A veteran of Canada’s mining industry is warning Ottawa should be prepared to scrutinize the sale of a massive African copper mine with an ownership structure that includes a company incorporated in British Columbia.
The Khoemacau copper mine in Botswana is valued at as much as US$2-billion. As many as three Chinese companies with state ties or owners are reportedly in the running to bid for the copper deposit.
Khoemacau Copper Mining is wholly owned by Cuprous Capital Ltd., which has its registered office in Vancouver and was incorporated in B.C. in 2012. Cuprous, in turn, is 88.1 per cent owned by U.S. private equity firm Cupric Canyon Capital LP, a company majority owned by funds managed by London-based Global Natural Resources Investments, and 11.9 per cent by Resource Capital Fund VII LP.
Copper is listed as a critical mineral by the Canadian government and Canada’s most important ally, the United States, has been leading a push to ensure unimpeded access to metals and minerals vital to the economy and leading-edge technology.
Pierre Lassonde, co-founder and chairman emeritus of mining royalty company Franco-Nevada Corp. FNV-T, urged the Canadian government to look at any sale of the Botswana copper mine very carefully.
“The bottom line is a Canadian company controlling a critical mineral – a very valuable critical mineral asset,” he said.
Mr. Lassonde said Ottawa needs to get involved, particularly because of the size of a potential transaction.
In late October last year, the Canadian government warned that it would make it harder for foreign state-owned companies to make big purchases in this country’s critical minerals sector – and that these approvals would only be exceptions. “Significant transactions by foreign state-owned enterprises in Canada’s critical minerals sectors will only be approved as of likely net benefit on an exceptional basis,” Innovation Minister François-Philippe Champagne and Natural Resources Minister Jonathan Wilkinson said in the statement.
“As well, should a foreign state-owned company participate in these types of transactions, it could constitute reasonable grounds to believe that the investment could be injurious to Canada’s national security, regardless of the value of the transaction.”
Bloomberg reported last month that Zijin Mining Group Co., MMG Ltd. and Aluminum Corp. of China Ltd., known as Chinalco, all made it to the second round of bidding for the Khoemacau project. It also said MMG has been in talks to team up with Citic Metal Co., an arm of Chinese state-owned conglomerate Citic Group. Other bidders include two South African companies.
It reported Khoemacau is ramping up annual output to more than 50,000 tonnes after starting operations in mid-2021.
The U.S. has shown a keen interest in keeping Western assets within the control of like-minded countries and out of the hands of the Chinese state. On Tuesday, the U.S. State Department held a webinar on encouraging interest in the redevelopment of Toronto-based Premium Nickel Resources Ltd.’s PNRL-X nickel, copper and cobalt assets in Botswana, calling them three of the largest critical metals deposits in that country and “some of the largest deposits of their kind on the continent.”
Asked about the Khoemacau mine sale, the Canadian government said in a statement that a transaction involving Cuprous would fit the criteria for a review, but would not comment on whether it would review a takeover affecting the company.
“The Investment Canada Act (ICA) provides for the review of the most significant investments by non-Canadians to ensure their likely net benefit to the Canadian economy. And all investments, no matter their value, can also be subject to a national security review under the ICA. Therefore, the acquisition of a Canadian company by a foreign company could be subject to a review under the ICA,” Laurie Bouchard, director of communications for Mr. Champagne, said in a statement.
“As mentioned in our policy, cases involving critical minerals are also scrutinized closely. The protection of Canada’s critical minerals is not only a matter of national security, it is a matter of economic security as well. Due to the confidentiality provisions of the Act, we cannot comment further.”
A spokesperson for Khoemacau Copper Mining declined to say whether investors would seek approval from Canada should a sale commence.
“We do not comment on ongoing processes. However, we confirm that all applicable laws have been and will be complied with,” Alan Fine, a senior principal at R&A Strategic Communications, said on behalf of Khoemacau.
With reports from Reuters
Steven Chase