On March 3, 2010, the federal government announced that it intends to liberalize the foreign investment restrictions on Canada's uranium mining sector. Specifically, the government stated that it intends to "ensure that unnecessary regulation does not inhibit the growth of Canada's uranium mining industry by unduly restricting foreign investment." Canada is currently the world's largest producer of uranium, and foreign investors have shown significant interest in making investments in the sector.

The existing Non-Resident Ownership Policy in the Uranium Mining Sector prevents non-Canadian residents from acquiring more than a 49% ownership interest in a uranium-mining property unless the property is in fact "Canadian-controlled." With federal government approval, exemptions to this policy are available where it can be demonstrated clearly that no Canadian partners can be found. Uranium exploration properties are not subject to this policy.

Although the government's announcement did not specify whether it intends to abolish or simply relax the current ownership policy, it seems to suggest that the government intends to treat proposed acquisitions in the Canadian uranium mining sector as it does all other proposed acquisitions under the Investment Canada Act, as described below.

The announcement also seems to signal that Canada may be prepared to unilaterally abolish the ownership policy. In the past, recommendations to liberalize foreign ownership restrictions in the uranium mining sector have been accompanied by statements that this should only occur if Canada receives reciprocal benefits from the foreign investor's country of origin (e.g., Canadian companies being permitted to participate in the development of uranium resources in the foreign country and uranium-processing technologies).

The proposed change is consistent with recent amendments to the treatment of uranium investments under the Investment Canada Act. Historically, a proposed direct acquisition of control of a Canadian business operating in a "sensitive sector" (e.g., uranium mining) was subject to a "net benefit" review if the acquiror was not Canadian and the asset value of the Canadian business exceeded a special lower threshold of as little as C$5 million. In March 2009, this special lower threshold for review of acquisitions in the uranium mining section under the Investment Canada Act sector was repealed.

Today, a proposed direct acquisition of control of a Canadian business that engages in the production of uranium or owns a uranium producing property can be subject to two types of review under the Investment Canada Act, which are not mutually exclusive:

  • Net Benefit Review. If the asset value of the Canadian business exceeds the current threshold of C$299 million, the proposed acquisition will be reviewed to determine if it meets a "net benefit to Canada" test.
  • National Security Review. Any investment (regardless of the size of the target or of the investment) can be reviewed by the Minister of Industry to determine if it could be "injurious to national security."

The government's proposal to liberalize the restrictive non-resident ownership policy in the uranium mining sector will make the government's policy on foreign ownership in this sector consistent with the recent amendments to the Investment Canada Act.

The announcement clarifies that Canada welcomes foreign investment in the uranium mining sector and is committed to taking steps to ensure that "unnecessary regulation" does not prevent growth in this sector. We will continue to monitor and report on developments in this area.

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