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Cablegate: Canada Imposes 45-Day Hold On Forsys Uranium Sale

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OO RUEHGA RUEHHA RUEHMT RUEHQU RUEHVC
DE RUEHOT #0639/01 2312056
ZNY CCCCC ZZH
O 192056Z AUG 09
FM AMEMBASSY OTTAWA
TO RUEHC/SECSTATE WASHDC IMMEDIATE 9768
INFO RUCNCAN/ALL CANADIAN POSTS COLLECTIVE PRIORITY
RUEHWD/AMEMBASSY WINDHOEK PRIORITY 0068

C O N F I D E N T I A L SECTION 01 OF 02 OTTAWA 000639

SIPDIS

STATE FOR ISN/RA - J. ALLEN-CLOSE AND N. MENKHOFF, WHA, AF, L, AND T E.O. 12958: DECL: 08/19/2019

TAGS: PREL PARM MNUC KNNP EINV IR NA CA

SUBJECT: CANADA IMPOSES 45-DAY HOLD ON FORSYS URANIUM SALE REF: A. OTTAWA 627 B. STATE 84119

Classified By: PolMinCouns Scott Bellard, reasons 1.4 (b) and (d)

1.(C) The Government of Canada notified George Forrest International (GFI) on August 18 that it had invoked section 25.2 of the Investment Canada Act (ICA) to freeze for 45 days the company's intended purchase of Forsys Metals Corporation's Valencia uranium mine in Namibia, according to Department of Foreign Affairs and International Trade (DFAIT) Nuclear Non-Proliferation and Disarmament Director Andre Francois Giroux. (Text of relevant legislation in para 6.) Giroux added that senior officials during the week of August 10 had briefed the relevant ministers (Foreign Affairs, Public Safety, and Industry) on U.S. concerns about the proposed sale (ref a).

2.(C) Giroux underlined that Industry Canada (IC) now has the statutory lead in preparing a preliminary evaluation of the national security implications of the sale. Once IC has completed the evaluation, the relevant ministers will meet again to make the final decision to allow or prohibit the sale. Giroux noted that Assistant Deputy Ministers (Under Secretary equivalents) from DFAIT, Public Safety, IC, the Royal Canadian Mounted Police, and the Canadian Security Intelligence Service will meet during the week of August 24 to discuss Canada's options in light of strong U.S. concerns and Canada's awareness of its international legal obligations with respect to non-proliferation.

3.(U) Forsys Metals acknowledged the Canadian government's move in a press release on August 19, which noted that the corporation will provide further information to shareholders when they have "been advised by GFI of the full impact, if any, of the Notification and determined the effect on the plan of arrangement with GFI." On August 18, Forsys had issued a press release saying that GFI had delayed closing on the sale until August 24 due to unspecified financing delays.

4. (U) Despite Forsys' press release, there has so far been no coverage of this issue in the mainstream media, but since the mining sector trade press has picked up this story, it may receive more public attention soon.

5.(C) Comment: This new provision of the ICA remains little known and untested, but DFAIT is adamant that the government now has the clear authority to review and if necessary block a Canadian company's sale of one of its assets outside Canada on national security grounds, and will be lobbying strongly in this case during the 45-day review period. End Comment.

6. (U) Begin relevant excerpts from the Investment Canada Act: 25.2 (1) If the Minister has reasonable grounds to believe that an investment by a non-Canadian could be injurious to national security, the Minister may, within the prescribed period, send to the non-Canadian a notice that an order for the review of the investment may be made under subsection 25.3 (1).

(2) If a non-Canadian has not implemented a proposed investment when they receive a notice under subsection (1), they shall not implement the investment unless they receive (a) a notice under paragraph 4(a) indicating that no order for the review of the investment will be made under subsection 25.3 (1); (b) a notice under paragraph 25.3 (6)(b) indicating that no further action will be taken in respect of the investment; or (c) a copy of an order made under section 25.4 authorizing the investment to be implemented. Q25.4 authorizing the investment to be implemented.

(3) The Minister may require the non-Canadian or any person or entity from which the Canadian business or the entity referred to in paragraph 25.1 (c) is being acquired to provide, within the time and in the manner specified by the Minister, any prescribed information or any other information that the Minister considers necessary for the purposes of determining whether there are reasonable grounds to believe that an investment by a non-Canadian could be injurious to national security.

(4) The Minister shall, within the prescribed period, send to the non-Canadian (a) a notice indicating that no order for the review of the investment will be made under subsection 25.3 (1); or (b) a notice referred to in subsection 25.3 (2) indicating that an order for the review of the investment has been made. OTTAWA 00000639 002 OF 002 25.4 (1) On the referral of an investment under paragraph 25.3 (6)(a), the Governor in Council may, by order, within the prescribed period, take any measures in respect of the investment that the Governor in Council considers advisable to protect national security, including (a) directing the non-Canadian not to implement the investment; (b) authorizing the investment on condition that the non-Canadian (i) give any written undertakings to Her Majesty in right of Canada relating to the investment that the Governor in Council considers necessary in the circumstances, or (ii) implement the investment on the terms and conditions contained in the order; or (c) requiring the non-Canadian to divest themselves of control of the Canadian business or of their investment in the entity. (2) The Minister shall send a copy of the order to the non-Canadian or other person or entity to which it is directed without delay after it has been made. (3) The non-Canadian or other person or entity to which the order is directed shall comply with the order.
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