Canada takes action to protect domestic mining sector

Canada is making it harder for foreign companies to take over domestic mining companies, introducing measures that could protect major takeover targets from big global rivals.

The Canadian government will only approve foreign takeovers of Canadian mining companies “in the most exceptional circumstances,” according to the latest guidance from Canadian Minister of Innovation, Science and Industry Francois-Philippe Champagne.

The directive issued on Thursday is part of a broad effort by Canadian Prime Minister Justin Trudeau’s government to protect the country’s key mineral extraction sector and national security interests.

Photo: Reuters

The move appears to shield domestic companies from takeovers as the world’s largest miners hunt for metals that underpin a global shift away from fossil fuels. Industry giants such as Glencore PLC, BHP Group Ltd and Rio Tinto PLC have all sought to increase their exposure to metals such as copper through large, transformational acquisitions.

Canadian mining companies, meanwhile, have become attractive targets. Teck Resources Ltd. spent much of last year fending off a $23 billion takeover attempt by Glencore before the Swiss company decided to simply buy its steel and coal operations. The Canadian federal government approved the $6.9 billion deal on Thursday, while also setting new criteria for future foreign mining deals.

“This high bar reflects the strategic importance of Canada’s minerals sector and the importance of taking decisive action to protect it,” Champagne said in a statement.

Teck is one of the few major Canadian metals producers to have weathered a wave of industry takeovers, despite long being coveted by foreign competitors for its copper and zinc assets spread across the Americas. The Vancouver-based company is widely expected to become a takeover target once founder and lead investor Norman Keevil relinquishes control of the company in the coming years.

“They’re basically telling Glencore not to bother coming back for the other half of Teck,” said Canadian mining financier Pierre Lassonde, who last year made a competing bid for Teck’s coal assets. “It looks like Ottawa is ready to wall off Canada’s critical metals industry with this new directive.”

The new directives go even further than the repression against the takeover of state-owned enterprises by foreign entities that began in October 2022.

The Champagne Ministry has thwarted several recent attempts by Chinese companies to enter the Canadian minerals sector through acquisitions or large investments.

But Thursday’s comments show the federal government is tired of companies being taken over by foreign entities, even those from friendly countries.

Canada’s crackdown could also limit access to capital for companies that rely on foreign investment to fund exploration and mining projects. The government is “squeezing” funding for the industry with its “more aggressive statements,” said Shane Nagle, a metals and mining analyst at the National Bank of Canada. “If it’s hard, they’ll just go elsewhere.”