Government equity in miners becomes US norm

[Redator]

The Trump administration is ratcheting up government ownership in mining companies that are nominally Canadian, raising questions about whether Ottawa plans similar investments.

Trump has ordered his Department of War to take a 10% stake in Trilogy Metals (TSX, NYSE American: TMQ) and help fund South32 (ASX, LSE, JSE: S32), joint partners of the Arctic copper-zinc project in Alaska. That follows a 5% US government stake announced this month in Lithium Americas (TSX, NYSE: LAC), which is developing the $3 billion Thacker Pass project in Nevada. Trilogy and Lithium Americas are based in Vancouver.

“The funny part is, they’re not Canadian because all their assets are in the United States, so are they Canadian? Are they American?” says Krisztián Tóth, a partner at Toronto-based law firm Fasken who focuses on mining financing and cross-border transactions. “The national security aspect of this has not been examined fully, but that’s really what it goes to anyway.”

The American government investing in Canadian companies isn’t new – that goes back to the Second World War with funding for Quebec aluminum plants – and the Biden administration earmarked millions for projects in Canada through clean energy and transition metals funding. However, Trump officials are promoting direct ownership, which has elated some mining industry players while others urge caution.

Canada has a more nuanced approach, at least on paper so far. Prime Minister Mark Carney has opened a Major Projects Office to fast-track energy and mining projects, but he’s stopped short of seeking equity stakes in projects, although the government under his predecessor did buy a gas pipeline to help build it. Carney also makes sure to mention that environmental and Indigenous concerns will be addressed amid government support.

Northwest Territories

Fortune Minerals (TSX: FT), developing the NICO cobalt-gold-bismuth-copper project in the Northwest Territories with a refinery in Alberta, received $6.4 million last year from the Pentagon as part of a total $17 million from governments on both sides of the border. The project has the world’s largest deposit of bismuth, which is used in products such as Pepto Bismol.

“The validation and combined support from the governments have allowed the project to move forward during a challenging environment at a quicker pace than would have been possible with support from only one government,” Fortune President and CEO Robin Goad said in an emailed reply to questions. “The US support was a catalyst for additional Canadian government support.”

Mining companies will welcome investment wherever it comes from, given how hard it is to raise funds, Fasken’s Tóth noted. But he urged Ottawa to revise its policy on foreign investment, like how it has been applied to the Chinese. Canada has ordered China-controlled businesses to divest from Canadian companies even when the mineral assets were abroad.

“I echo the words of Ronald Reagan: ‘The most dangerous words you’re ever going to hear is, I’m the government, and I’m here to help,’” Tóth said in a phone interview.

“As long as there’s a free market and the government doesn’t artificially keep out other potential investors, then it’s healthy for the government to also want to invest in projects. I would prefer there would be more Canadian-based projects than foreign projects, just because we should be developing our own assets. And if the government has an interest in those assets, then they might be more compelled to have policies that favour development.”

Asian giant

Western nations are targeting the Asian giant which controls some 90% of critical metals mining and processing in a surge of resource nationalism that has lately erupted into a Cold War of critical metals. Washington and Beijing are squaring off over access to advanced US computer chips, and the critical minerals needed for aerospace, defence applications and mobile phones that America craves.

MP Materials (NYSE: MP), which holds the producing Mountain Pass rare earths mine in California, secured in July a $400 million agreement with the Pentagon that will see it acquire a 15% stake in MP and buy critical minerals for defence projects. The miner also reached a deal with the Department of Defense in August for a $150 million loan to add heavy rare earth separation capabilities at Mountain Pass.

Jay Martin, CEO of mining forum company Cambridge which runs the annual Vancouver Resource Investment Conference, was a bit of two minds on government stakes, but he considers nation states as corporations, and their investment as good for the industry.

“It’s a bit distasteful, because I don’t want government in my private business,” Martin told The Northern Miner podcast host Adrian Pocobelli.

“But if we could have the firepower of the US government, adding some additional capital, cutting red tape and expediting the permitting processes of our core industries being raw materials, that’s good for commodity investors.”

Indeed, the stocks of companies with US government investment have soared on the news.

Kevin Torpy, senior vice-president of mining at Graphite One (TSXV: GPH), welcomed $37.5 million in US government funding under Biden in 2023 to advance the $1.13 billion Graphite Creek project in Alaska.

“Graphite One is grateful for the funding and believes that this type of federal support for establishing domestic supply chains for graphite and other critical minerals is an important part of the nation’s security,” Torpy said in an emailed reply to questions.

The funding helped Graphite One accelerate its feasibility study for the project, deemed to hold America’s largest reserve of the battery metal.

More examples

Recent Defense Production Act and Department of Energy grants illustrate how widely Washington is investing across North America.

In Canada, funding included $20 million in August 2024 for Electra Battery Materials’ (NASDAQ, TSX: ELBM) cobalt sulfate refinery in Temiskaming Shores, Ontario, and $8.35 million in May 2024 for Lomiko Metals (TSXV: LMR) to convert flake graphite into battery-grade anode material. The Quebec government, however, remains opposed to Lomiko’s project after local complaints.

Fireweed Metals (TSXV: FWZ) received $15.8 million to advance development studies for the Mactung tungsten project — the world’s largest deposit — in the Northwest Territories and Yukon.

In the United States, Canadian companies have also benefited from Biden-era programs, including $114.8 million for Talon Metals (TSX: TLO) to build a nickel processing plant in North Dakota, plus $20.6 million and $2.4 million for expanded exploration and extraction research at its Tamarack project in Minnesota and Michigan.

Under Trump, Ucore Rare Metals (TSXV: UCU) secured $18.4 million to scale up rare-earth separation in Louisiana and $4 million from the US Army for separation demonstrations at its Kingston, Ontario. RapidSX plant.

Rare earths

The US has also broadened its footprint in critical minerals and rare earth projects through new equity, contract and grant support. Lynas Rare Earths (ASX: LYC) secured a Department of Defense contract to build a heavy rare earth separation facility in Texas, supplementing earlier Title III support for light rare earth processing there.

Perpetua Resources (NASDAQ, TSX: PPTA) won up to $6.9 million from the US Army for its Stibnite antimony-gold project in Idaho. NioCorp (NASDAQ, TSX: NB) is slated to receive Title III support via a $10 million award for its Elk Creek rare earth, niobium and titanium project in Nebraska.

Golden Metal Resources (AIM: GMET) was awarded $62 million under a Department of Defense program to support tungsten production. Syrah Resources (ASX: SYR) received a conditional commitment of up to $107 million from the US Department of Energy’s Loan Programs Office to expand lithium-ion battery materials capacity at its Vidalia, Louisiana facility.

Opposition

The Trump administration is supporting critical minerals projects even where there is local and environmental opposition, like at Rio Tinto’s (ASX: RIO) Resolution project in Arizona and Trilogy’s project in Alaska. There, the environmental advocacy group Sierra Club called the government investment a blow to subsistence communities and wildlife because of potential impact on caribou migration.

It remains to be seen if Washington will go as far to support the contentious Pebble copper-gold project in the same state. Northern Dynasty Minerals (TSX: NDM; NYSE-A: NAK) is challenging in court the US Environmental Protection Agency’s veto of the project.

“It’s good for government to get behind mining projects,” Fasken’s Tóth said. “It’s been a long time since Western governments have been pro-mining. For too long, mining has been the anti-carbon type of view. And it’s actually nice to see that governments are realising that mining plays a central role in the world, much like water and air.”

– With files from Henry Lazenby