Chinese Firm to Acquire 13 Percent of Canadian Lithium Company for CA$5 Million

Chinese Firm to Acquire 13 Percent of Canadian Lithium Company for CA$5 Million
Lithium batteries displayed in the workshop of a lithium battery manufacturing company in Huaibei, eastern China's Anhui Province, on Nov. 14, 2020. (STR/AFP via Getty Images)
Isaac Teo

A Chinese firm that specializes in industrial explosives is planning to acquire a more than 10 percent stake in a Canadian lithium company for CA$5 million (about US$3.96 million).

On April 17, China-based company Sichuan Yahua Industrial Group Co. Ltd. (Yahua Group) announced its plan to acquire 13.2 percent of Ultra Lithium Inc., a Vancouver-based lithium and gold exploration firm, through its wholly-owned subsidiary Yahua International Investment and Development Co. Ltd.

The deal signed between the two companies will also see Yahua International acquiring a 60 percent stake in a wholly-owned subsidiary of Ultra Lithium that has two lithium mining projects in Ontario, at Forgan Lake and Georgia Lake.

Due to the local geology, Yahua Group said the two projects offer high potential for the discovery of large spodumene deposits. Spodumene is an essential source of lithium used in ceramics, cellphones, and car batteries, among several uses.

The joint venture will see the construction of a lithium concentrate mining and processing plant with the capacity to produce 200,000 tons of lithium oxide a year for at least the first 10 years of operation, a capacity that could subsequently be doubled following that first phase, according to Yahua Group.

The company, based in Chengdu, the capital of Sichuan Province in China, added that the deal will help secure its upstream resources in the lithium sector. The board of directors of the joint venture will have five members, three of whom will be nominated by Yahua International and two by Ultra Lithium.

This acquisition of a Canadian lithium-mining firm by a China-based company follows another such acquisition earlier this year, this time by a state-owned company.

Chinese state-owned enterprise Zijin Mining Group Co. Ltd. announced in January that it had completed its acquisition of Toronto-based Neo Lithium Corp.
Zijin Mining first announced its intention to purchase Neo Lithium in October 2021, opening a 45-day period during which the federal government could conduct a review. However, no review took place.
When news broke in January that the deal had been approved by Neo Lithium’s shareholders on Dec. 10, 2021, and that the Ontario Superior Court of Justice granted approval of the transaction five days later, the Conservative Party called for a national security review of the purchase.
“It’s concerning that the foreign takeover of Canadian lithium mining company Neo Lithium was not immediately subject to a national security review by the Liberal government,” said a statement issued by Conservative MPs Michelle Rempel Garner and Ed Fast on Jan. 13.
Canada is falling behind in developing its critical mineral industries, and allowing the foreign takeover of companies like Neo Lithium without due diligence could further weaken our strategic interest in developing a domestic supply of lithium and other critical minerals.”

Prime Minister Justin Trudeau has said that securing critical minerals is a key objective of his government.

In a mandate letter last December, he instructed Minister of Innovation, Science and Industry François-Philippe Champagne to work to attract investments in “key areas like minerals processing, cell manufacturing, and zero-emissions vehicle parts and assembly manufacturing” and to “ensure the protection and development of our critical minerals.”
Champagne, along with Natural Resources Minister Jonathan Wilkinson, was told to launch a Canadian Critical Minerals Strategy to make Canada a global leader in mining and the production of batteries.
In a webinar last November, Jane Nakano, a senior fellow in the Energy Security and Climate Change Program at the Center for Strategic and International Studies in Washington, D.C., said clean energy technology has become the latest frontier for geoeconomic competition between China and the West.
“Once upon a time, China was the world’s factory, sort of a supplier of these minerals and middles, but it’s no longer the case. China is starting to capture the higher end value of these clean energy supply chains or value chains,” Nakano said.
She noted that the demand in China for the critical minerals needed for clean energy technologies has also been rising, which means “they’re consuming much more of what they produce as opposed to exporting.” This has put pressure on Western economies dependent on mineral imports to secure their critical minerals supply chains, she said.

Equally important is that China recognizes that its critical mineral supplies can serve as geopolitical leverage, Nakano added.

Noé Chartier contributed to this report.