Canadian gold miner with lithium project sells itself to Chinese miner

Breadcrumb Trail Links Mining Commodities Yintai Gold to buy Osino…


Yintai Gold to buy Osino Resources for $368 million

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Ottawa’s policy of preventing Chinese companies from investing in Canadian-listed firms may be put to the test after Vancouver-based Osino Resources Corp. agreed to be bought by Yintai Gold Co. Ltd. for $368 million.

Yintai’s main interest in Osino seems to be the latter’s gold project in central Namibia. The Twin Hills Gold project is expected to have a 13-year mine life with average gold production of more than 169,000 ounces per year, according to a third-party study. The project is expected to generate about US$1.5 billion with a relatively low cost of about $365 million to build the mine.

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Yintai president Xingong Ou in a press release said Twin Hills represents a unique opportunity for the company to add a “high-quality gold development asset” to its portfolio.

However, Osino’s Omaruru Lithium project, still in its early stages, lies just 20 kilometres away from the Twin Hills project. Osino in 2022 inked an agreement with Australia’s Prospect Resources Ltd. to explore the property for lithium. Prospect can own about 51 per cent of the project if it meets certain conditions.

Yaron Conforti, an Osino spokersperson, said that the company would divest its lithium asset prior to closing.

Even though Canada has blocked gold transactions in the past — for example, Shandong Gold Ming Co.’s bid for TMAC Resources Inc. — Beacon Securities Ltd. analyst Bereket Berhe said Osino’s assets are not in Canada and gold is not recognized as a critical mineral.

“The acquisitions of TSE-listed gold mining companies by Chinese operators, including Zijin Mining’s acquisition of Nevsun Resources (2018), Continental Gold (2019) and Guyana Goldfields (2020) did not prove problematic,” Behre said in a research note. “All acquired companies had assets outside of Canada. Although there is no guarantee … we believe there is a higher probability of the transaction closing successfully than not.”

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Ryan Walker, an analyst at Echelon Wealth Partners Inc., doesn’t expect Osino’s lithium project to be an obstacle in completing the deal.

“We would expect that if such an asset were to present any impediment to deal completion (lithium representing a strategic mineral and currently subject to a ban on unprocessed ore), which we do not expect, the asset would be monetized,” Walker said in a note on Feb. 26.

In November 2022, Canada ordered three Chinese companies to divest their shares from three junior Canadian lithium miners. This was after Ottawa released a policy that made it more difficult for foreign businesses either owned or influenced by “non-like-minded” nations to own or invest in Canadian miners dealing with metals such as lithium, nickel and copper.

Late last year, Industry Minister François-Philippe Champagne reaffirmed this stance and said he would not compromise on national security.

Canada considers 31 minerals, including lithium and copper, as critical due to the key roles they are expected to play in the gradual transition away from energy produced from fossil fuels in the near future. The restrictions were imposed to ensure Canada lessens its dependence on China for these raw materials.

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A spokesperson from the federal government said in a statement that the Investment Canada Act provides for the review of the most significant investments by non-Canadians to ensure its likely net benefit to the Canadian economy, and for the review of foreign investments of any size for national security concerns. 

“The government has not hesitated and will not hesitate to take action on transactions that would be injurious to Canada’s national security,” the statement read. 

Despite Ottawa’s stance, Canadian companies have been looking to make deals with Chinese companies.

For example, Montreal-based SRG Mining Inc. in July agreed to sell 19.4 per cent of the company to China’s Carbon One New Energy Group Co. Ltd. SRG is developing the Lola Graphite Project in Guinea, West Africa. Graphite, used in batteries, is also considered a critical mineral.

SRG on Feb. 26 said it was now thinking of redomiciling the company in the United Arab Emirates. The move will be subject to a shareholder vote in the second quarter of this year. The company said it intends to be listed on the Toronto Stock Exchange and will, therefore, require approval from the exchange as well.

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In another deal, Vancouver-based Solaris Resources Inc., which is developing a copper project in Ecuador, inked an agreement with China’s Zijin Mining Group Co. to receive $130 million by way of a private placement of common shares. The deal is subject to approval from the Canadian government among other conditions.

• Email: nkarim@postmedia.com

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