Shenghe acquires ore stockpile that symbolized a shift away from China for REEs critical to North America’s green energy and high-tech sectors.
High-grade ore dug up from a small open pit at Vital Metal Ltd.’s Nechalacho project in the summer of 2021 marked the start of Canada’s first rare earth elements mine and the first link in an REE supply chain that was envisioned to be completely independent of China.
“The combination of our efforts clearly work together towards the collective goal of establishing an ex-China rare earth supply chain to ensure that Western world manufacturers have access to North American produced and sourced rare earth oxides,” Mike Schrider, COO of Ucore Rare Metals Inc., said upon entering an agreement with Vital for future North American processing of rare earth products originating at Nechalacho.
As of Dec. 18, however, China-based Shenghe Resources Holding Co., Ltd. has cut a deal to buy the high-grade Nechalacho rare earth ore stockpiles originally destined for an REE supply chain with links in North America and Europe.
At the same time, Shenghe has invested A$5.9 million (US$4 million) to buy an initial 9.9% strategic position in Vital.
“We are appreciative of the strong vote of support shown by Shenghe in the company’s projects,” said Vital Metals Chairman Richard Crookes.
Shenghe has the option to increase its ownership of Vital to 18.2% by investing an additional A$8.9 million (US$5.6 million) in the stock of the Australian mining company.
This strategic position in Vital, along with the sale of rare earth stockpiles, has raised concerns in Yellowknife and Ottawa.
Kieron Testart, a newly elected member of the legislative assembly in Northwest Territories and former director of economic development for Yellowknives Dene First Nation, said Chinese ownership of Nechalacho is not what “the Yellowknives Dene First Nation signed up for” when they began contract mining at Nechalacho in 2021.
“Nechalacho was sold as a source of rare earths and critical minerals that would be controlled by allies,” he told Yellowknife, NWT-based Cabin Radio. “I was there with the late Chief Edward Sangris when that announcement was made publicly, with representatives from Australia, Norway and the United States all holding hands, showing that this was going to be a Western supply chain. Now, with China involved, that’s clearly not the case anymore.”
In the days leading up to the closing of Shenghe’s initial investment in Vital, the Canadian House of Commons Standing Committee on Industry and Technology passed a motion urging Canada Minister of Innovation, Science, and Industry François-Philippe Champagne to invoke a national security review of Shenghe’s investment in Vital.
“Beijing-backed raiding of Canadian assets and resources have reached an all-time high,” said Rick Perkins, Shadow Minister for Innovation, Science, and Economic Development.
“China cannot be allowed to continue to control Canada’s mining assets,” the Conservative member of parliament from Nova Scotia added.
Win-win for Beijing
Short of resource nationalism, there may be very little that Ottawa can do to prevent Chinese control of the Nechalacho rare earths project.
Given that Vital is an Australian company that has already received approval by its own government for the investment by Shenghe, preventing China’s influence through a minority stake in the company advancing the rare earths mine is already off the table.
Section 25 of the Investment Canada Act, however, does provide the Canadian industry minister the authority to order a national security review if there is reason to believe an investment by a non-Canadian threatens national security.
While such a review could delay or stop a Shenghe-backed Vital from pursuing its plans for a larger mine at Nechalacho, it will likely not help advance the original plan of a rare earth supply chain free from China.
If Ottawa decides to do nothing at all, then Vital moves ahead with plans to advance towards a larger mine at Nechalacho. Under this scenario, Vital will need to raise tens to hundreds of millions of dollars to develop the larger rare earths operation. This opens the door for larger investment and potential increased ownership by Shenghe.
If a national security review delays or stops further investments in Nechalacho by a Shenghe-backed Vital, then the project stalls. This scenario could be considered acceptable, or even preferable by Beijing.
Currently, China controls roughly 70% of the rare earths mining and at least 85% of the processing and separation of these elements vital to electric vehicles, wind turbines, and innumerable high-tech devices.
So, either the advancement or stalling of Nechalacho by Vital would likely help China maintain its grip on the rare earths sector.
In the meantime, Shenghe is working toward buying up the stockpiles of high-grade ore from the first, only, and currently shuttered rare earths mine in Canada.
“It’s a sad day for Canada. We are now part of China’s supply chain for REE (rare earth elements),” Bill Braden, who previously served as media manager for Cheetah Resources, Vital Metals’ Canadian subsidiary for the development of Nechalacho, told Data Mine North in an email.
Source: Mining News North
