Copper and gold company Solaris has decided against selling a minority stake to China’s Zijin Group, owing to concerns that the transaction – announced in January – would not meet Canada’s foreign investment standards within a reasonable timeframe.
The transaction entailed Solaris selling a 15% stake to Zijin for C$130-million to support the development of the Warintza copper project, including the potential major purchase of an adjacent asset in Ecuador.
The transaction required approval under the Investment Canada Act, which underwent revisions late last year to impose stricter scrutiny on foreign investments, particularly from State-owned companies in the critical minerals sector.
Solaris CEO Daniel Earle said the inability to finalise the transaction in a specified timeframe highlighted the challenges posed by Canada’s critical minerals policy concerning foreign assets.
“This transaction represented a minority equity investment from a well-known and respected, publicly listed foreign company where the proceeds were intended to be used for the growth of a Canadian-controlled company’s principal asset in a foreign jurisdiction.
"That this transaction cannot be completed in a reasonable timeframe signals that Canada’s critical minerals policy is counterproductive in relation to foreign assets," he said.
Given the minority investment nature of the transaction and that it involved assets outside of Canada with use of proceeds to expand Canadian interests in critical minerals, the parties expected regulatory approval within the four months that have now elapsed.
Further, Solaris noted that the transaction was priced at a 14% premium. However, the share price had increased by more than 35% in the four months since announcement and the transaction no longer adequately reflected market value.
"Even with significant appreciation, Solaris’ share price has underperformed peers in the recent sector rally due to the overhang of Canadian regulatory uncertainty in an environment of heightened domestic political sensitivity," said Solaris.
The company affirmed that it remained funded for the 2024 and 2025 Warintza baseline programmes and key deliverables with a further $40-million available through an offtake financing package announced in December.
In addition, Solaris on Tuesday also announced a bought financing of C$35-million, priced at C$4.90 a share.
The environmental impact assessment of Warintza remained pencilled in for the second half of 2024 and the prefeasibility study for the second half of 2025.