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New frontier of resource wealth beckons Chinese

By Eddy Lok | China Daily | Updated: 2013-04-02 10:57

Market conditions

China, which currently buys half of the world's production of chromium, is seeking deals and joint ventures abroad to mine the metal, which is used in a variety of industrial applications.

"Things in Canada are getting cheaper for Chinese companies to buy," Mingay said. He pointed to ongoing weakness in the prices of commodities such as copper and iron ore that make it hard for companies in the sector to finance upgrades or acquisitions.

Bogdan Teofilovici, Mingay's colleague at Cassels Brock who took part in a panel discussion at the Toronto mining symposium, said Chinese investors are ideal sources of "patient capital": They are willing to make significant investments that aren't expected to generate returns in the short term.

This is especially important in mining because projects often require massive infusions of cash to develop local infrastructure and can take years to reach the production stage.

"While it is important for Chinese firms to understand Canada's foreign-investment review process and the regulatory and political landscape, we have every reason to be optimistic about opportunities for Chinese investment in the natural-resources sector," Teofilovici said.

Industry Canada, a federal government ministry, announced in May 2012 that it was raising - to $1 billion from $330 million over four years - the enterprise-value threshold at which deals involving foreign investment in Canadian companies would trigger an automatic regulatory review. The move is expected to hasten foreign investment in various Canadian industries.

Prime Minister Stephen Harper said during a tour of northern Canada in August that more than 500 large resource-development projects had been proposed for the region over the next 10 years, representing some $500 billion in new investment.

In Quebec, the provincial government's $80 billion Plan Nord initiative that, among other things, targets Chinese capital to develop minerals and other resources, has been in limbo since the nationalist Parti Quebecois was swept into power in September 2012 elections, Mendell from the law firm Davies Ward said.

So far, royalties proposed by Quebec's new leadership have been too low for potential outside investors, according to the lawyer.

"It is just a question of what the details will be. Quebec has been focusing on Chinese companies and money to carry out joint ventures, including taking minority interests and developing infrastructure," he said.

In addition to the massive mineral wealth in the far north, Canada has about 5,000 square kilometers in Ontario that are home to deposits of copper, zinc, nickel, platinum, vanadium and gold. The area contains chromium deposits that are huge by world standards and the only known reserve of its kind in North America.

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