Canadian resources coveted by the Asian superpower

China is Canada’s third largest trading partner and British Columbia’s second. It is an important market for Canadian commodities, and since the 1990s Canadian resource companies have benefited from $78 billion in foreign direct investment from China.

“While the idea of ​​withdrawing trade with China is often discussed in expert circles, China’s rapid growth, massive consumption of raw materials and integration into the global supply chain make it is extremely difficult for Canada to ‘turn off the taps,'” the University said. from the China Institute of Alberta noted in a 2021 report.

British Columbia’s exports to China are dominated by commodities, and the lion’s share of China’s $98 billion in foreign direct investment in Canada since the 1990s has been disproportionately toward resource industries. : oil and gas and mining.

Investments in oil and gas accounted for $57 billion; Canadian minerals, metals and mining companies accounted for $21 billion.

While much of the investment in oil and gas was in Canadian assets – primarily in Alberta and British Columbia – Chinese investment in mining has been less in Canadian mines and more in Canadian mining companies with assets outside of Canada.

British Columbia exported $8.9 billion in raw materials to China in 2021. Three raw materials accounted for 69% of those exports: metallurgical coal ($3.4 billion), pulp ($2 billion), dollars) and copper ores and concentrates ($1.4 billion). China accounted for 39% of British Columbia’s metallurgical coal exports in 2021, 24% of pulp and 15% of copper.

One of China’s largest investments in oil and gas was the 2013 acquisition of Nexen Energy for $20 million by the China National Offshore Oil Corp. (CNOOC), which included the Long Lake oil sands project in Alberta and shale gas assets in British Columbia.

CNOOC is now said to be considering divesting its Alberta assets over fears that Chinese companies will one day face the kind of sanctions Western countries have imposed on Russia. CNOOC also owns seven percent of Syncrude, one of Alberta’s largest oil sands operations; Sinopec owns nine percent.

In British Columbia, PetroChina (SHA:601857) – the publicly traded arm of state-owned China National Petroleum Corp. (CNPC) – owns 15% of LNG Canada’s $40 billion project under construction in Kitimat.

PetroChina also owns 20% of Shell Canada’s operations at Groundbirch in northeast British Columbia. Groundbirch has over 500 natural gas producing wells and four natural gas producing plants.

In the case of LNG Canada, some of the investments have also been made in the other direction, the China Offshore Oil Engineering Corp. (COOEC) having won a contract for the construction of 35 treatment modules for an amount of 960 million dollars, according to the Chinese company Jinzheng Energy.

But Chinese investment in Canadian oil and gas has declined in recent years. It was supplanted by an increase in acquisitions of Canadian mining and mineral exploration companies, notably in gold, copper, lithium, uranium and metallurgical coal.

China is the largest steel producer in the world. Unsurprisingly, Chinese companies have invested in coal mining in British Columbia.

China Investment Corp., China’s largest sovereign wealth fund, owns 10% of Teck Resources (TSX:TECK.B), Canada’s largest metallurgical coal producer. A Chinese mining company, HD Mining International Ltd., plans to build an underground metallurgical coal mine: the Murray River project near Tumbler Ridge.

Chinese companies have also invested heavily in or acquired Canadian copper and gold mining companies.

Ivanhoe Mines (TSX:IVN), a major copper and platinum miner, is nominally a Canadian company, headquartered in Vancouver, but its assets are outside of Canada and Chinese investors are now its major shareholders.

CITIC Metal Africa Investments Ltd. owns 25.98% of Ivanhoe Mines and Gold Mountains (HK) International Mining Co., a subsidiary of Zijin Mining Group, owns 13.65%. Founder and co-chairman Robert Friedland owns 13.42% and now co-chairs the company with CITIC Metals Group chairman Yufeng (Miles) Sun.

In 2018, Vancouver-headquartered Nevsun Resources Ltd., which had a zinc-copper mine in Eritrea, was acquired by Zijin Mining Group for $1.8 billion.

China’s appetite for gold has been insatiable in recent years. In 2020-21, China bought $2 billion worth of gold from Canada, mostly from Ontario, according to the China Institute.

The most recent corporate target of this appetite is the Rosebel gold mine in Suriname, which is owned by IAMGOLD (TSX: IMG, NYSE: IAG). The Canadian company announced last week that it had agreed to sell the mine to Zijin for $360 million.

Gold Mountain Asset Management Ltd., a subsidiary of Zijin Mining Group, owns a 10.5% stake in Guyana Gold Strike, headquartered in Vancouver (TSX-V: GYA), which has claims in the Golden Triangle. British Columbia gold.

In 2020, Zijin acquired Continental Gold, which had a development project in Colombia, for $1.4 billion.

Chinese companies have also invested in lithium and uranium companies in Canada.

In 2018, Lithium-X Energy Corp. of Vancouver, which had properties in Argentina and Nevada, was acquired by Nextview New Energy Lion Hong Kong Ltd. for $330 million.

Most recently, in January, the Canadian government approved the sale of Canadian company Neo Lithium Corp. to Zijin for $960 million. The federal Conservative Party has called for the sale to be subject to a national security review. Even American politicians weighed in.

“China’s increased economic influence over companies in the United States and Canada is a serious threat to national security, especially with respect to critical minerals that are essential to the future of energy independence of the United States. United States,” Republican Congressman Michael Waltz told CTV News.

In approving the sale, Ottawa noted that while Neo Lithium is headquartered in Canada, its only development project is in Argentina.

Uranium is another critical metal that raises sovereignty concerns over strategic minerals and metals. Chinese company CGN Mining Co. holds a 14.3% stake in Fission Uranium Corp. (TSX: FCU), based in British Columbia, whose Triple R exploration project is located in Saskatchewan.

Gordon Houlden, director emeritus of the China Institute, said the sale of strategic minerals like uranium to China is under intense scrutiny.

“There will be no real uranium – ore or enriched – leaving Canada for China, no matter what companies they invest in,” Houlden told BIV.

“One, uranium is prohibited by federal law. So that one is impossible. But on lithium or other rare earth metals, I just don’t see any approvals [from Ottawa] for anything considered sensitive or strategically important.

In 2020, the Canadian government rejected the acquisition of TMAC Resources – now owned by Agnico Eagle Mines Ltd. (TSX, NYSE: AEM) – by Shandong Gold Mining, a state-owned Chinese gold mining company, suggesting that the Canadian government may now be taking a tougher stance against the ownership of Canadian resources and assets by Chinese state entities.

“I am very skeptical that everything [Chinese investment] will not be subject to further scrutiny,” Houlden said. “While there are opportunities, the resistance is just too high, and I don’t see the [political] climate change soon.

(This article first appeared in Business in Vancouver)

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