Rare earth expert unsure why China is interested in N.W.T.'s Nechalacho mine project

A mineralogist says he is puzzled by a Chinese company's interest in an Australian company and its rare earth mine project in the Northwest Territories — while a journalist who reports on the industry says he can see both benefits and disadvantages for its new investor.

The mine's owner, Vital Metals, announced over the weekend that Shenghe Resources had purchased a 9.9 per cent stake in Vital and had purchased all of its stockpiled rare earth material.

Anton Chakhmouradian, a professor of geology at the University of Manitoba and an expert on rare earth elements, told CBC News he's not convinced the Nechalacho rare earth project will become an international source of rare earth material. 

Shane Lasley, the publisher of Mining News North, said there are challenges with the mine's location and the lack of infrastructure around it, but he disagreed with Chakmouradian about the quality of the deposit.

"It is a very high-grade, large and near-surface deposit of rare earth — all of which point to its financial and technical viability," he said in an email. 

The Nechalacho mine project, 110 kilometres southeast of Yellowknife, had been marketed as a way for Canada to develop a rare earth market independent of China. Canada and its allies are trying to upend China's dominance in critical minerals — of which rare earth elements are a type — and create a supply chain that relies on what they describe as more stable and reliable partners. Rare earth elements are crucial in types of low-carbon technology.

Natural Resources Canada Minister Jonathan Wilkinson told CBC News in an emailed statement that he is focused on maintaining supply chain security. But critics of the deal between Vital and Shenghe say it flies in the face of those goals. 

Chakhmouradian said he's not clear what the Chinese want with the company because the North T Zone deposit, a smaller pile of metals that were extracted to demonstrate what was possible at Nechalacho, is "spectacular" but also very limited. 

The rest of the Nechalacho deposit consists of rock that Chakhmouradian believes is not "amenable to a commercially viable extraction of rare earth oxide or rare earth products of any kind that would be competitive internationally."

Chakhmouradian hasn't visited the Nechalacho mine site, nor has he worked on the project as a consultant. He said he's drawing his conclusions based on publicly available information — which he pointed out is meant to entice investors.

Chakhmouradian said he's not sure what motivated the Chinese company to make a deal with Vital Metals.

He also said he's not sure any rare earth project would be able to succeed without expertise from China and doesn't believe Canada has any legal recourse to block the investment.

"Unless Canada enacts some sort of law that would nationalize these types of resources or make them inaccessible to foreign capital and foreign development and foreign involvement, I see no viable route to limit that involvement," he said. 

Canada's Innovation Minister François-Philippe Champagne said in 2022 that Canada would be limiting the involvement of foreign state-owned companies in the mining sector and ordered three Chinese resource companies to sell their interests in Canadian critical mineral firms. Rick Perkins, a Conservative MP in Nova Scotia, told a House of Commons standing committee that Shengde is partly state-owned.