Investments from autocratic states need full ICA review, says parliamentary committee  

All investments made by firms from authoritarian regimes should undergo the complete security review process stated in the Investment Canada Act (ICA), a parliamentary committee said in a new report that analyzed the acquisition of Neo Lithium, a Canadian-listed company, by China’s Zijin Mining.  

While all foreign investments undergo a preliminary national security screening by Canadian authorities, if an investment raises a national security concern, the industry minister can recommend a national security review under section 25.3 of the ICA. Neo Lithium’s acquisition, which closed in January, was criticized as the deal wasn’t further reviewed.  

“The committee believes that all investments by state-owned enterprises from authoritarian states meet the threshold of ‘could be injurious to national security’ under section 25.3,” said the report published by the Standing Committee on Industry and Technology. “The minister should use his discretion to invoke that section in all such cases.”  

Zijin completed its acquisition of Neo Lithium, which owned the Tres Quebradas lithium brine project (known as the 3Q project) in Argentina, on Jan. 26. The $6.50 per share all-cash offer was announced in October.  

The 3Q project has measured and indicated resources of 5.3 million tonnes of lithium carbonate equivalent at an average grade of 636 mg/l lithium.  

As the deal neared completion, former Conservative Party leader Erin O’Toole on Jan. 17 asked the federal government to conduct a national security review. O’Toole said the review was critical for Canada to safeguard its supply and access to critical minerals, to protect its economy, and to ensure that Canadian mining companies stay ahead of its competitors.  

In response to O’Toole’s comments, Laurie B. Bouchard, a spokesperson for Science and Industry Minister François-Philippe Champagne told The Northern Miner on Jan. 18 that all foreign investments are subject to review and that critical minerals receive “special scrutiny” by the Investment Review Division.         

“Every investment is reviewed on its merits,” said Bouchard.  “Considerations can include…the nature of the mineral deposits involved and its role in critical Canadian supply chains, as well as the nature of the Canadian business and whether it has operations in Canada. For example, whether it is principally domiciled here for regulatory or other reasons, with few local staff or assets.” 

On Jan. 27, Innovation, Science and Industry Minister François- Philippe Champagne told the House of Commons industry committee that the acquisition was “thoroughly reviewed and scrutinized,” saying: “Let me be very clear. Neo Lithium was reviewed by the government and national security experts, full stop. 

“Those who claim that a national security review was not done in [Neo Lithium’s] case … are cherry picking and jumping ahead to another step in the process further down the chain of verifications under the ICA,” he added.  

Champagne also said that the 3Q project would not produce lithium hydroxide but lithium carbonate, a form of lithium that Canada will not be relying on for the growing demand of electric battery production, although lithium carbonate can be converted to lithium hydroxide.  

The parliamentary committee in its report further said that the government needs to “create a formalized and transparent process” that discloses a list of government departments and agencies consulted on decisions made under the ICA.  

The committee, which heard from independent experts prior to publishing the report, said that they spoke about the importance of “broader government policies and priorities” to support decisions taken under the ICA, including the timely release of a “full and comprehensive” critical minerals strategy.  

The government isn’t legally bound to follow the recommendations made by the parliamentary committee.