Conservative party leader O’Toole calls for security review of Chinese takeover of Neo Lithium

The leader of Canada’s opposition Conservative party, Erin O’Toole, has asked the federal government to conduct a national security review of the proposed takeover of Canadian-based Neo Lithium (TSXV: NLC; US-OTC: NTTHF) by China’s Zijin Mining.

O’Toole said that his party “will be calling an emergency meeting” of the industries committee to ensure that the ruling Liberal party explain why they didn’t do the review “in the first place.”

“Canada’s Conservatives are calling on the Liberal government to immediately conduct a national security review of the takeover of the mining company Neo Lithium by a Chinese state-owned and controlled company,” O’Toole said during a press conference on January 17.

In response to O’Toole’s comments, Laurie B. Bouchard, a spokesperson for industry minister François-Philippe Champagne, told The Northern Miner that the government hasn’t hesitated to block transactions that are not in Canada’s interest and that every case is “reviewed on its merits.”  

Neo Lithium wasn’t immediately available for comment.

The company’s Tres Quebradas lithium brine project (known as the 3Q project) is located in the Argentine province of Catamarca — considered to be the largest lithium producing area in the country.

The 3Q project has measured and indicated resources of 5.3 million tonnes lithium carbonate equivalent at an average grade of 636 mg/l lithium.

China’s Zijin Mining announced its plans to acquire Neo Lithium for $6.50 per share in cash in October, and Neo Lithium’s shareholders approved the transaction in December.  

On January 11, Neo Lithium said that it received clearance from Argentina’s environment and mining authority for the construction and operation of its 3Q project — one of the final conditions Zijin Mining needed to acquire the junior exploration company.

“Zijin is in the process of obtaining approval for the transaction from relevant authorities in the People’s Republic of China,” Neo Lithium stated in a press release on January 11.

Bouchard said that all foreign investments are subject to review and that critical minerals receive “special scrutiny” by the Investment Review Division along with other government departments and Canada’s security and intelligence community.   

“Any investments found to be of potential concern through this process proceed to a formal national security review. This means all potential threats are taken very seriously,” Bouchard said in an e-mail.   

“Every investment is reviewed on its merits,” said Bouchard.  “Considerations can include…the nature of the mineral deposits involved and its role in critical Canadian supply chains, as well as the nature of the Canadian business and whether it has operations in Canada. For example, whether it is principally domiciled here for regulatory or other reasons, with few local staff or assets.” 

Conservative leader O’Toole said the review was critical for Canada to safeguard its supply and access to critical minerals like lithium “to protect our economy and our competitive advantage” and to ensure that Canadian mining companies stay ahead of competitors under “autocratic, non-democratic rule like the Chinese Communist Party.”

Lithium is used to make batteries that power electric vehicles, the demand for which has increased globally as the world looks to meet its decarbonization goals.

“We are poised to play a key role in the growth of electric vehicles,” O’Toole said. “Combine this with Canada’s global leading natural resources economy…to our leading role as a global center of excellence of mining finance, Canada should become a leader in the value chain for battery production.”

 “Companies like Neo Lithium are Canadian because we are mining finance leaders,” he added. “As electric vehicles become more common Canada needs to make sure it has capital, market access and the capacity to stay ahead of competitors.”

A feasibility study of the 3Q project completed in October, forecast a mine life of 50 years with average annual production in the first 20 years of 20,000 tonnes of battery grade LCE.

At an 8% discount rate, the 35,000-hectare project would generate a post-tax net present value (NPV) of US$1.13 billion and a post-tax internal rate of return (IRR) of 39.5%.