Governments worldwide are taking unprecedented steps to safeguard critical minerals and secure domestic supply chains. Learn how these changes are reshaping global investments, especially in Canada, with stricter National Security reviews for outbound transactions.
Video transcription
Developed Nations Are Protecting Critical Mineral Supply Chains
Developed countries are starting to protect their resources in a way that hasn't been seen in the past. They want to secure their domestic supply chains, and this shift is creating new challenges for mining transactions worldwide.
Canada's National Security Review Framework
In Canada, there is a legislative scheme that allows the government to review incoming transactions for national security concerns. This mechanism was very rarely used in the past - there were only a few cases of it. But in more recent years, especially with the shift towards protecting critical minerals, the situation has changed significantly.
Canada maintains a list of critical minerals, and whenever a company is involved in investing or buying assets that are on that list, there is a much more stringent review process. This can throw a lot of uncertainty into transactions. Companies need to lay the groundwork early, but they can't really control how the government is going to view their transaction or its outcome.
Chinese Investment and Growing Scrutiny
Currently, the biggest producer of critical minerals is China, and there are also a lot of conflict minerals coming out of Africa. China has been making significant outbound investment that didn't really attract much scrutiny in the past. But now, particularly from the Canadian government's perspective, there is a level of oversight that didn't exist before.
Where state-owned enterprises coming out of China are making outbound investment is where the biggest roadblocks are appearing - whether it's small investments, strategic investments in assets, or purchasing assets entirely. The government has stepped in to even reverse some of those transactions where parties had already negotiated a deal, taken on expenses, and gotten their shareholders on board - only for the government to say the deal cannot proceed.
Extraterritorial Jurisdiction Over Mining Assets
Canada is now taking the position that assets a Canadian company owns outside of Canada are still effectively subject to jurisdiction under national security review. The government wants to protect those assets even if they might be located in Argentina, Chile, or an African country. This is a posture that didn't really exist even five years ago, and it is reshaping how cross-border mining transactions are structured and evaluated.