Canadian Government to target Chinese offtake agreements in critical minerals

The Canadian Government is considering how to handle offtake agreements that function as loans or investments by China in Canadian mining companies as part of a push to scrutinise Chinese critical mineral transactions.

The Canadian mining industry has grown concerned about Chinese control of critical mineral supplies. Last month, First Quantum Minerals received $500m (C$672.83m) from Jiangxi Copper to sure up its finances as it struggled with the fallout from the closure of its flagship copper mine in Panama. Under the agreement with Jiangxi Copper, First Quantum will deliver 50,000 tonnes of copper anode per year from its Kansanshi mine in Zambia to the Chinese miner.

Jonathan Wilkinson, Canada’s Natural Resources Minister, told reporters in Toronto: “There are active conversations going on about how best to approach some of those kinds of issues. What you are going to find increasingly moving forward is democratic countries around the world coming together to try to find pathways through which we actually are ensured of access of the minerals we are going to need.”

In 2022, the Canadian Government launched its critical mineral divestment strategy, targeting Chinese investors’ holdings in three lithium companies. Jiangxi Copper is the largest shareholder in First Quantum, but Wilkinson said the government will not target investments that pre-date the inauguration of the divestment strategy.

“We have been pretty clear that we are not interested in investment generally from state-owned enterprises. Certainly, the ones that are raising significant flags would be those that actually require some kind of offtake agreements, those that require control – effectively controlling shareholders – or provide for significant board representation,” Wilkinson said in response to the Northern Miner at the Prospectors and Developers Association of Canada annual conference in Toronto.

As domestic funding has dried up, Canada’s mining companies have been lured with the favourable terms offered by Chinese investors. The federal government will have to balance securing resources with ensuring a steady flow of funding to miners.