Canadian critical mineral shares fall on concern after tighter M&A announcement
By Divya Rajagopal
TORONTO, July 8 (Reuters) -Shares of Canadian companies that mine critical minerals such as copper and uranium fell on the Toronto Stock Exchange (TSX)on Monday as investors assessed the potential impact of Canada's announcement last week that it would restrict large mergers and acquisitions in critical minerals.
Last Thursday, Industry Minister Francois-Philippe Champagne cleared London-listed Glencore's GLEN.L takeover of the coal unit of Teck Resources under strict conditions after taking into account the "net benefit" of the deal. But he added Canada would allow large mergers and acquisitions in the sector only under the 'most exceptional circumstances.'
Six critical mineral companies were among the top losers in opening trade on the Toronto Stock Exchange. Copper miners, including Capstone Copper CS.TO Hudbay Minerals HBM.TO, Teck Resources TECKb.TO, First Quantum Minerals FM.TO, Ivanhoe Mines IVN.TO were all down by over 3% around 1 p.m. Eastern Time, while uranium miner Cameco Corp CCO.TO was down 2.13%.
"This updated policy significantly compresses M&A optionality and potentially restricts financing options for Canadian miners. As a result, we now anticipate most Canadian miners to trade at lower valuation multiples vs. global peers," said an analyst note led by Scotiabank analyst Orest Wowkodaw.
Champagne said the ministry would set a high bar for clearing future deals involving large Canadian companies in the critical minerals sector, reflecting the strategic importance of critical minerals and the need for Canada to protect its interests.
Canada has identified 31 minerals, including copper, uranium, lithium and nickel, that it considers critical for their strategic uses in modern technology and the transition from fossil fuels, such as in electric vehicle batteries.
"The door has not been closed, but narrowed even further on investments in critical minerals...," said Calvin Goldman, former head of Canada's Competition Bureau, who now runs an independent practice on advising clients in foreign investments. "So business community, get ready because you have to be fully prepared, as now they have to satisfy increasingly quiet strict criteria," Goldman added.
Under the Investment Canada Act the government can reject a proposed acquisition or any inbound foreign investment if the government believes the deal represents a threat to national security or if it fails to satisfy the criteria for bringing a "net benefit" to Canadians.
In the last two years, Canada has asked Chinese investors to divest from Canadian critical mining companies after a national security review, signaling that investments from certain countries such as China will come under tougher scrutiny.
Some of the largest investors in leading Canadian copper companies are Chinese. Teck Resources counts China Investment Corp as its biggest shareholder. First Quantum's largest shareholder is China's state-owned copper miner Jianxi Copper 600362.SS and Ivanhoe Mines has Hong Kong-headquartered CITC Metal Group has its leading shareholder.
Reporting by Divya Rajagopal;
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