By Paul Vieira

OTTAWA-An Australian company that operates a rare-earth mine in northern Canada says it has scrapped a deal with a Chinese resource company in favor of a Canadian government-led transaction.

The about-face comes amid recent decisions and comments by officials in Ottawa aimed at deterring and countering Chinese economic interest in sensitive sectors of the Canadian economy, such as rare earths and critical minerals.

Vital Metals, based in Sydney, said Monday it reached a deal to sell stockpiled rare earth material from its operations in the Northwest Territories - known as the Nechalacho project - to the province of Saskatchewan, for a total of 3 million Canadian dollars, or the equivalent of $2.8 million. In December, Vital unveiled a transaction to raise cash through a sale of shares and rare-earth material to Shenghe Resources, a China-based company. At the time, proceeds were estimated at $5.75 million.

Vital said the deal with Canada replaces the Shenghe transaction. "The government of Canada recognizes Nechalacho as a strategic asset that contributes to the country's prosperity and critical minerals goals," Vital said in its statement.

A spokeswoman for Canada's industry minister - who has responsibility in enforcing foreign-investment laws - declined comment on the Vital transaction. Representatives for Vital and Shenghe did not immediately respond to requests for comments.

The Vital deal with Canada was earlier reported by Toronto's Globe and Mail newspaper.

Canadian foreign-investment law gives officials the authority to block investments and transactions viewed as detrimental to the country's economic outlook. Last week, Canada increased the number of minerals on its critical-minerals list by three. This was significant because any proposed foreign investment in companies mining for these minerals could be subject to intense government scrutiny.

In an interview last week, Industry Minister François-Philippe Champagne and Trade Minister Mary Ng vowed to take a hard line on Chinese investments should they pose a threat to Canada's economy. "We need to be extremely vigilant," Champagne said. "There is no ambivalence when it comes to the alignment between the United States and Canada on China."

Champagne in late 2022 ordered three Chinese companies to divest their shares from domestic companies involved in extracting critical minerals, citing national-security concerns.

Mining started in 2021 at Nechalacho, roughly 1,200 miles east of Anchorage, Alaska. Rare earth elements are crucial components for sectors such as healthcare, transportation, power generation and consumer electronics.

Write to Paul Vieira at

(END) Dow Jones Newswires

06-17-24 1345ET