While the energy sector is sifting through Ottawa's new takeover rules, the mining industry is abuzz about paragraph No. 6.
That's the line in the Industry Canada policy statement last week that revised guidelines for investments by state-owned enterprises (SOEs), showing it will monitor transactions by SOEs throughout the Canadian economy and not just in the oil sands.
"It is easy to see how they might expand this to mining under the rationale given in the sixth paragraph that they will be looking at SOE investment broadly in the Canadian economy," said Sander Grieve, co-chair of the mining group at Toronto law firm Fraser Milner Casgrain LLP. "We'll be watching very closely."
Canada announced the changes on Friday as it gave the green light to two controversial acquisitions by Asian companies of domestic oil and gas producers, the $15.1-billion (U.S.) bid by China's CNOOC Ltd. for Calgary-based Nexen Inc., and the $6-billion (Canadian) acquisition by Malaysia's Petronas of Progress Energy Resources Corp.
It also warned that takeovers of Canadian oil sands business in particular would only be deemed of net benefit on an exceptional basis.
Asked about the message to industries beyond the oil and gas sector, Industry Minister Christian Paradis said on Monday that the government will enforce the new guidelines across the board.
"We are not for sale to foreign governments," he said. "So when we deal with minority stakes, we are pleased but when we deal with control under the influence of a foreign government, this is where we put some clarification to say we have to make sure there is a commercial orientation."
"The signal that we sent here is that we will watch everything," he said.
To be sure, the Canadian mining industry does not have the number of major global mining companies of even a decade ago, when foreign takeovers saw the disappearance of such giants as Inco and Falconbridge and critics decried what they described as the "hollowing out" of Corporate Canada.
But there are a few majors left who might be cause for pause should a SOE express interest, like Barrick Gold Corp., the world's largest gold producer, Teck Resources Ltd. and Potash Corp. of Saskatchewan Inc., the largest fertilizer maker that was nearly acquired by BHP Billiton Ltd. before the government stepped in two years ago.
"I think if there's any major iconic Canadian business that is going to be subject to a takeover by a state-owned enterprise, then the government is going to ask themselves, what does this mean for Canada. It doesn't mean they'll turn them down, they'll just review that transaction very carefully," said Oliver Borgers, a partner with the competition law group of McCarthy Tétrault LLP in Toronto.
Legal specialists agree that for the time being there is little need for concern in Canadian mining because there are so many more players than in the oil sands industry.
Since there are fewer SOEs in global mining, the issue is less likely to crop up in the metals and minerals industry, one senior banker pointed out.
The policy change may also lead to more interest in Canadian mining assets by non-SOEs, dispelling a sense that Canada was not open to foreign investment after it rejected BHP's $39-billion bid for Potash Corp. in 2010.
Industry Canada also said it was amending the Investment Canada Act, progressively increasing the threshold at which point it would review a foreign takeover bid to $1-billion from $330-million currently. For SOEs, the existing threshold will remain in place.
"There's no doubt they are being treated differently, with a different threshold of review," said Richard Steinberg, who heads mergers and acquisitions at Fasken Martineau DuMoulin LLP.