Canada’s North is quickly becoming a popular foreign investment site for Asian investors.
- Yukon Zinc’s Wolverine Mine is supported by China-based owners Jinduicheng Molybdenum Group Co Ltd.and Northwest Non Ferrous International Investment Co Ltd.;
- In 2009, China Minmetals Non-ferrous Co. purchased Kitikmeot mining company OZ Minerals;
- Yunnan Chihong Zinc Germanium Co. Ltd. has finalized a deal with Selwyn Resources Ltd. that will lead to the development of a zinc mine in Yukon, starting with a $1 million exploration and feasibility study;
- Last September it was announced that China was prepared to invest $1 billion on development of an iron ore site in Roche Bay, Nunavut;
- South Korea’s state-run gas corporation has invested in several gas sites in NWT and plans to buy a 20 per cent stake in the Umiak gas well;
- A recent article on a Canadian Chamber of Commerce-Hong Kong site suggests the possibility of an Asian group buying a stake in Avalon Rare Earths to help finance its Nechalacho project in Canada’s Northwest Territories.
Savvy Northern business promoters are starting to recognize their appeal, and are more actively marketing to Asia. For example, the “Mining Yukon” website specifically references their attractiveness to Asian investors. Yukon also committed to sending representation to a number of investor events in China last fall, and has previously promoted itself in Japan.
Each country may have its own reasons for this increased interest in Canada’s North, however the interest by China appears to be inspired by the need to increase global imports of iron ore in order to keep up with the country’s domestic steel industry. Yet there could be many sources, so what makes Canada so tempting?
We understand that Chinese state-owned enterprises (SOEs) have been encouraged to seek out investment in Canada in part because Chinese businesses have found the Canadian government overall more welcoming than most other governments in the developed world. A good example is the New West Partnership Trade Agreement (NWPTA) formed between the Governments of BC, Alberta and Saskatchewan in the summer of 2010. The NWPTA was designed not only to create Canada’s largest, barrier-free interprovincial market, but to also boost trade and investment with countries, such as China, Japan and Korea. We can safely assume that private investors from China have similar reasons for looking to Canada.
This interest is by no means one-sided. Taking lessons from the recent recession, Canadian businesses have also been eager to decrease their dependence on American markets and the growing economy of China has been perfect to fill that need. This synergy between Canada and China has been especially prevalent in the Canadian mining and energy sectors, as Canadian firms have been welcoming the financial support of capital-intensive Chinese SOE’s to fund massive projects, while these Chinese firms have been happy to supply the resource-hungry markets back in the Mainland. As Canada continues to tap into its Northern lands and the abundant resources located there, the trend of investments made from Chinese SOE’s into Canada’s mining and energy sector will only continue to grow in the foreseeable future.
If you are interested in investing in Northern Canada, perhaps BLG’s Team North can help? Team North is a practice of over 70 professionals spanning all areas of the law, and dedicated to providing services for businesses and investors in Canada’s North. Team North is the only practice of its kind in Canada, and is ideally positioned to assist with foreign investment in Canada’s North.