The U.S. government secured equity stakes in Lithium Americas Corp. and Trilogy Metals Inc., both based in Vancouver, ahead of Prime Minister Mark Carney’s visit to Washington earlier this week.Evelyn Hockstein/Reuters
U.S. President Donald Trump is pursuing annexation by stealth.
His government’s decision to take strategic stakes in two Canadian mining companies is about more than Washington securing access to critical minerals. It is also a novel way for Mr. Trump to ratchet up the pressure on Ottawa to manufacture a “merger” between the United States and Canada.
Mr. Trump, who has spent months brazenly broadcasting his desire for Canada to become the 51st state, is the ultimate showman. So it wasn’t a coincidence that the U.S. government secured equity stakes in Lithium Americas Corp. and Trilogy Metals Inc., both based in Vancouver, ahead of Prime Minister Mark Carney’s visit to Washington.
Much like Mr. Trump’s punitive trade war, it was a flagrant flex of economic might to show Canada who’s boss. That he again mused about joining the two countries in front of Mr. Carney this week was also a calculated move – one that highlights the national-security risks posed by Washington’s investments in the two Canadian miners.
Explainer: Four key moments from Carney’s meeting with Trump in Washington
The U.S. government is taking a 5-per-cent equity stake in Lithium Americas and a 5-per-cent ownership stake in its new lithium mine in Nevada called Thacker Pass.
It is also taking a 10-per-cent equity position in Trilogy Metals, while securing the right to later increase its stake on the cheap. Trilogy has a 50-per-cent stake in the Upper Kobuk Mineral Projects in Alaska, which include deposits of copper, zinc, lead, silver and gold. The U.S. government will also have the ability to nominate a director to Trilogy’s board.
Let’s set aside the surrealism of the U.S. government engaging in leftist-style central planning.
In the before times, no one in Canada would have qualms about Americans taking minority stakes in domestic miners, especially if those companies’ major assets were located in the U.S. But there is no going back.
The Canadian government has expressly linked national security to economic security when it comes to investments in critical minerals by state-owned enterprises. To that end, it has previously ordered the divestiture of Chinese corporate investments in Canadian critical-mineral companies.
Beijing, though, posed an obvious threat. Now Ottawa is in the awkward position of potentially assessing national-security risks posed by Washington’s investments as it seeks to resolve a trade war and fend off annexation.
Opinion: Canada can, and should, be the world’s elder statesman in critical minerals
It’s quite a conundrum. Although the Investment Canada Act empowers Ottawa to conduct national-security reviews of foreign investments regardless of size, blocking these U.S. government investments would further inflame bilateral relations.
The legislation’s national-security review process allows the federal cabinet to block an investment from closing or subject it to terms and conditions. If an investment has already been finalized, Ottawa can seek other remedies, including divestiture.
“There’s a lot of sensitivity in the Canada-U.S. trade relationship and broader relationship, the security relationship,” said Sandy Walker, partner and co-leader of the competition and foreign investment review group at Dentons Canada LLP.
“In this context, is it likely that the Canadian government – if we’re just looking at percentage ownership – that they would actually intervene to stop this investment by the U.S. government? That seems low likelihood to me, especially since the assets are in the U.S.”
It is unclear whether the act’s net-benefit test would apply to these investments because the U.S. is acquiring minority stakes and not significant control. Industry Minister Mélanie Joly, though, still has the power to find “control in fact,” if such indicators exist, when it comes to investments by state-owned enterprises or if there is a national-security concern, Ms. Walker said.
Ottawa declined to comment on the U.S. government’s investments, citing confidentiality provisions.
“The government welcomes foreign direct investment that benefits Canada’s economy,” stated Justin Simard, a spokesman for Innovation, Science and Economic Development Canada.
With respect to the national-security assessment process, Mr. Simard said that “reviews of foreign investments in critical minerals will be conducted in the best interests of Canadians.”
Given Mr. Trump’s claim that “a lot of companies from Canada are moving into the United States‚” there is reason to worry that Washington could use its investments to push both mining companies to redomicile south of the border.
The potential loss of more corporate headquarters in the mining sector was already a concern for Mr. Carney. A further hollowing out would only aggravate Canada’s productivity crisis.
Still, it would be difficult for Ottawa to demand a commitment to keep a head office in Canada through the national-security review process if the U.S. government’s investment is non-controlling, Ms. Walker said.
You’ve got to hand it to Mr. Trump. These mining investments are yet another means to achieve manifest destiny.