Lithium brine ponds and processing infrastructure in an arid Andean landscape.
By Charles Pitts
Canada has opened a national security review process into Lithium Chile Inc.’s proposed US$175 million sale of its Argentum Lithium subsidiary to China Union Holdings, placing a cross-border transaction involving an Argentine lithium project under scrutiny from Ottawa.
The Director of Investments issued a notice under subsection 25.2(1) of the Investment Canada Act, saying there are reasonable grounds to believe the transaction could be injurious to Canada’s national security. The notice also indicates that the deal could be referred for further review under subsection 25.3(1).
Lithium Chile, a Canadian-listed company trading under TSX-V: LITH, disputes Canada’s jurisdiction. It says Argentum Lithium is an Argentine corporation with no Canadian assets, employees, place of business or operations, and that the proposed sale therefore falls outside the relevant provisions of the Act.
The dispute adds a new regulatory obstacle to a deal that already required Chinese approval to transfer funds and had been extended to allow the parties more time to complete closing conditions. It also offers an early test of how Canada’s strengthened foreign-investment framework may apply to critical-minerals transactions involving assets outside the country.
The issue is particularly relevant to the critical minerals supply chain 2026 outlook, as governments increasingly assess ownership, control, processing access and geopolitical alignment alongside the geological quality of mineral projects.
Transaction at a glance
| Issue | Disclosed position | Why it matters |
|---|---|---|
| Seller | Lithium Chile Inc., a Canadian-listed mining company | Creates a Canadian connection to the transaction |
| Buyer | China Union Holdings Ltd. | Chinese ownership is likely to attract heightened scrutiny in strategic minerals |
| Target | Argentum Lithium S.A., an Argentine subsidiary | Lithium Chile says the target has no Canadian operations or assets |
| Asset | A 62.2% interest in ARLI S.A., which owns and operates the Arizaro project in Salta, Argentina | Transfers control of a large lithium brine development |
| Consideration | US$175 million in cash | The transaction remains material to Lithium Chile’s capital plans |
| Project estimate | 4.122 million tonnes of battery-grade lithium carbonate over approximately 20 years | Gives the project strategic significance beyond its current development stage |
| Current status | Subject to an Investment Canada Act notice and potential further review | Closing could be delayed, conditioned, restructured or blocked |
Why the Arizaro project matters
The Salar de Arizaro project is located in Salta Province, part of Argentina’s lithium-producing northwest. The project is a brine development that Lithium Chile has advanced through an NI 43-101 resource report, a preliminary economic assessment and a prefeasibility study.
The prefeasibility study estimates production of approximately 4.122 million tonnes of battery-grade lithium carbonate over a 20-year operating period. Lithium Chile’s previous disclosures also described potential production of about 25,000 tonnes of lithium carbonate equivalent annually.
Those figures place Arizaro within the group of large, long-life lithium projects being evaluated as the battery industry seeks additional supply outside established production centres.
The project has also attracted attention because of its position within the wider Argentine lithium basin. Although the asset is not located in Canada, its proposed ownership change connects an Argentine resource to a Canadian-listed company and a Chinese purchaser. That structure is central to Lithium Chile’s jurisdictional argument and to Ottawa’s decision to issue the notice.
Processing and fluid-handling equipment used in lithium brine operations.
What the Investment Canada Act notice means
The notice does not represent a final prohibition of the transaction. It is a step that allows the Canadian government to determine whether a fuller national security review is warranted.
Under Canada’s national security review regime, the government can examine foreign investments regardless of transaction value where it believes the investment could cause national security injury. The review can consider the identity of the investor, potential state influence, access to critical minerals, effects on supply chains and the transfer of sensitive technology or information.
If the transaction proceeds to a further review, the government could allow it to close without conditions, permit it subject to undertakings, or take measures to prevent completion. In certain circumstances, the Investment Canada Act also allows the government to require divestiture after an investment has been implemented.
According to the Investment Canada Act annual report for 2024–25, 30 investments entered extended national security review during that fiscal year. Six were allowed to proceed on the basis of enforceable undertakings, nine were withdrawn and one resulted in an order to wind up the Canadian business. The average extended review lasted 155 days.
The figures do not predict the outcome of the Lithium Chile transaction, but they show why the notice creates meaningful timing risk for the parties.
Lithium Chile challenges Ottawa’s jurisdiction
Lithium Chile said it first wrote to Innovation, Science and Economic Development Canada on January 7, setting out its position that Argentum did not meet the criteria for review under the Act.
In an August 17 release, the company said Argentum:
- Is incorporated outside Canada;
- Does not own Canadian assets;
- Has no Canadian employees;
- Has no Canadian place of business; and
- Does not conduct operations in Canada.
Lithium Chile said it received no response from ISED before the section 25.2 notice was issued. The company is reviewing the notice with legal advisers and intends to challenge what it describes as an attempt to apply the Act to the sale of a foreign asset.
In a subsequent shareholder update, Lithium Chile said both parties remained committed to closing the transaction. It also said it was evaluating alternative transaction structures that could monetize its interest in Arizaro while complying with applicable laws.
The company added that uncertainty over the deal could delay plans to reinvest proceeds into its other Chilean projects.
A tougher Canadian policy environment
Canada’s scrutiny of the transaction comes after a significant expansion of its foreign-investment review framework.
Bill C-34, which amended the Investment Canada Act, received Royal Assent in March 2024. Most provisions that did not require new regulations came into force on September 3, 2024. The changes gave the minister greater authority to extend reviews, impose interim conditions and conclude reviews based on written undertakings.
In updated guidelines, the Canadian government also identified the potential impact of an investment on critical minerals and critical-mineral supply chains as a factor in national security assessments. The guidelines added economic security considerations, including whether an investment could increase a Canadian business’s integration with a foreign state in ways that affect domestic supply chains.
The policy shift has been accompanied by direct action involving lithium. In 2022, Canada ordered Chengze Lithium International to divest its investment in Lithium Chile, alongside orders involving Power Metals and Ultra Lithium. The government said the decisions reflected national security concerns related to foreign investment in critical-mineral companies.
That history gives the current transaction added context. The proposed sale does not involve a Chinese acquisition of a Canadian mine. However, it involves the sale by a Canadian-listed company of a foreign subsidiary holding a significant lithium project to a Chinese buyer.
Lithium exploration and production infrastructure on a remote salt flat.
Implications for cross-border critical-minerals M&A
The case could affect how mining companies and buyers structure international transactions involving critical minerals.
For sellers, the review highlights the importance of assessing Canadian regulatory exposure even when the underlying mine, subsidiary and operating workforce are located abroad. A Canadian listing, parent company, financing structure or corporate nexus may become relevant during due diligence and transaction planning.
For buyers, the case reinforces the need to evaluate not only the location of the asset but also the seller’s jurisdiction, the buyer’s ownership profile and the strategic importance of the commodity. Chinese buyers in particular may face additional review when acquiring lithium, rare earths, graphite, nickel or other minerals linked to energy-transition and defence supply chains.
For investors, the central question is no longer simply whether a project has permits, resources and financing. Regulatory clearance, geopolitical alignment and the ability to transfer funds across borders may determine whether a transaction closes on its original terms.
That is already influencing discussions around the lithium price forecast 2026. Supply growth may depend on projects in Argentina, Chile, Australia, Africa and North America, but ownership restrictions and cross-border approvals can affect how quickly those resources reach the market.
Large-scale lithium brine evaporation ponds in an arid mining region.
What happens next
Lithium Chile and China Union will need to determine whether to challenge the notice, seek discussions with Canadian authorities, propose undertakings or pursue a revised structure. The parties must also continue addressing other closing conditions, including the transfer of funds from China.
The transaction’s previous extension moved the original drop-dead date to August 20, with a further extension to October 19 available if additional time is required. The Investment Canada Act process may now become the dominant factor in the closing timetable.
No final decision has been announced by the Canadian government, and the notice does not establish that the transaction will be prohibited. The immediate outcome will depend on whether Ottawa orders a fuller review and whether the parties can address any concerns through legal arguments, undertakings or structural changes.
For the broader mining sector, the case is a closely watched example of how critical-minerals M&A is being reshaped by national security policy. Projects can be located in one country, owned through a second, listed in a third and sold to a buyer from a fourth. Governments are increasingly treating those connections as part of the strategic supply-chain question.
