The Trump administration has purchased a stake in two Canadian critical mineral companies, a move experts say is certainly unusual, if not extraordinary, and which raise questions about whether Ottawa should block them in the interest of national security.
It’s “possibly unprecedented for the U.S. government itself to be buying an interest in a Canadian company,” said Lawrence Herman, an international lawyer and a senior fellow at the C.D. Howe Institute.
Canada should be concerned, he said, “about any foreign state purchasing interest in a Canadian company, especially in the sensitive critical minerals sector.” Those minerals include lithium, copper, nickel and others that are essential for modern technology.
The White House announced last week it was spending $35.6 million US for a 10 per cent stake in Vancouver-based Trilogy Metals Inc., which has mining interests in Alaska that the U.S. government wants to see developed. The U.S. government also has options to increase its stake and the right to appoint a member to the company’s board.
It is also taking a minority stake in Lithium Americas, another Vancouver-headquartered company, which is developing one of the world’s largest lithium mines in Nevada.
Under that deal the Department of Energy will take a five per cent equity stake in the company and a five per cent stake in its Thacker Pass lithium mining project, a joint venture with General Motors.
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‘Not benign’
“These are not benign investments in the open market by corporations,” said Herman. “These are investments by government entities in the United States… when we have a difficult, tense relationship with that government.”
Herman says when a foreign government purchases a stake in a company it raises concerns as to whether the political interests of that government will come to dominate its activities.
He also cautions that critical technologies and sensitive information could be directed to that government, which is not in Canadian interests.
In the case of the U.S., Herman notes the current administration already has policies against Canadian interests.
“Even a small shareholding by a foreign state can influence the activities of the company concerned. So, yes, Canada has to be attentive to these matters.”
The federal government should put these investments on its radar screen and possibly subject them to a national security review, Herman says.
Under the Investment Canada Act, Ottawa can review the investments of any foreign government. The guidelines were even tightened, in 2022, for the critical minerals sector.
Since then, the government will only approve “significant” foreign state investment in that sector on an “exceptional basis,” meaning there has to be a clear “net benefit” to Canada.
But the beefed-up guidelines state that a would-be foreign state investor in critical minerals could also be subject to a national security review. This review would be triggered if the government has “reasonable grounds” to believe the investment could be “injurious” to Canada’s national security.
The “reasonable grounds” the government would consider include the effect the investment may have on the ability of Canadian supply chains to exploit the asset or access alternative sources. The government would also consider the current geopolitical circumstances and potential impact on allied relations.
Just days later after the act was tightened, the federal government ordered the divestiture of investments in Canadian critical minerals companies by three Chinese companies.
Non-controlling investments
Sandy Walker, co-chair of Dentons Convocation and Foreign Investment Review Group, says because the Trump administration’s stakes in the Canadian companies are non-controlling investments, they may not raise significant issues.
Also, particularly in the current political climate, the Canadian government might not want to express reservations about them as it continues working on a trade deal and broader security deal with the U.S, she says.
What might cause Canada some pause, however, is if the U.S. government insisted that the minerals from some of these mines, once they’re up and running, only go to the U.S., Walker said.
“That would be the sort of thing that might concern the Canadian government,” she said. “That would be implicating domestic supply chains.”
In a statement to CBC News, the Ministry of Innovation, Science and Economic Development Canada said foreign investments in critical minerals will be reviewed “in the best interests of Canadians,” but would not comment on specific investments, citing the act’s confidentiality provisions.
But David Rosner, who heads the Competition and Foreign Investment Group at the Toronto-based business law firm Goodmans LLP, says he doesn’t believe the deal itself is a strong candidate for national security concerns, in part, because the U.S. governments’ stakes are small.
Rosner also says that, even though the companies are headquartered in Vancouver, their mining assets are in the United States.
“If the United States government was mindful to take action in respect to the mining assets, it could, because it’s in their territory,” he said.
Rosner added that the types of transactions in which Ottawa has previously taken action involved governments not aligned with Caanda when it concerns matters like critical mineral supply.
He said despite recent frictions, it’s unlikely there’s a belief that “Canada is misaligned with the U.S. significantly.”
However, if there is a new trend of foreign governments investing in critical mineral companies, that will call for the developmemt of. a new Canadian policy to keep up with that trend, he said.
“And concerns might come out of that policy process.”
