking and policy playbooks.
Zijin Mining’s purchase of Toronto-listed Neo Lithium was certified by authorities within days of the Chinese buyer’s filing of a notification under Canada’s foreign investment regulations, according to Neo Lithium (pdf, p.39). This was despite the fact that Canada considers lithium a critical mineral, and more importantly, requires “enhanced scrutiny” of foreign investments by state-owned investors in accordance with new guidelines issued last March on the Investment Canada Act, a takeover review law.
Several US lawmakers criticized Canada for approving the sale of Neo Lithium, especially in light of ongoing joint US-Canada efforts to improve critical mineral security. In January, bipartisan Canadian parliamentary committee on industry and technology questioned why the Canadian government did not require a national security review of Zijin’s purchase of Neo Lithium.
Over hearings, Canada’s innovation minister said “no national security harm” would arise from the sale to Zijin, noting that Neo Lithium’s operations are in Argentina, not Canada. The deputy minister of industry added that Neo Lithium’s mineral deposit “was not of strategic value to the North American supply chain.”
That, at best, reflects a very narrow conception of what national security means in the context of critical minerals. China has for years sought to acquire overseas resources, including minerals, as part of its state-led strategy of using control of key supply chains as leverage over other nations—and Neo Lithium’s operations being outside Canada’s borders doesn’t change that.
For now, the Canadian parliamentary committee has made several recommendations for how to strengthen the national security review process in light of Zijin’s acquisition. One of those, detailed in a committee report published last week, is to require a national security review for all investments in Canadian assets by state-owned firms from authoritarian regimes—a not so subtle reference to China.
Critical minerals are crucial for powering economies and technologies. Different countries have different definitions of what counts as “critical,” though there is often lots of overlap. Canada’s list features 31 items, including lithium, nickel, and rare earths.
China is a critical minerals heavyweight, processing the bulk of the world’s rare earths, lithium, and cobalt. That means that even if it’s not the largest producer of all these minerals, other countries are heavily reliant on China to turn the raw materials into ingredients that go into batteries, magnets, and wind turbines.
Right now, China is far ahead of the pack.