Marshall Eidinger comments in Lexpert's special edition on Finance and M&A on Canada's Policy Regarding Foreign Investments from State-Owned Enterprises in Critical Minerals under the Investment Canada Act. In line with the strategy to bolster domestic capabilities, the government of Canada ordered three Chinese firms to pull their investments out of three Canadian lithium companies in 2022. 

Canada’s protectionist measures might be unwelcome for Canadian mining companies dealing in critical minerals, however. Marshall says that, “First and foremost, right away, the pool of potential capital available to them has been significantly reduced. Any ability to finance now will require them to go to a shallower or smaller pool of potential parties, which also means that how they finance their projects may change.”

Instead of a straight equity investment with associated governance rights, issuers may have to use unique securities or royalty financing, Marshall says. Or, rather than a financing transaction, they may seek out an M&A transaction, so they are better capitalized as a combined entity than alone.