China North: Canada’s resources and China’s Arctic long game – by James Munson ( – December 31, 2012)

China’s designs for a greater role in the Arctic could be built on Canadian resources.

Chinese firms have invested over $400 million in northern Canada through various mineral and petroleum projects, while the Chinese government tries to simultaneously edge its way into the region’s key governance body, the Arctic Council.

While most of these deals are small, the resource sector is intiminately linked to the larger policy questions facing Arctic nations, which range from environmental protection to shipping corridors. If China gains influence in Artic affairs in the coming years, the impacts could be felt in Canada’s northern backyard.

“They have demonstrated that they will play hardball politics in terms of their interests,” said Rob Hubert, an associate professor at the University of Calgary who tracks China’s economic and strategic creep into the Arctic.

Ottawa enacted new restrictions on the foreign ownership of oilsands and other sectors in early December, signalling that the Asian powerhouse’s interest aren’t always concurrent with Canada’s.

Yet the two countries are engaged in a “strategic partnership,” an economic relationship that has a don’t-ask, don’t-tell approach to issues with more friction like human rights and foreign policy.

It’s a balancing act in constant evolution and the North — filled with oil, gas and minerals that could one day be feeding Chinese homes — is one place where the relationship could one day get icy.

China pays a premium for Arctic resources

The most obvious sign of just how serious the Chinese are about the Arctic and northern Canada more generally is the amount of cash they’re willing to put up for resources that haven’t even left the ground yet.

“What we’re seeing with the Chinese, in particularly with their purchases in the North, is that they tend to be long-term, they tend to offer a premium,” said Huebert. “They tend not to buy to own. In other words, to keep concerns at a minimum… They tend not to buy more than a 48 per cent share.”

Yunnan Chihong Zinc and Germanium finalized a $100 million joint venture proposal with Selwyn Resources to develop the Selwyn Project in February.

While Selwyn claims the project is one of the world’s largest undeveloped zinc deposits, the site is remote and the company’s shares have remained a penny stock for the past five years.

In northern Yukon, the Eagle Plain’s natural gas basin has been explored for decades without any large-scale project coming to fruition.

That didn’t stop CNOOC, whose $15.1 billion purchase of oilsands developer Nexen sparked the new foreign investment restrictions earlier this year, from spending $20 million exploring the basin in the summer of 2011 through its local firm, Northern Cross.

In the controversial Ring of Fire region in northern Ontario, a subsidiary of the Baosteeel Group has invested in Noront Resources’ Eagle’s Nest project, despite the many social and regulatory hurdles facing mineral development in the region.

Other notable investments in the North include MMG’s Izok Corridor Project, which includes plans for two mines in Nunavut, and several joint ventures between the Wuhan Iron and Steel Group Corporation (WISCO) and Century Iron Ore in northern Quebec.

Jilin Jien Nickel Industry Co. Ltd. acquired the Nunavik Nickel project and the Goldbrooks project, two exploration sites in the northern Quebec region of Nunavik, after buying Goldbrook Ventures early last year.

iPolitics could only find one operating mine owned by the Chinese: the Wolverine zinc and silver mine in southern Yukon is owned by Jinduicheng Molybdenum Group Co. Ltd. and Northwest Nonferrous International Investment Company Ltd.

In the case of Jilin Jien Nickel Industry Co. Ltd.’s purchase of the Nunavik projects, the Chinese firm paid a 59 per cent premium for Goldbrook Venture’s shares.

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