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Jul 02, 2023

Chinese mining company Sinomine planning Manitoba lithium refinery, eyeing Korea’s LG as joint venture partner

Chinese mining company Sinomine Resource Group Co. Ltd. is considering building

Chinese mining company Sinomine Resource Group Co. Ltd. is considering building a lithium refinery in Manitoba, and is looking at teaming up with Korea's LG Energy Solution Ltd. in an attempt to assuage any national-security concerns on the part of the federal government.

Last year, Beijing-based Sinomine put its Tanco lithium mine into production in Manitoba. It currently ships unrefined lithium concentrate from the site to China for use in the country's electric-vehicle industry. China dominates the processing of lithium, with roughly a 60-per-cent share of the global market.

If Sinomine gets the go-ahead for the construction of its new facility, known as a lithium hydroxide plant, the company would be able to refine the key battery metal in Canada and sell it into the North American supply chain. The company is hoping this arrangement will ease the minds of politicians concerned about China hoarding EV metals at home.

"We are planning to talk to the government by the end of this year, and tell them that we want to build a plant here," Frank Wang, the president of Sinomine's North American division, said in an interview.

"We want to expand our supply chain here, and better service downstream customers in North America, so that all the materials can stay provincial, stay in Canada, and supply North America."

But there are no assurances the federal government will give its blessing to Sinomine. Ottawa's critical-minerals policy is centred on shoring up domestic mining companies and "friendshoring" with like-minded countries.

Over the past few years, as the political relationship between Canada and China has deteriorated, fears have mounted over China's grip on the global battery metals and critical-minerals industry. Relations between the countries have been strained further in recent months, as The Globe and Mail has published revelations about Chinese interference in past federal elections and other attempts by Beijing to influence Canadian politicians.

After facing intense criticism for allowing Chinese companies to invest billions in the domestic critical-minerals sector largely unchecked for more than a decade, Ottawa introduced a series of new curbs late last year.

Industry Minister François-Philippe Champagne said in October that he wouldn't allow more investment in the Canadian critical-minerals sector by foreign state-controlled companies, except under extraordinary circumstances – a move that was clearly directed at China. Days later, he ordered three Chinese mining companies, including Sinomine, to divest from Canadian critical-minerals companies.

Sinomine was forced to sell its shares in Power Metals Corp., a Canadian lithium and cesium developer, as well as an offtake agreement with the company.

Asked how the Industry Minister would rule on an application by Sinomine to build a lithium plant in Manitoba, Mr. Champagne's office did not answer directly. "We can't speculate on the potential national security impact of a hypothetical investment," Laurie Bouchard, a spokesperson for the minister, said in an e-mail.

Despite the order to divest from Power Metals, Mr. Wang expressed optimism that Sinomine will win Ottawa's favour and be able grow its business in Canada. As part of that strategy, Sinomine is searching for potential joint partners among global battery makers that already have plants in North America. Among these is LG Energy Solution, Mr. Wang said.

If Sinomine ends up in a joint venture with LG, lithium processed at the refinery in Manitoba could be fed to the electric-vehicle battery plant LG is building with automaker Stellantis in Windsor, Ont., keeping all of the supply chain in North America.

LG declined to comment for this story.

Ottawa's crackdown on Chinese investment in the critical minerals sector left out major miners, critics say

Ottawa has faced severe scrutiny for allowing Sinomine to buy Tanco from United States-based Cabot Corp. When Sinomine proposed the acquisition in 2019, the federal government had the authority to block the deal on national-security grounds, but instead approved the transaction promptly.

The sale was greenlit by Navdeep Bains, who was industry minister at the time. He has since left government, and recently joined Rogers Communications Inc. as its chief corporate affairs officer. He did not respond to a request for comment.

The Tanco mine currently employs 170 people, about 90 per cent of them from the local community. Sinomine says the new lithium hydroxide plant could create an additional 200 jobs.

Mr. Wang said that despite the misgivings some have over the Chinese company's powerful position in the North American critical-minerals industry, Sinomine is keen on building a strong relationship with Ottawa, and is willing to be flexible in its approach.

"Sinomine is willing to find a way to make it more comfortable for the government," he said.

Despite a push to produce electric cars in North America, and several announcements from multinationals that they will build battery factories in Canada, there is almost no refining capacity here that can feed processed lithium into the supply chain.

Several companies have plans to build lithium refining plants in Canada and the U.S. over the next few years. Tesla is building a refinery in Texas that it hopes will be operational by the end of the year. Nemaska Lithium, which is co-owned by United States-based Livent Corp. and Investissement Québec, a provincial government agency, is planning to complete a refinery in Quebec by 2026. Lithium Americas Corp. hopes to have a refinery built in Nevada around that time.