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The Federal Industry Ministry is under fire from security experts for being vague about the length of its security screening of Chinese-state-owned Zijin Mining Group Co. Ltd.’s acquisition of Canadian lithium development company Neo Lithium Corp NLC-X.

As a domestic company being acquired by a foreign buyer, Neo Lithium was subject to a review by Innovation, Science and Economic Development Canada (ISED), to determine whether the transaction threatened Canadian national security. A review can start as soon as the government becomes aware of a deal.

But when François-Philippe Champagne, the federal Minister of Innovation, Science and Industry, was questioned repeatedly during a parliamentary hearing last week about when he had become aware of the Neo Lithium acquisition, he refused to say.

Adding to the opacity, Deputy Industry Minister Simon Kennedy said in the same hearing that an extended review took place, beyond the minimum 45 day requirement. But he too refused to be tied down on specifics. When pressed, he said the government reviewed the deal for “some time,” over a period of months. Mr. Kennedy declined an interview.

Conservatives call on Trudeau government to conduct formal security review on Chinese takeover of Canadian lithium firm

There is no evidence that points to Mr. Champagne having known about the $960-million deal before it was announced on Oct. 8.

A regulatory document filed by Neo Lithium in November disclosed extensive behind-the-scenes information about how the transaction came together. It’s clear from the document that there was considerable uncertainty over whether the deal with Zijin would be consummated up until a few days before it was announced. No mention is made of anyone from either company approaching the Federal Industry Ministry early.

Wesley Wark, senior fellow at the Centre for International Governance Innovation, was one of several expert witnesses who testified last week in parliamentary hearings on the deal. He said Mr. Kennedy’s timeline of the review process doesn’t square with the public record.

“Testimony provided by the Deputy Minister of ISED to the Committee about an expanded time frame for national security review regarding the Neo Lithium acquisition appears to be contrary to the facts of the case,” Mr. Wark wrote in a brief submitted to the standing committee on industry and technology this week.

Both the Industry Minister and the Deputy Minister have cited confidentiality requirements under the Investment Canada Act as the reason for their silence on the timeline of the security review. But last week Mr. Champagne and Mr. Kennedy disclosed added details of the review process that the ministry had previously characterized as confidential.

The inconsistency in the ministry’s approach to divulging confidential information, and the general lack of transparency around the national security review process, has even attracted criticism from within the Liberal’s government’s own ranks.

Liberal MP Nathaniel Erskine-Smith said in one of the hearings last week that “the inability to answer fairly straightforward, specific questions,” and the use of confidentiality as a justification for staying silent, “lends itself to suspicion.”

“We’ve got to change that process,” he added.

Federal rules give the government 45 days to investigate a foreign acquisition and decide whether to order a more thorough security examination of the deal. Even if the Industry Ministry is not saying when it started the Neo Lithium security review, the date of the review’s conclusion is a matter of public record. It was Dec. 4.

The government did not elect to subject the transaction to a more thorough review under section 25.3 of the Security Act. This would have extended the process by at least another 45 days, and possibly many more months, and could ultimately have resulted in the deal being nixed.

Last year, the parameters of security reviews governing foreign acquisitions of Canadian companies were widened considerably to look at whether such transactions harm Canada’s supply of critical minerals. At the same time, the government vowed it would subject acquisitions by state-owned enterprises (SOEs), to “enhanced scrutiny.”

By not extending the security review of the Neo Lithium deal, the government decided state-controlled Zijin posed no threat to Canada’s national security, and that the acquisition would have no negative impact on Canada’s lithium supply chain.

China is among the largest miners of lithium. The country is also the biggest manufacturer of lithium ion batteries, and it controls 60 per cent of the world’s lithium refining. Canada has no lithium mines, no lithium processing plants and no lithium ion battery makers.

Neo Lithium plans to build a mine in Argentina that will supply battery-grade lithium to the electric car industry for 50 years.

Mr. Champagne has said that keeping Neo Lithium as a Canadian company would not benefit the domestic lithium supply chain, because North American automakers would not be able to use lithium produced so far away.

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