The move appears to protect domestic companies from takeovers at a time when the world’s largest mining companies are seeking metals to underpin the global transition away from fossil fuels.
 "Canada's mining sector protection policy to protect takeover targets")
Image via Bloomberg
Jacob Rorink
Canada is making it harder for foreign companies to buy domestic mining companies by imposing measures that could protect major targets from larger global rivals.
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The Canadian government will only approve foreign acquisitions of Canadian mining companies in the “most exceptional circumstances,” according to the latest guidelines from Industry Minister François-Philippe Champagne. The directive, issued Thursday, is part of a larger effort by Prime Minister Justin Trudeau’s government to protect Canada’s critical minerals sector and national security interests.
The move is seen as a way to protect domestic companies from takeovers at a time when the world’s largest mining companies are looking for metals to help them move away from fossil fuels.Industry giants such as Glencore, BHP Group and Rio Tinto are looking to boost their exposure to metals such as copper as appetite for big, transformative deals returns across the industry.
Canadian mining companies are also attractive targets. Teck Resources spent much of last year fending off a $23 billion takeover attempt by Switzerland’s Glencore, which ended up buying only its steelmaking coal business. The federal government approved the $6.9 billion deal on Thursday, setting a new standard for future foreign mining deals.
“This high standard reflects the strategic importance of Canada’s critical minerals sector and how important it is to take decisive action to protect it,” Champagne said in a statement.
Foreign acquisitions of mining companies have been a sensitive issue in Canada since the succession of some of the country’s largest companies, including nickel miner Inco and aluminum producer Alcan, 18 years ago. When BHP proposed to buy Potash Corporation of Saskatchewan in 2010, the government of then-Prime Minister Stephen Harper blocked the deal, saying it would not bring “net benefits” to the country.
Teck is one of the few big Canadian metals producers to survive a wave of industry takeovers, despite long being targeted by foreign competitors for its copper and zinc assets across the Americas. The Vancouver-based company is widely expected to become a takeover target once its founder and largest investor, Norman Keevil, gives up control within the next few years.
“They’re basically telling Glencore not to go after the other half of Teck,” said Pierre Lassonde, a Canadian mining investor who launched a competitive bidding process for Teck’s coal assets last year. “It seems to me like Ottawa is prepared to isolate Canada’s key metals industry with this new mandate.”
The new directive goes further than a crackdown on foreign takeovers of state-owned enterprises that began in October 2022. Champagne has blocked several recent attempts by Chinese companies to penetrate Canada’s critical minerals sector through acquisitions and large-scale investments. But Thursday’s comments show the federal government is wary of foreign takeovers, even if they come from companies in friendly countries.
Canada’s crackdown could also limit access to capital for companies that rely on foreign investment to fund exploration and mining projects. Shane Nagel, a metals and mining analyst at National Bank of Canada, said the government is “restricting” funding for the industry with “more aggressive statements.” “If it’s difficult, companies will just go elsewhere.”
