May 26, 2020
According to a recent article in the Financial Post, the “federal government says it is reviewing a Chinese mining company’s proposed $207 million buyout of a struggling gold mining company in Nunavut under the Investment Canada Act, as a high-profile case against a Chinese executive in Canada reaches a crucial point.” Author Gabriel Friedman says that earlier this month, Shandong Gold Mining Co. Ltd., a Chinese state-owned enterprise, which is listed on the Shanghai Stock Exchange, announced that it would purchase TMAC Resources Inc., a Toronto-based company that operates a mine near Cambridge Bay that has been affected by operational challenges.
The article states that “Ottawa declined to provide any details on why it is scrutinizing the TMAC buyout, but lawyers who practise in this area said the government can easily invoke national security concerns amid rising political tensions with China.” The article also notes that on April 18, 2020, the government said that because of the COVID-19 pandemic, it would subject all investments by state-owned enterprises, such as Shandong, to “enhanced scrutiny.”
Peter Glossop, a partner in Osler’s Competition/Antitrust and Foreign Investment Group, tells the Financial Post that in the wake of the coronavirus pandemic, which has devastated many Canadian companies’ share prices, the federal government has also started reviewing nearly every transaction on national security grounds.
According to the article, earlier this month, the “Justice Department proposed draft legislation that would provide an additional 180 days for the federal government to review a foreign direct investment.”
While a small overall percentage of deals are flagged for national security review, which Peter estimates at less than 1%, Peter states that the number rose in the 2018-19 fiscal year to nine, up from four in each of the previous two years. “There is more tension around national security than there has been historically,” Peter says.
For more information, read Gabriel Friedman’s full article, “Ottawa to scrutinize Chinese acquisition of gold miner as Huawei case reaches crucial stage” in the Financial Post.