Canada’s SRG Mining plans move to the Middle East to avoid national security review
Canada’s SRG Mining Inc. is planning on moving to the Middle East to skirt a Canadian national security review into a key financing deal with China-based Carbon ONE New Energy Group Co. Ltd. (C-One).
The Montreal-based graphite development company in a press release on Monday said it intends on redomiciling to the United Arab Emirates (UAE), where it will have “expanded strategic optionality.”
The proposal to move to the UAE also comes with financial incentives. SRG said that the country has both a double taxation and investment treaty with the Republic of Guinea, where the company’s graphite project is located.
SRG originally announced last July that C-One was proposing to buy a 19.4-per-cent stake for $16.9-million. At the time, SRG warned its investors that the deal would be scrutinized by Ottawa under national-security grounds. But late in the year, SRG announced plans to redomicile outside of Canada, a legal maneuver it said would remove the requirement for a national security probe.
Federal Industry Minister Franois-Philippe Champagne in late 2022 said he would only allow proposed acquisitions of Canadian critical minerals companies by companies that have ties to, or are under influence from the Chinese state, to occur under exceptional circumstances. As part of that mandate, Mr. Champagne ordered three China-based companies to immediately divest themselves from three Canadian critical minerals companies which held development assets overseas.
The federal government has come down hard on Chinese investment into the Canadian mining sector, owing both to Canada’s weak positioning globally, and because of the Asian superpower’s growing dominance. According to the U.S. Geological Survey, China produces 65 per cent of the world’s graphite, a key input into electric car batteries. Relations between North American governments have deteriorated with China over the past five years in the face of human rights abuses by President Xi Jinping’s authoritarian regime. Against this backdrop, Canada, the United States and Europe are attempting to build up their own industries in critical minerals to reduce their dependence on China.
There is almost no publicly available information about privately-held C-ONE, its management or its investors. C-ONE was founded in 2022 by chairman Yue Min, the holder of more than 300 patents in the battery industry, and the co-founder of BTR New Material Group Co. Ltd., a major China based producer of electric car battery materials.
SRG is planning on retaining its listing on the TSX Venture Exchange. The Canadian exchange must approve the transaction to redomicile before it can go ahead. SRG shareholders must also approve the redomiciling of the company. Law firm Norton Rose Fulbright is working as a tax advisor with SRG on the move to the UAE.
China-based resource giants are once again wading into the Canadian critical minerals sector, after a fallow period in the wake of the 2022 crackdown. Last month, Vancouver-based Solaris Resources Inc. said that Zijin Mining Group of China plans to take a 15 per-cent stake worth $130-million. The deal is subject to a security review by Ottawa. If the transaction goes ahead, Solaris plans to use the funds raised from Zijin to advance its Warintza copper project in Ecuador. Zijin is already deeply embedded in the Canadian mining sector, with joint ventures in place with Ivanhoe Mines Ltd. and Barrick Gold Corp.