The U.S. government has announced its acquisition of a 10 percent stake in Trilogy Metals Inc., a Vancouver-based metal exploration company, for $35.6 million. This decision, made public recently, comes as part of a broader strategy to secure access to critical minerals essential for various industries. In addition to this investment, the U.S. government has the right to purchase more shares in Trilogy Metals in the future.
Trilogy Metals Inc. controls significant mining properties in Alaska. The Ambler mining district, where they’re mainlining this cash infusion, is rich in copper deposits. On the very day that investment was announced, U.S. President Donald Trump signed an executive order in favor of building one. This decision highlights the Administration’s dedication to increase responsible resource development in the region.
The U.S. government, through the DOD, is taking a 49% equity stake in Lithium Americas. Together with Alberta, Canada’s Trilogy Metals, this Canadian company is building one of the world’s largest lithium mines in Nevada! This decision follows last year’s investments in American tech giant Intel and rare earth miner MP Materials. These investments have raised national security concerns over foreign government ownership or control over our domestic markets.
Some experts have been raising alarm about future conflicts of interest that might arise from these equity investments. Sara Ghebremusse, an assistant professor at the Allard School of Law at the University of British Columbia, emphasized a concerning direction. She noted that the U.S. government’s recent moves signal that Western countries are becoming more desperate to compete with China for access to critical minerals.
“You see right now, a lot of Western countries looking to at least catch up and be in a position to compete with China for access to critical minerals.” – Sara Ghebremusse
Richard Leblanc, a governance, law, and ethics professor at York University, made a fascinating observation. He explained that foreign government investments in the corporate sector in Canadian companies are extremely rare. He noted that it’s unusual for any government to have equity positions in domestic companies. It’s downright miraculous when a foreign government gets interested.
“It is uncommon for a government to have a stake in a domestic company, but it’s even more uncommon for a foreign government.” – Richard Leblanc
Leblanc underscored the leverage large shareholders have. He pointed to the fact that the U.S. government, as an example, could direct or indirectly shape the board of Trilogy Metals Inc. He highlighted that this participation could lead to discriminatory treatment of Canadian shareholders. American shareholders who act as their own regulators may be less susceptible to this imbalance.
“A large shareholder like the U.S. government could influence the board, either directly or indirectly. And directly would be to nominate someone onto the board.” – Richard Leblanc
Leblanc warned that preemption was a huge factor to abide by in solely establishing regulatory authority. He further underscored how introducing such an outside investor—if approved by the regulators—would constitute a conflict of interest. He cautioned that this would predispose companies toward a “super shareholder” dynamic. How a company makes decisions could potentially be transformed by the government’s increased involvement.
“To have an outside investor who can have regulatory approval, is that a conflict of interest? It absolutely is a conflict of interest.” – Richard Leblanc
Ghebremusse further emphasized the need to consider how such investments would undermine Canadian sovereignty and governance over homegrown companies. She emphasized that those investments would lead to immediate economic returns. They may create long-term consequences for Canada’s defense and sovereignty.
“That would also have implications for Canadian sovereignty, for Canadian defence, for our ability to govern our own Canadian companies.” – Richard Leblanc
Adam Fremeth, associate professor at the Ivey Business School, emphasized the need for de-risking investments. This strategy is central to the strategy of creating more easy acquisitions. He noted that public ownership can reduce the cost of capital and risks borne by firms.
“One of the things that allows to happen is the de-risking of investment. That government ownership can bring with it the ability to lower cost of capital.” – Adam Fremeth
Fremeth noted that the negotiations could lead to a U.S. government-nominated shareholder-nominated director. In fact, this amendment would have a profound impact on the balance of power within Trilogy Metals’ boardroom.
“If or when that happens, the discussions in the boardroom change because you now have a shareholder-nominated director.” – Adam Fremeth
