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Canada concerned about critical metals market manipulation, minister says

FILE PHOTO: Visitors crowd booths at the PDAC annual conference in Toronto

By Divya Rajagopal

TORONTO (Reuters) -Canada is concerned about market manipulation and dumping in key metals used in electric vehicle batteries, a federal Canadian minister told Reuters, adding the country wants to explore a U.S.-mooted alternative pricing model.

Canada, along with Australia and the U.S., is looking to develop its critical mineral supply chain to break the monopoly of China which controls over 90% of key metals that are crucial for energy transition.

"There will be significant incremental demand for critical minerals going forward, but we do have some challenges right now with prices and clearly we are concerned about issues relating to market manipulation and dumping," Energy and Natural Resources Minister Jonathan Wilkinson said this week, adding the concerns are shared by many democratic countries.

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Dumping refers to an anti-competitive trade practice when a country exports certain products at a price lower than what is sold in its home country.

The minister said the topic will be discussed during the annual Prospectors and Developers Association of Canada (PDAC) conference in Toronto, one of the world's largest gatherings of mining companies and their financiers, that starts on Sunday.

Wilkinson said there is still some way to go before Canada and its allies solve the issue of dumping, but one of the ideas being discussed is the concept of an alternative pricing mechanism.

The U.S. Department of Defense plans to develop a program to estimate prices and predict supplies of critical minerals to boost market transparency.

Wilkinson said Canada does not want to be in a position like Germany which was reliant on Russia for cheap natural gas.

"We need to find pathways through which we are developing resources outside of Chinese influence."

The mood at the four-day PDAC gathering will be dour, as miners are buffeted by weaker demand and plummeting prices. Lithium and nickel prices have fallen by over 70% and 40% respectively in the past year, forcing many to cut production and cut jobs.

The S&P TSX Venture Metals and Mining index is down 28% year-on-year.

In Canada, which is home to about 40% of the world's listed mining companies, the slump in battery metal prices has impacted companies' ability to raise funds. Canadian miners say the commodity crash, macroeconomic challenges and the government's increased scrutiny of foreign deals have led to a feeling that Canada is not as attractive a destination for capital formation as it was a few years before.

"I think Canada has lost its shine with regards to capital formation," said Dominique Barker, Chief Financial Officer, Lithium Royalty Corp, adding that better policy alternatives in countries such as Australia are making them more attractive to investors.

Ottawa's move in 2022 to force three Chinese companies to divest from Canadian listed companies citing national security concerns has cast a shadow on inbound deals in the mining sector.

"The decision (of asking Chinese companies to divest) dissipated or reduced the ability for transactions to occur during a very active phase of fund raising," said Ali Haji, CEO of ION Energy, a lithium exploration company with a project in Mongolia.

(Reporting by Divya RajagopalEditing by Denny Thomas and Josie Kao)