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Conservatives call on Trudeau government to conduct formal security review on Chinese takeover of Canadian lithium firm. 

Niall McGee, The Globe and Mail
Jan 13, 2022

The Conservative Party of Canada is calling on Prime Minister Justin Trudeau’s Liberal government to conduct a formal national security review on the pending acquisition of Canadian lithium development company Neo Lithium Corp. by Chinese state-owned Zijin Mining Group Ltd.

In October, Zijin announced its intention to buy Toronto-based Neo Lithium for $960-million. Neo Lithium is developing a mine in Argentina and hopes to eventually supply the silvery white mineral to the electric-vehicle industry for batteries.

Last year, Canada designated lithium as a critical mineral, meaning it is essential to the economy. Ottawa and Washington in 2020 finalized a joint action plan on critical minerals, with commitments by both governments to build secure North American supplies of battery minerals, as fears of a growing stranglehold by China on global supplies intensify.

All foreign takeovers of Canadian companies are subject to an initial security screening by Ottawa. If the government suspects the transaction could be a threat to national security, the deal undergoes a more thorough formal review under Section 25.3 of the Investment Canada Act, and could ultimately be blocked.

The Globe and Mail this week reported that the federal government did not conduct the formal review, paying the way for the deal to close.

Canada is playing catch-up in global frenzy for lithium, as China’s grip on critical clean energy mineral tightens.

A spokesperson with Neo Lithium said that the government had 45 days after the announcement was unveiled to launch the formal review, but that did not happen.

“Canada is falling behind in developing its critical mineral industries, and allowing the foreign takeover of companies like Neo Lithium without due diligence could further weaken our strategic interest in developing a domestic supply of lithium and other critical minerals,” the Conservatives said in a statement on Thursday.

“That’s why Canada’s Conservatives are calling on the Liberals to immediately conduct a national security review of the takeover under the Investment Canada Act and to explain why a national security review was not completed in the first place.”

Earlier in the week, Sophy Lambert-Racine, spokesperson with the federal Ministry of Innovation, Science and Economic Development, told The Globe that every foreign investment is reviewed on a case-by-case basis, and the process is undertaken “in consultation with Canada’s national security and intelligence agencies.”

Citing confidentiality provisions under the Investment Canada Act, she would not get into specifics around any government vetting of the Neo Lithium acquisition. She added that the Trudeau government is committed to protecting Canada’s national and economic security, including critical mineral assets.

The federal Ministry of Innovation, Science and Economic Development did not immediately respond to a request for comment for this story.

The lack of a formal security review by the government on the Neo Lithium deal took some security experts by surprise.

Wesley Wark, senior fellow at the Centre for International Governance Innovation in Waterloo, Ont., had been convinced the deal would merit an in depth review, and be scrutinized against the backdrop of supply fears over the critical mineral in North America, and worries about the potential loss of intellectual property to China.

In an e-mail to the Globe on Thursday, he called the outcome on Neo Lithium a “total head scratcher.”

Neo Lithium did not immediately respond to a request for comment.

At the moment, Canada has no lithium mines, no lithium ion battery plants and no lithium processing facilities. The country is an also-ran compared to the United States, Chile, Australia and especially China, which processes about two-thirds of global lithium output.