Macro

Copper Firm Solaris Cancels $130M China Deal Amid Canadian Scrutiny

Solaris Resources cancels $130M deal with Zijin Mining after Canadian regulatory delays.

By Mackenzie Crow

5/21, 14:53 EDT
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Key Takeaway

  • Solaris Resources terminated a $130 million financing deal with Zijin Mining after a four-month Canadian regulatory review.
  • Canada's stringent policies on foreign state-owned investments in critical minerals influenced the decision, impacting Solaris' share value.
  • The deal's collapse highlights challenges for foreign investments in Canada's natural resources sector, particularly from Chinese firms.

Solaris Resources Terminates Chinese Investment Deal

Solaris Resources Inc., a Vancouver-based copper company, has decided to terminate its financing deal with Zijin Mining Group, a Chinese miner, after a prolonged review by Canadian authorities. The deal, which involved selling a 15% stake to Zijin for $130 million, was announced in January but faced regulatory hurdles due to Canada's stringent policies on foreign state-owned investments in its natural resources sector. Canada has been particularly cautious about Chinese investments in critical minerals, approving such deals only on an "exceptional basis." In 2022, the Canadian government ordered three Chinese investors to divest their stakes in Canadian lithium firms.

Solaris CEO Daniel Earle expressed frustration over the regulatory delays, stating, "That this transaction cannot be completed in a reasonable time frame signals that Canada’s critical minerals policy is counterproductive in relation to foreign assets." The uncertainty surrounding the deal has negatively impacted Solaris' share price and created an unfair environment for investors. The funds from Zijin were intended to advance Solaris' flagship copper project in Ecuador and would have given Zijin a seat on Solaris' board of directors.

World Copper's Strategic Moves Amid Rising Prices

As copper prices surge above $10,000 per ton due to fears of supply shortages and increased demand from electric vehicles (EVs) and power grids, Vancouver-based World Copper Ltd. is taking strategic steps to capitalize on the market dynamics. The company has formed a Technical Advisory Committee to expedite the development of its Zonia project in Arizona. This committee will address critical development issues such as permitting, construction, and ramp-up of the project.

World Copper's CEO, Gord Neal, highlighted the urgency of the situation, stating, "The copper market is in desperate need of lower cost, faster to market copper oxide projects like Zonia." The committee includes experienced mining executives Joe Phillips and Derek White, who bring extensive expertise in developing and building mines. Neal added, "Mr. White and Mr. Phillips both understand the outstanding value proposition this asset offers and they bring a great deal of knowledge and experience in developing and building mines effectively."

Copper Market Dynamics and Future Outlook

Copper prices have risen 17% this year, driven by fears of shortages and increased consumption for EVs and power grids. Analysts from ANZ Group Holdings Ltd., including Daniel Hynes, have noted that supply growth is stagnating, with aging mines struggling to keep pace with demand. Taylor Combaluzier of Red Cloud Securities emphasized the potential of the Zonia project, stating, "It could either be rapidly developed for nearer-term production or potentially be expanded through exploration to increase the scale of the project."

World Copper's Zonia project has shown significant promise, with an updated mineral resource estimate (MRE) increasing total resources by about 90% to approximately 198 million tonnes, and contained copper increasing by 55% to about 1.03 billion pounds. Additionally, the Escalones project in Chile has an inferred resource of 426 million tonnes of 0.367% copper, containing 3,447 pounds of copper. A preliminary feasibility study (PFS) of Zonia's main deposit is expected to be a significant catalyst for the company.

Management Quotes

  • Daniel Earle, CEO of Solaris Resources Inc.:

    "That this transaction cannot be completed in a reasonable time frame signals that Canada’s critical minerals policy is counterproductive in relation to foreign assets."