The Decibel - China’s control over Canada’s very rare and important mineral

Episode Date: June 20, 2023

As the world races to mine more critical minerals, China has managed to capture nearly 100 per cent of the cesium market. While not as well known as lithium, cesium is an even rarer mineral. There are only two mines globally, and one of them is in Manitoba.But its owners are based in Beijing. And that is raising a number of national security concerns. The Globe’s mining reporter, Niall McGee, explains why.Questions? Comments? Ideas? Email us at [e-mail]

Canada has a rare critical mineral underground. It's called cesium. But even though cesium exists in Canada, the company that owns our one cesium mine isn't Canadian. It's Chinese. The Tanko mine in Manitoba is owned by a Chinese company called Sinomine. Now they want to expand it into an open-pit mine to boost cesium production. And China's full control of our cesium

is especially concerning because Canada and China's relationship is deeply strained. Niall McGee is the Globe's mining reporter. He's here to explain why the fight over this critical mineral is becoming a battleground for Canada's economic power and national security. I'm Mainika Raman-Wilms, and this is The Decibel from The Globe and Mail. Niall, it's great to have you back in studio. Thanks for having me, Monica. Last time you were here, we were talking about lithium, a critical mineral.

And today we're going to focus on a different critical mineral. Now, can you tell me, what is cesium? Yeah, so I'm guessing a lot of the listeners have not heard of cesium. I had not heard of cesium until fairly recently. So it's incredibly rare, but it's incredibly important. It's not used widely. It doesn't have hundreds of uses, but the uses it has are important. It's an incredibly dense material that doesn't really break down, so they can use it in drilling rigs, for example, and it doesn't really corrode and it doesn't really seep into the environment.

It's also environmentally friendly. And yeah, when they're done with it, they can reuse it. It's also used in the defense industry as airport scanners, believe it or not, it goes into airport scanners. And it's also used in small amounts in the GPS system. So the technology underlying the mobile phone network. So it does have these very important uses. Okay. And you said it is extremely rare. So just how rare is it? Unlike, let's say, lithium, where lithium is super strategic and super important. Lithium's mined kind of all around the world, basically, in many different locales. Cesium currently is only mined in two places.

One of them is Canada in Tanko, which we'll talk about in a little bit, but also in Zimbabwe. And so there really are only two cesium operations in the whole world right now. Wow. Okay. So Canada has cesium, but it sounds like we don't actually control the mining of it here. So why not? Yeah, that's right. I mean, it's basically down to a decision in 2019. The owner of the mine, which was an American company called Cabot Corp, wanted to sell the mine. And a Chinese company called Cynomine came in and offered to buy the

mine. Now, back then, both the US government and the Canadian government had the authority to stop the transaction. A lot of people thought that they should have because it's strategic and important. But both the US and Canadian government allowed the sale to happen in 2019. And X number of years later, here we are. And we have a Chinese company that owns the mine in Canada. It's a strategic mineral, and many people view that as a big mistake for Canada to allow that transaction to happen. Okay, so tell me about the company that owns this mine. Yeah, so the company is called Sinomine. They've been around for about 22 or 23 years. They are a public also produces lithium. And yeah, they are currently

a force in the critical mineral space worldwide. And when you say they control cesium worldwide, you said there's two mines. Do they control both of those mines? Yeah, that's right. They also own Beketa, which is another cesium mine in Zimbabwe. So yeah, they have 100% market share in mine Cezium. And so was this strategic and purposeful on the part of Sinomine? Like, did they try to control that all of, because it sounds like they have 100% control over Cezium mining here. So was this intentional? I mean, absolutely. Yeah, just on a very kind of strict business basis. Whenever you have 100% control of anything, you have massive power to

dictate the price. And that's essentially what Sinomine does right now. It controls the market, it sets the price. And in some cases, it doesn't even sell the product because it's so expensive because people can't afford to buy it. I guess I wonder now, so yes, when any company has a monopoly over something that could be cause for concern, As you said, they can set the price. What is the specific concern, though, of having a Chinese company dominate here? Yeah, so you're really getting at the heart of it there, Manika. I mean, anyone who's reading the Global Mail right now will know that there are big geopolitical concerns about Chinese interference into past federal elections in Canada. The Global Mail has extensively and

exclusively reported on that. China, of course, has denied that that's the case. But relations between the two countries, as anyone knows, are just not great. And people are concerned about the Chinese authoritarian regime. Now, Sinomine isn't held by the state. There is no state ownership. That's what they say. But people are afraid that nonetheless, they may get orders from the Chinese government at some point. And cesium is critical. And people are very worried about an authoritarian regime or more specifically a company that a Chinese company owning this resource. I mean, China in the past and critical minerals are more specifically in rare earth minerals, which is a subset basically of critical minerals, has put down its foot and used its leverage to cut countries off.

It did that with Japan temporarily more than a decade ago. And national security experts, of course, remember that. And they are afraid that it could happen in critical minerals like lithium, like cobalt, and possibly cesium. Now, the fact that this is not a state-owned company, national security experts would argue, is not that relevant, because it's such an authoritarian regime, that in theory, if the Chinese government wants to do something tomorrow, it's going to do it. We're talking about supply of this mineral and then national security concern of a Chinese company owning the supply of this mineral now. So can we kind of connect those dots? Why is controlling the supply chain necessarily a national security concern?

Yeah, that's because the government, the Canadian government, a couple of years ago decided that national security concerns is not strictly over things like the military or space, but also the economy. So you also do not want authoritarian regimes controlling minerals that are critical to the modern economy, your cell phones, your computers, your cars, anything that you rely on, and that it's just not a good idea to have that control with a country like China or Russia or Iran or any other country that Canada would be deemed to not have friendly relations with. So yeah, they do designate this as officially a national security risk. We'll be back in a moment. So now, how did we get here? It sounds like the Canadian government is concerned about Sinomine's operations here

and its control of cesium. If this mine is on Canadian soil, how did Sinomine gain such control here? There is a kind of long story about how this happened. So if you go back as recently as five years ago, relations between China and Canada were actually quite chummy. And it was a different regime in China. And it was seen as sort of more welcoming to openness and capitalism. So back then, it was okay to have a Chinese company buy a Canadian mining company. Of course, there were always people that had some concerns, but Canada basically did have an open door policy.

And for a long time, Canada allowed Chinese companies, Chinese state-owned companies to buy Canadian mining companies, take huge stakes in Canadian mining companies. We see this with a lot of Canada's biggest mining companies today. Barrick Gold, Tech Resources, Ivanhoe Mines, all these companies have major state-owned shareholders. And we saw earlier this year, in fact, the dangers of relying on a Chinese state-owned shareholder tech resources, which had planned to do a much-publicized restructuring, wanted to go one way,

and then wanted its Chinese shareholders to vote for that strategy. And in the end, we reported that they, in fact, did not vote for tech. And that decision has left tech very vulnerable now because no one really knows what's going to happen to the company. If a Chinese company has a controlling stake there, they do have a significant amount of power. Yeah. And there's also just the fact that over the last decade, they've been allowed to gain this huge chunk of the Canadian critical minerals industry control over lithium assets, cesium assets. We were talking about lithium last time you were on the show, right? Their control in the Canadian lithium mining. Yeah, particularly in lithium. Cyanamine was the only lithium producer in Canada up until very recently. So finally, an Australian company got a lithium

mine into production in Quebec. So cyanamine is not the only one, but until recently, it was the only lithium producer in Canada. And lithium arguably is the most strategic of all the critical minerals. But now, if the Canadian government doesn't like Sinomine having this kind of dominance, can it do anything about it now? Like, I don't know, can it take control of the mine? So there's a very interesting nuance with this planned expansion of Tanko. So because Sinomine's plans involve moving from an underground operation to an open pit operation. In this case, the underground mine is under a lake. So if they want to move to an open pit situation,

they'll basically be flipping the mine. So they'll be doing it on surface. And you can probably see where we're going with this. They're not going to be mining with all the water. They'll have to drain the lake and that will trigger a federal impact study, likely under natural resources. So Canada will have another chance to effectively block Sinomine if Sinomine does move forward with its open pit application. Okay. Yeah. Because what Sinomine wants to do now is essentially expand production of the mine. And the way to do this, as you say, would be to drain this lake, Lake Burnick, I believe, in eastern Manitoba, so they can actually have that open pit mining. So it sounds like the federal government then it's not really like legislation about, you know, having a Chinese company in here. It's actually about environmental regulations where the government can do something now then. Yeah, that's right. If the government does block the expansion of the mine,

if Natural Resources Canada decides, or the Environment Ministry decides that this is not a good idea for the environment, they're doing it for those reasons. But ultimately, it's the same thing, you're blocking someone's plans. So national security experts are sort of interpreting it as, well, here's another chance to potentially block them on national security concerns, even if it's not explicitly framed that way. I wonder, though, because, you know, the Canadian government banned Chinese telecom company Huawei, right, from building its 5G network in Canada. We will always protect the safety and security of Canadians, and will take any actions necessary to safeguard

our telecommunication infrastructure. Could Canada just do the same and ban cyanomine? Like if it's really worried about China controlling these mines, couldn't it just do something like that? Yeah, that's really interesting because there are people that I spoke to last year when I first wrote about Sinemine's lithium expansion plans that were calling for Canada to nationalize the Tango mine. I asked the industry minister directly about that about six months ago, and his answer was, I don't have the authority to do that under the Investment Canada Act. This is an act that basically foreign companies that are doing business in Canada have to abide by. So having said that, I have spoken to national security experts that say the government does potentially have leeway to nationalize an asset if it wants to, if it wants to go down that road. But I guess we'll see over the long term whether they would make such a

drastic move. Now, if they did make that move, that would make global headlines, because Canada is not known for nationalizing assets against perceived foreign hostile regimes. And if it did that, at a minimum, it would send a big chill through the Canadian mining sector in terms of future projects. But I guess it remains to be seen. Okay, yeah, so nationalizing an asset like that would be a big deal. But Industry Minister François-Philippe Champagne has been pushing back against Chinese influence in the Canadian mining industry. Can you just kind of give us a rundown here, Niall?

What has the minister done in the recent months? Yeah, so late last year, Mr. Champagne, he made two drastic steps. So the first thing he did was he said in late October that no more foreign state-owned enterprises will be allowed to invest in the Canadian critical minerals industry except under exceptional circumstances. So basically a de facto ban on China and Russia and other countries that are not deemed friendly to Canada from now on. And then days later, he followed that up with a very specific move. So there were a number of proposed investments that were in front of him at that time. And he basically said, no, this is not going to happen.

And one of the companies that was targeted was Sinomine. So Sinomine had a deal in place to buy equity in a company called Power Metals, which was a little development company that's working on a cesium project. So this is something that could happen years in the future or not. And the government said, no, you can't do this. So they actually forced them to divest from Power Metals. So those were for sure two very drastic steps. Okay. And it's interesting because Sinoine does seem to recognize this kind of pushback from the Canadian government. One of the proposals the company has is it could build a lithium refinery in Manitoba. Lithium, of course, used in batteries for electric vehicles. So why

would that be attractive to the Canadian government now? Some people might think, well, if you're not welcome somewhere, you might want to just be as quiet as you can and maybe wind down your operations over time. But Sinemine's strategy is very interesting. They're actually trying to strategize the way out of this. So they're actually going ahead with expansion plans, and they believe that they can actually placate politicians. So one of them, as you mentioned, is potentially building a lithium refinery in Manitoba, which would generate a lot of jobs and also potentially redirect lithium that Sinemine is shipping back to China to Manitoba and then feed it into the North American car system. So their argument is, we're actually reducing the national security risk, we're creating jobs, and we're helping the North American car industry. Another part of that plan is they want to bring in a partner

that would be much more politically palatable to the government than Cynomine is. So one of the partners that Cynomine has talked to is LG Energy Solution, which you'll probably know. LG Energy Solution is a friend of Canada. In fact, Canada is jockeying to keep LG Energy Solution in Windsor, where they have committed to building a battery plant. This is the Stellantis plant that we keep hearing go back and forth. Okay. So this is a really interesting move, right? Because so right now, they mine the lithium in Canada, they ship it back to China to be refined. But

Sinomine is saying, well, we could build a refinery here, mine the lithium, refine it here. And then basically, it's in the vicinity of these new electric vehicle plants that Canada is building in Ontario. So we could just use it for the batteries right there. So this is a strategic idea on their part, essentially. I mean, I think it actually puts the government in an interesting situation because I do see the argument from Sinomine that this actually potentially reduces the security risk. But there are many constituents that would be horrified about the idea of allowing this to happen because the optics still just do not look good. There are no lithium refineries, to my knowledge,

in Canada currently. So allowing a Chinese company to build one, even if they're only a 50% partner in the project, would, I think, for a lot of national security experts, just be a bridge way too far. So just lastly here now, I mean, so we've talked about the environmental concerns that could stop Sinomine potentially from expanding the cesium mine and increasing production. We've talked about the potential for building this lithium refinery. When will we actually know if either of these things actually happen or not? So you'll probably know in mining, nothing ever happens fast, like ever. So Sinomine has told me that they will make a decision on whether they want to go ahead with the open pit roughly by the end of the year.

So if they do forge ahead with the plans and they've said that that's kind of the best option, they will, I guess, make an application at that point. And then who knows? Reviews in Canada in the mining sector over permitting take a long time. So I'm going to imagine if they do apply, it's going to take many years for the government to come back with an answer. And then building a mine will take a lot of years as well. So an actual cesium above ground mine in Manitoba is probably many years off at this point. Now, this is really interesting. Thank you so much for taking the time to speak with me.

My pleasure, Madhika. That's it for today. I'm Maina Karaman-Wilms. Jay Coburn helped produce this episode. Our summer producer is Nagin Nia. Our producers are Madeline White, Cheryl Sutherland, and Rachel Levy-McLaughlin. David Crosby edits the show. Adrian Chung is our senior producer, and Angela Pachenza is our executive editor.

Thanks so much for listening, and I'll talk to you tomorrow.