China’s Jiangxi Copper currently owns about 18.5% of the Toronto-based miner
Ottawa has been taking steps to prevent Chinese companies from investing in key Canadian sectors, but a prominent Toronto-based miner announced an agreement on Tuesday that it hopes will provide more clarity on its relationship with a Chinese shareholder and strike a “balance” between the companies, shareholders and the government.
“I think we have struck the balance between something that works for our shareholders, something for Jiangxi copper, and something that works for the Canadian and other governments,” Ryan MacWilliam, First Quantum’s chief financial officer, said. “It’s consistent with what the (Canadian) government is trying to achieve.”
He said the agreement provides “clarity and structure” considering the “heightened geopolitical” complexity.
“With this agreement, we can say to the Canadian government, ‘Look, they can’t sell shares to other companies in large blocks without us having visibility on that,’” MacWilliam said.
Jiangxi first made a notable investment in First Quantum in 2019, when restrictions against Chinese investments weren’t as strict. But the situation has since changed as Western countries look to reduce their reliance on China for key raw materials and focus more on trading with friendlier nations.
In October 2022, the federal government said investments from foreign state-owned companies in Canadian critical minerals could also be considered injurious to national security. A few days later, it ordered three Chinese companies to exit three Canadian lithium firms.
Canada’s mining sector has said the government needs to provide miners with alternate access to investments since it has banned funding from certain sources.
Dean McPherson, head of global mining at TMX Group Ltd., which runs the Toronto Stock Exchange, described the government’s announcement in July as “troubling.”
“If we were concerned before with the first statement a couple of years ago, we are 10 times more concerned now,” he said. “It’s extremely troubling to see this continue.”
McPherson said that issues linked to capital are “at the heart of all this,” so the government needs to come up with programs to replace the money that miners are no longer able to access.
Jiangxi agreed to make a US$500-million prepayment to First Quantum in February in return for the Canadian miner supplying it with 50,000 tonnes of copper annually for three years from its Kansanshi mine in Zambia. First Quantum will also have to pay interest on the prepayment, the company said.