Chinese Investment Targets Canadian Resources

Canadian energy and mining companies have a history of encouraging other countries to open their doors to Canadian investment. They argue that global resources, especially those in developing countries, badly need the expertise and access to capital that Canada has to offer. In return, enterprising Canadians provide local jobs and generate tax dollars, sometimes even build a school or a hospital. It doesn’t always work out that way, but that’s the idea. 

So how do Canadians react now that the tables are turned and foreign investors – namely China - are gobbling up Canadian resources as fast as you can say “state- sponsored capitalism?”

China has gone from being a net recipient of foreign investment in its mining industry to being net investors abroad. The impact has been swiftest and greatest in Australia, where the Chinese have spent more than A$18 billion in the past 18 months, mostly on resource projects, to become the third largest foreign investor in the country behind the United States and Britain.

But the dragon’s fiery breath extends much further. Over the summer, the China Investment Corporation (CIC) bought a major equity stake in Teck, Canada’s biggest base metal producer and PetroChina International purchased a 60% share of the Athabasca Oil Sands Corporation’s MacKay and Dover  projects for $1.9 billion.

Those two high-profile cases received a lot of media attention, but Chinese companies are also targeting Canada’s beleaguered junior mining sector while they can still get bargain basement access to the next generation of deposits.

The latest transaction is the purchase of a 15% stake in Royal Nickel Corp., a privately held junior led by former Inco executives, by China’s largest nickel trader. The prize is the Dumont nickel project ear Val d’Or, Que. Royal Nickel’s management is apparently delighted with the $22 million infusion of capital and has dismissed concerns that China is gaining too much control over Canadian resources. Chairman Scott Hand, ex -CEO of Inco, told The Globe & Mail that “Canada  has to get used to that.”

In November, Jien Canada, a partnership between China's Jilin Jien Nickel Industry Company and Vancouver's Goldbrook Ventures hoped to wrap up a $192 million bid to purchase cash-strapped Canadian Royalties and its Nunavik nickel project. One of the deal’s last hold-outs was Canadian Royalties CEO Glenn Mullan, who said he won’t tender his shares until Jien agrees to continue community initiatives the junior negotiated with the Inuit. Jien already holds a 51% stake in Edmonton-based Liberty Mines and a 15% stake in Toronto-based Victory Nickel.

Will Chinese companies be willing to play by our rules, especially if they negotiate majority stakes in our mining and energy resources? It wasn’t so long ago that a Chinese-backed company raised the ire of labour unions in B.C. by proposing they would be bring 400 workers from China to mine their coal deposit in the province. Could Chinese wages for Canadian miners be next?

Comments

[Gwen Martin]

Virginia Heffernan's article on increasing foreign ownership of Canada's mineral resources is disturbing and thought-provoking.

It raises a fundamental question: who owns Canada's natural resources, and who ultimately has the right to sell them abroad?

An even more fundamental question forms a subtext to the first: are Canadians living by the code that the ends justifies the means? Larger corporate profits, larger tax bases for govt, and higher annual sales for companies are used to justify removing Canadian resources, possibly using non-Canadian workers, to be processed in foreign countries at a time when common sense and community conscience (strange words, aren't they?) dictate that those resources, those jobs, and those secondary industries remain in our own country.

Sometimes the emperor really does have no clothes. Sometimes, it seems, the catechism that maximum profits justify minimum attention to other components in a mining operation - the people, the environment, the larger community ... dare one say, the greater common good - well, sometimes that truism begins to sound very hollow.

We're often told that "we don't want to scare companies away so they will not invest in Canada." But the metals and minerals in the ground are not going anywhere. They can wait until the appropriate company with the appropriate corporate attitudes and approaches shows up at our door and is welcomed. It is less important where those companies come from, and more important what they bring to the table in terms of respect for what we still call Canadian social and community and environmental values.

Threatening to bring in Chinese workers to displace Canadian miners shows utter disrespect for those values. Any provincial government that opts to ignore such behaviour is guilty of worse: total disloyalty to and betrayal of its citizens. In a way, it is a form of treason.

Meanwhile, it is ironic that, when miners go on strike for better working conditions or wages, it is called 'going on strike.' Yet when companies leave Canada to work mines in areas with lower labour and environmental standards - well, that's just called 'pursuing better economic opportunities.'