Miner tied to Chinese state-owned enterprise says Ottawa shouldn't challenge Peru deal

A subsidiary of a Chinese state-owned mining firm says Canada is wrongly considering a national security review in its agreement to purchase a gold and copper mine in Peru.

In May, Vancouver-based Pan American Silver Corp. announced an agreement worth almost $300 million US to sell its stake in Peru's La Arena gold mine to Jinteng (Singapore) Mining, a subsidiary of China's Zijin Mining Group.

Pan American said then that the agreement was "subject to customary conditions and receipt of regulatory approvals."

Since then, however, Canada's Industry Minister François-Philippe Champagne has found the agreement "could be injurious to national security" and told the company in late June that he "may" order a formal review under the act.

Certain types of foreign investments involving Canadian companies are reviewed on national security grounds, and Jinteng voluntarily notified the director of investments at Innovation, Science and Economic Development Canada shortly after the agreement was announced.

The federal government maintains a list of nearly three dozen critical minerals "essential to Canada's economic or national security," and reviews of investments involving foreign companies like Zijin are a protective measure to maintain Canadian control of materials essential to "the green and digital economy."

Zijin is partially owned by the Chinese government and overseen by members of the Chinese Communist Party.

Canada's critical minerals strategy outlines how allies in Europe have "experienced the consequences of dependence upon non-like-minded countries for strategic commodities."

Jinteng claims in a judicial review application filed in Federal Court in late July that the minister "lacks jurisdiction under the act" to order a national security review of the La Arena deal.

"The targets are Peruvian entities. They do not have a place of operations in Canada or otherwise carry on operations in Canada, they do not have individuals in Canada who are employed or self-employed in connection with their operations and they do not have [assets] in Canada used in carrying on their operations," the application says.

National security experts have warned of the geopolitical consequences of letting foreign actors scoop up Canadian companies in the sector, and Jinteng's actions to skirt the national security review process represent a test of Ottawa's reach on companies incorporated in Canada, but that have no domestic operations and exist only to hold foreign assets.

Despite the voluntary notification sent to Ottawa about the deal, Jinteng claimed it doesn't involve a "Canadian business" as defined by the act because the target companies and their assets are in Peru, although they're owned by Pan American subsidiaries incorporated in B.C. and Ontario.

The company claims in its application that the minister's decision is "based on an untenable and unreasonable interpretation of the act, and is therefore wrong in law."

Aaron Shull, managing director and general counsel at the Centre for International Governance Innovation in Ontario, said the case presents a "fairly complicated story that is actually quite simple."