CANADA IMPOSES 45-DAY HOLD ON FORSYS URANIUM SALE

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.


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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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