Expect More FDI Scrutiny in Critical Minerals Sector, Law Firm Says
Foreign companies in the critical minerals sector should expect to see increased investment review scrutiny among the U.S. government and its allies, Holland & Knight said in a January client alert. The firm pointed to the Biden administration’s September executive order outlining priorities for the Committee on Foreign Investment in the U.S. (see 2209150053) -- as well as “enhanced” review policies by Australia and Canada -- as signs that critical mineral supply chains are receiving extra government attention.
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The alert specially mentioned Canada’s November order that required three Chinese companies to divest themselves from Canada’s critical minerals sector after the country said they threatened Canada’s critical mineral supply chains (see 2211030017). Canada also strengthened its foreign direct investment review procedures in December (see 2212160019), which Holland & Knight said “more closely align[s]” Canada's review process with CFIUS and the U.K.
“Canada's tough stance on Chinese investments in the critical minerals sector is one example of the broader geopolitical risks associated with minerals dependency and a convergence in treatment of foreign investments in the critical minerals sectors by the U.S. and its closest allies,” the firm said.
The firm also said Australia, which is the world’s leading producer of lithium and rutile, also has “pursued enhanced regulation” of FDI in the critical minerals sector. The firm pointed to Australia's 2020 order blocking a $20 million investment by Chinese state-controlled Baogang Group Co. in Northern Minerals, a “holder of significant deposits” of rare earths.
“Moving forward, further efforts are expected by the U.S., Australia, Canada and allies to counter Chinese dominance in this space, including through foreign investment screening,” the firm said.