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Giant pillars that hold up the roof of the Tanco underground mine in Manitoba contain one of the world’s last remaining minable deposits of cesium. Beijing-based Sinomine Resource Group is proposing partially draining a lake above, and building an open pit mine to extract the resource.

About 180 kilometres from Winnipeg, below Bernic Lake in eastern Manitoba, sits one of the world’s last remaining minable deposits of cesium.

The soft silvery gold-coloured metal is housed in otherworldly giant pillars that hold up the roof of the Tanco underground mine. For stability reasons, it can’t be accessed safely, but the owner of the mine, Beijing-based Sinomine Resource Group, has potentially figured out a way to get around that: a partial drainage of the lake above, and the construction of an open pit mine.

Classified as a critical mineral in Canada and the United States, cesium is essential to the economic and national security of both countries. It has several important strategic uses, including in drilling fluid for high-pressure oil and gas wells, in medical imaging for cancer diagnostics, in timekeeping for the global mobile phone and GPS network, and in airport scanners to combat terrorism.

Already one of the few lithium producers in North America, Sinomine’s cesium strategy would see the Chinese company embed itself deeper into the continent’s critical minerals supply chain.

Frank Wang, general manager of Sinomine’s North American business division, said in an interview that while a final decision hasn’t been made, and other extraction methods are being considered, including the replacement of the natural pillars with artificial ones, a surface mine appears to be the best option.

“The final goal definitely is we hope to have open pit mining,” Mr. Wang said.

Sinomine currently mines small amounts of cesium underground at Tanco. The company also has a few years of potential supply it can harness from stockpiles and tailings. But the open pit would open up a whole new world of opportunity, because of the amount and the grade of the critical mineral trapped in the pillars.

“The grade of the cesium they have there at the Tanco mine is super high,” said Robin Dunbar, chief executive officer of Grid Metals Corp., which has an agreement to potentially supply ore to Sinomine for processing. “It’s around 20 per cent.”

Unlike other critical minerals such as lithium and cobalt, cesium is mined in vanishingly small quantities worldwide. Over the past few decades, global stockpiles have run so low, that one-time producer Cabot Corp. started renting cesium to the oil and gas industry, and then insisting upon its return, so it could be used again.

China already controls vast swaths of the global rare earths, critical minerals and battery metals industries, but nowhere is its dominance as absolute as in cesium. There are only two operating cesium mines in the world, Bikita in Zimbabwe, and Tanco in Canada. Sinomine controls both. With a 100-per-cent share of primary cesium production (about 20 per cent of cesium output is produced as a byproduct of lithium mining), Sinomine wields extraordinary power.

Not only does the company mine cesium at Tanco, it processes the mineral on site, and sells finished cesium to mostly North American end users, giving it a complete lock on the supply chain.

“If you have it, then you set the price,” said Johnathan More, chairman of Power Metals Corp., a lithium and cesium development company that previously had Sinomine as a shareholder.

China has encroached on Canada’s critical minerals industry, with almost no obstruction from Ottawa

Regardless of whether the open pit goes ahead, Sinomine has plans to increase its output of cesium products at Tanco. In 2021, it applied to the Manitoba environment regulator for a major revamp of its on-site chemical plant.

If approved, Sinomine would be able to produce two new forms of cesium: nitrate and carbonate crystals. In its application, Sinomine cited the “high North American demand” for both variants. The regulator, which is scrutinizing the impact the production increase would have on air quality because of added dust and carbon emissions, hasn’t yet made its decision.

China has become so dominant in critical minerals that there are fears that it could hold the West for ransom over metals such as cesium, as it did with Japan more than a decade ago. After a diplomatic fallout between the two countries in 2010, China temporarily halted exports of rare earth minerals to Japan, resulting in price spikes and supply chain disruptions. The incident was an early warning sign for the West that relying on China for strategic minerals is risky.

Ottawa has faced backlash for allowing far too much of Canada’s critical minerals industry to be sold to Chinese buyers over the past decade. Two of Canada’s biggest critical minerals miners, Teck Resources Ltd. and Ivanhoe Mines Ltd., both have state-controlled Chinese companies as their biggest shareholders as a result of that open-door approach.

At Teck, the dangers of relying on a powerful Chinese investor was made painfully clear earlier this year, when China Investment Corp. voted against Teck’s planned corporate restructuring, throwing the future of the miner into great uncertainty.

When Sinomine proposed buying Tanco from Cabot in 2019, the federal government had the power to stop the deal on national security grounds. Instead, then-industry minister Navdeep Bains approved the transaction in 45 days, the shortest time frame possible.

After acquiring Tanco, Sinomine spent tens of millions of dollars recapitalizing the mine, and last year restarted lithium production, becoming the only operation of its kind in Canada. All of the battery metal that Sinomine mines at Tanco is shipped back to China, processed in Chinese refineries and then fed into the country’s electric-vehicle market.

Over the past few years, as the political relationship between Canada and China has deteriorated markedly, Ottawa’s laissez-faire approach toward Beijing’s incursion into the Canadian mining sector has not aged well.

In recent months, The Globe and Mail has published revelations about Chinese interference in past federal elections and other attempts by Beijing to influence Canadian affairs. Just this week, Deputy Prime Minister Chrystia Freeland said that Canada needs to limit its strategic vulnerabilities to authoritarian regimes, such as China, and must be cognizant of “the means through which these regimes exercise their influence around the world.”

After being rebuked in parliamentary hearings for allowing the sale of a Canadian lithium company to a state-controlled Chinese company in January last year, federal Industry Minister François-Philippe Champagne took what was viewed by national security experts as much-needed action. In October, he brought in a de facto ban on new investment from foreign state-controlled companies into Canada’s critical minerals sector. He also rejected attempts by Chinese mining companies to invest in three Canadian critical minerals companies, including ordering Sinomine to sell its equity stake and offtake agreement with Power Metals.

While Mr. Champagne doesn’t have the authority to retroactively force Sinomine to divest itself from Tanco, because that transaction was approved by his predecessor, the government now finds itself with the next best thing. Sinomine can’t proceed with its open pit cesium expansion without Ottawa’s approval, because draining a lake to mine for minerals almost certainly requires federal permits.

“The reason it would probably trigger a federal impact assessment would be because of the Fisheries Act,” said Alex MacWilliam, partner with Dentons. “The implication for fish and fish habitat.”

Christopher Ecclestone, principal and mining strategist at Hallgarten + Co., a commodities and mining research firm, says regulators have a second chance to effectively block Sinomine. “It’s like the fish that got away. Now the fish has come back into the pool.”

Sinomine’s big push in cesium will likely raise alarm bells, not only in Canada, but also in the United States. President Joe Biden will view the mine expansion as a North-American-wide security threat, said Mr. Ecclestone.

“Cesium isotopes are also something that is potentially usable in dirty bombs,” he said. “The bat phone between Ottawa and Washington will be ringing.”

Mr. Ecclestone argues that the response from Canada and the United States should be an unequivocal no to a cesium expansion by Sinomine. The mineral is far too important strategically to hand over more control to the Asian superpower, he said, and the strategy should be to “keep it in the ground.”

Cognizant that the U.S. and Canada both likely have national security concerns over Sinomine’s lithium and cesium production, the company has a plan to potentially placate politicians. Earlier this month, The Globe reported that Sinomine will soon apply for permission to build a lithium refinery in Manitoba and sell it to the North American automotive industry. That would allow Sinomine to make the case that the national security risk would fall, because lithium mined at Tanco that is currently shipped to China would be redirected to North America.

In addition, Sinomine hopes to build the plant with a politically palatable partner, such as LG Energy Solutions Ltd. The Korean company already has plans to build an EV battery plant in Windsor, Ont., alongside Stellantis N.V.

Perhaps more than anything, Sinomine wants to reassure Canadians that it is not the enemy. Mr. Wang said that anxieties over Chinese government influence over Sinomine are unwarranted. The company has no connection whatsoever to the Communist Party of China, he says. Furthermore, he believes that the Canadian government unfairly targeted the company last year, by forcing the divestiture from Power Metals, falsely believing that Sinomine is under the control of the state.

In a letter to Innovation, Science and Economic Development Canada (ISED), Sinomine said that Ottawa got it wrong in claiming that state-owned enterprise (SOE) firm China Nonferrous Metal Mining Group is Sinomine’s biggest shareholder. The company said that its biggest shareholder is, in fact, Zhongse Mining Group, which has no ties to the Chinese government. ISED’s error, it seems, stemmed from a botched translation that converted Chinese characters into English and incorrectly identified Zhongse as China Nonferrous, the letter stated.

“Once translated into English, the names of the two companies are almost identical,” Sinomine wrote. “Therefore it is understandable that the Minister mistakenly determined that the aforementioned SOE was a shareholder.”

The letter added that decisions by Sinomine are made “solely for commercial purposes,” and are “without any government interferences.”

But ISED disputes the notion that it unfairly targeted Sinomine last year. Sean Benmor, spokesperson for ISED, wrote in an e-mail to The Globe that while Ottawa won’t comment on the specifics of Sinomine’s forced divestiture from Power Metals, reviews of foreign investment into the Canadian critical minerals sector involve “rigorous scrutiny” by Canada’s national security and intelligence community, and decisions are based on facts and evidence.

Sinomine never received a reply to its letter, and for a time considered suing the government over the matter. Ultimately, the Chinese mining company decided it would be more prudent to foster a better relationship with Ottawa, as it makes a plea for a more open dialogue with Canada.

“You can’t just tell us, ‘[Sinomine] is hurting national security,’ but you don’t tell us how we can give you more comfort,” Mr. Wang said. “We are willing to discuss all kinds of possibilities and opportunities in order to be able to work together.”

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