Solaris Resources has called off its planned sale of a 15% stake to China’s Zijin Mining Group, citing concerns over meeting Canadian foreign investment standards. The decision underscores the growing complexities facing cross-border transactions in sectors deemed critical by national governments.
Initially announced in January, the deal valued at C$130 million ($95 million) aimed to bolster the development of Solaris’ Warintza copper project in Ecuador. However, the evolving landscape of Canadian regulatory oversight proved too great a hurdle. The transaction required approval under the Investment Canada Act, which was amended in late 2022 to intensify scrutiny on investments from state-owned enterprises, particularly in the critical minerals sector, which includes resources like copper.
Solaris Resources’ CEO, Daniel Earle, expressed his dissatisfaction with the current regulatory environment, stating that the inability to complete the transaction within a reasonable timeframe indicated that Canada’s critical minerals policy might be counterproductive when it comes to attracting foreign capital for domestic assets.
“This development not only reflects the stringent regulatory measures in place but also the heightened domestic political sensitivity surrounding foreign investments in essential sectors,” Earle noted. The uncertainty hanging over the deal has impacted Solaris’ market performance, with its shares underperforming compared to its peers. On the day of the announcement, Solaris’ stock dipped by 0.4% on the Toronto Stock Exchange, contrasted with a 0.3% rise in the broader Canadian share index.
Market analysts, including those from RBC Capital Markets, commented that terminating the deal could alleviate some of the regulatory uncertainties that have overshadowed Solaris’ operations and potentially impacted its stock value negatively. The firm pointed out that the move removes the dilutive effect of the transaction on shareholder value, hinting at a potential positive rebound in investor confidence.
Canada’s rigorous stance on foreign investments, especially those emanating from China, has been evident in other sectors as well. Earlier in the year, the Canadian government intervened to prevent SRG Mining, a graphite mining company, from accepting an investment proposal from China’s Carbon One New Energy Group. This action aligns with Canada’s broader strategy to safeguard its interests in critical minerals like copper, graphite, and lithium—materials essential for modern technologies and energy solutions.
The termination of the Solaris-Zijin deal marks a crucial moment for Canada’s policy on foreign investments in critical minerals, reflecting a delicate balance between national security interests and the need to attract foreign capital for resource development. As countries increasingly view critical minerals as strategic assets, the interplay between economic development and national security is becoming more complex, influencing investment flows globally.
