By Ismail Shakil and Siyi Liu
OTTAWA/BEIJING (Reuters) -Canada ordered three Chinese companies on Wednesday to divest their investments in Canadian critical minerals, citing national security.
China in response accused Ottawa of using national security as a pretext and said the divestment order broke international commerce and market rules.
As countries compete to shore up reserves of materials needed for a transition to a cleaner economy, the news pushed down the Chinese companies' shares on Thursday, although they said in stock exchange filings they did not expect a major impact on their performance.
The three ordered to divest their investments are Sinomine (Hong Kong) Rare Metals Resources Co Ltd, Chengze Lithium International Ltd, also based in Hong Kong, and Zangge Mining Investment (Chengdu) Co Ltd.
The Canadian government ordered the divestiture after "rigorous scrutiny" of foreign firms by Canada's national security and intelligence community, Industry Minister Francois-Philippe Champagne said in a statement.
"While Canada continues to welcome foreign direct investment, we will act decisively when investments threaten our national security and our critical minerals supply chains, both at home and abroad," Champagne said.
Sinomine was asked to sell its investment in Power Metals Corp, Chengze Lithium was asked to divest its investment in Lithium Chile Inc and Zangge Mining required to exit Ultra Lithium Inc.
'UNREASONABLE'
Chinese foreign ministry spokesperson Zhao Lijian said the Canadian government was using national security as a pretext to block normal cooperation between Chinese and Canadian companies and was damaging global supply chains.
"China urges Canada to stop the unreasonably targeting Chinese companies (in Canada) and provide (them) with a fair, impartial and non-discriminatory business environment," Zhao told a regular news briefing, adding that Beijing would resolutely defend the legitimate rights and interests of Chinese companies
Spot lithium prices have risen by more than 200% in the last year, driven by supply constraints that are expected to endure.
Rystad Energy forcast primary lithium minerals supply to be 8.5% short of the total lithium demand 2025, compared with about 10% short of demand this year.
"The latest attitude from Ottawa underscores the global competition of critical battery minerals in light of projected EV battery demand boom," Susan Zou, a senior analyst at Rystad Energy, said of Canada's decision.
The share price of Sinomine Resources fell 7.8% to 86.74 yuan ($11.86) on Thursday, while Chengxin's share price fell by as much as 4% but closed at 0.7% higher at 45.65 yuan. Zangge Mining's share price slid 3.7% during the day before edging 1.1% up to close at 28.96 yuan.
Last week, Ottawa said it must build a resilient critical minerals supply chain with like-minded partners, as it outlined rules meant to protect the country's critical minerals sectors from foreign state-owned companies.
"The federal government is determined to work with Canadian businesses to attract foreign direct investments from partners that share our interests and values," Champagne said.
Canada has large deposits of critical minerals such as nickel and cobalt essential for cleaner energy and other technologies. Demand for the minerals is projected to expand in the coming decades.
Earlier this year, countries including Britain, Canada and the United States established a partnership aimed at securing the supply of critical minerals as global demand for them rises.
($1 = 7.3163 Chinese yuan renminbi)