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Lithium mine takeover by Chinese company did get thorough security review: Champagne

OTTAWA — Industry Minister François-Philippe Champagne says the pending takeover of a Canadian lithium mining company by a Chinese state-owned company was subjected to a thorough national security review — contrary to what some experts and Conservati
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OTTAWA — Industry Minister François-Philippe Champagne says the pending takeover of a Canadian lithium mining company by a Chinese state-owned company was subjected to a thorough national security review — contrary to what some experts and Conservative politicians have asserted.

Champagne told the Commons industry committee Thursday that the critics don't understand the process required under the Investment Canada Act for reviewing all foreign investments.

That review is led by the Industry Department and national security and intelligence agencies and includes multiple other federal departments, as well as consultation with Canada's allies, he said.

Under additional guidelines Champagne himself introduced, he says that review is "enhanced" when the transaction involves a state-owned enterprise or critical minerals — as was the case with last fall's proposed takeover of Neo Lithium Corp. by China's Zijin Mining Group Ltd.

Only if that initial review concludes there's any potential risk to Canada's national interests or security is the matter referred to cabinet to decide whether to launch a more intensive, extended security review.

In the case of Neo Lithium, Champagne said that was not necessary because the initial enhanced review found there was no potential risk.

"Transactions involving critical minerals are systematically and thoroughly reviewed and scrutinized and Neo Lithium was no exception," he told the committee.

"Let me be very clear. Neo Lithium was reviewed by the government and national security experts. Full stop."

Under the Investment Canada Act, the government has 45 days after a foreign investment transaction is announced to launch an extended security review. Champagne said critics appear to have mistakenly assumed that the extended review is the only opportunity to look deeply into potential national security risks.

"Those who claim a national security review was not done in this case are simply knowingly or unknowingly misrepresenting the facts," he said.

His department is authorized to begin a review the moment it becomes aware of a transaction; it does not have to wait to be formally notified, he stressed.

In the case of Neo Lithium, that meant the initial review lasted longer than 45 days, officials told the committee.

Deputy industry minister Simon Kennedy said the bar for deciding whether cabinet should be asked to consider an extended review is low. During the initial review, he said, officials "are interested in any and all possible threats and if anything is detected that looks like it's problematic, we would zoom in on that."

Due to confidentiality requirements, Champagne said he was not able to go into details about why the Neo Lithium case was not deemed to pose a national security risk.

But he pointed out that while Neo Lithium is incorporated in Canada, its mine is in Argentina, its operations are in Argentina and "all but a handful of its employees are based in Argentina."

Moreover, he said the mine involves lithium carbonate, not the lithium hydroxide preferred by manufacturers of electric vehicle batteries in North America, Europe and Japan. Lithium carbonate, he said, is aimed at the Asian market.

Conservatives triggered two committee meetings on the Neo Lithium takeover to look into why an extended security review was not conducted. They argue that lithium is a critical strategic asset, not only for Canada but for the world, and that Canada has an obligation to ensure the industry is not monopolized by China, which already dominates the world's supply of lithium batteries.

Intelligence expert Wesley Wark told the committee Wednesday that the government misjudged the significance of the Neo Lithium takeover to Canada's economic and national security interests.

"Following compelling testimony by experts, it is clear the Trudeau government failed to take Canada's national security seriously," Conservative industry critic Ed Fast said in a statement Thursday.

"Critical minerals such as lithium are essential to Canada’s future prosperity and our strategic interest with our allies."

However, Champagne said his Liberal government has conducted four times more reviews of investments by state-owned enterprises than the previous Conservative government and has blocked twice as many of them.

"So I think we should take no lessons from the Conservatives when it comes to national security," he said.

This report by The Canadian Press was first published Jan. 27, 2022.

Joan Bryden, The Canadian Press