- The Federal Government is considering equity and debt positions in smaller Canadian critical mineral companies
- Jonathan Wilkinson, Natural Resources Minister, made the announcement at PDAC 2023 earlier this week, with the capital to stem from the upcoming Canada Growth Fund for equity and the Canada Infrastructure Bank for loans
- Ottawa’s investments in smaller Canadian miners are meant to grant them flexibility to pursue higher-risk, higher-reward projects less likely to attract sufficient funding
- TMH readers with current or prospective junior miner allocations may benefit from a considerable tailwind as government capital validates these venture-type investments
The Federal Government is considering equity and debt positions in smaller Canadian critical mineral companies.
Jonathan Wilkinson, Natural Resources Minister, made the announcement at PDAC 2023 earlier this week, with the capital to stem from the upcoming Canada Growth Fund for equity and the Canada Infrastructure Bank for loans.
The Canada Growth Fund – part of last year’s budget – is backed by $15 billion in federal funding with a mandate to support low-carbon industries, including critical mineral companies active in lithium, cobalt, nickel and graphite. The fund is intended to make Canada more competitive against similar initiatives in Australia, Japan and the U.S.
The news follows Ottawa’s November 2022 order for three Chinese companies to divest from Canadian critical minerals for national security reasons.
Sinomine Rare Metals Resources (Hong Kong) divested from Power Metals (TSXV:PWM), Chengze Lithium International (Hong Kong) divested from Lithium Chile (TSXV:LITH), while Zangge Mining Investment (Chengdu) divested from Ultra Lithium (TSXV:ULT).
The Chinese government views the decision as a violation of international commerce and market rules.
Ottawa’s investments in smaller exploration and development companies are meant to grant them flexibility to pursue higher-risk, higher-reward projects less likely to attract sufficient funding.
This week, Wilkinson tiptoed into the initiative announcing $14 million for Sherritt International (TSX:S), E3 Lithium (TSXV:ETL), FPX Nickel (TSXV:FPX), Search Minerals (TSXV:SMY), Geomega Resources (TSXV:GMA) and Prairie Lithium. All six companies were deemed to have worthwhile critical mineral technologies that may lower production costs and reduce carbon emissions.
Quebec’s Plan Nord has been engaged in these resource investments since 2011, including $222 million in debt and equity in 2014 to build Stornoway Diamond’s Renard Mine in the James Bay Area, the province’s first diamond mine.
Quebec has also purchased hundreds of millions in Nemaska Lithium stock over the past five years. The company’s forthcoming lithium mine would put it one step closer to becoming Canada’s first non-Chinese-owned lithium producer.
In terms of large-cap companies with mining interests, the Federal Government has been a far more reliable allocator, investing approximately $1.5 billion since 2022 in the likes of Stellantis NV, General Motors, BHP Group and Rio Tinto, which received funding for a battery factory, battery parts factory, potash mine and titanium project, respectively.
Earlier this week, Ottawa also announced that it will not require Chinese divestment from three large Canadian miners – Teck Resources (TSX:TECK.A), First Quantum (TSX:FM) and Ivanhoe Mines (TSX:IVN) – which count Chinese state-owned businesses as their largest collective shareholder.
As Canada works to diversify its mineral supply chain and better position itself for long-term decarbonization goals, TMH readers with current or prospective junior miner allocations may benefit from a considerable tailwind as government capital validates these venture-type investments.
That said, any whiff of national security risk, whether in the form of dubious international involvement or otherwise, brings total capital loss into play.
