Canada China Resource Fund Ends Amid Losses, Eroded Ties

A Canadian industrial group has ended a decade-long tie-up with a Chinese private equity fund that aimed to raise up to $10 billion for natural resources.

The Alberta Industrial Heartland, a not-for-profit made from five provincial municipalities, and the Hong Kong-based private equity firm Can-China Global Resource Fund (CCGRF) was set up in 2013 to encourage investments across North America.

“This partnership no longer exists,” Karlee Conway, director of communications of the Alberta Industrial Heartland said. The spokesperson did not respond to queries on why the partnership was called off and when.

The lead investor of the fund was China’s Export-Import Bank, Vancouver-based mining firm Hunter Dickinson and Swiss commodity trader Mercuria.

ALSO SEE:

Canadian AIIB Exec ‘Fled’ China After Quitting Over CCP Meddling

Increased tension in bilateral ties

The previously unreported development comes as tension between China and Canada has escalated in recent years, though sources could not confirm whether the dissolution of the fund is a direct result of that.

Hong Kong-based MEC Advisory Ltd, which was tasked with managing the investments, CCGRF, Mercuria, Hunter Dickinson and EXIM Bank did not respond to Reuters’ email request for comment.

“I cannot confirm this is directly related to bilateral relations, but it could indeed be a product of the increased tensions between the two countries,” Lynette Ong, Professor of Political Science at University of Toronto, said.

She added that provincial governments might feel compelled to toe the official stance of Ottawa or not to veer too much from public opinion, as it could incur risks.

Ties frozen but fund suffered ‘big losses’

The only known investment by this fund was a C$722 million ($545.4 million) buyout of Calgary-based CQ Energy in 2017, a private natural gas production services company. The status of this investment is unknown.

Diplomatic ties between Beijing and Ottawa started to deteriorate after Canada arrested Huawei Technologies CFO Meng Wanzhou in 2018 at the request of the United States.

Following Meng’s arrest, China detained two Canadian citizens, known as the ‘two Michaels’, who were accused of spying. While all three were released in 2021, the relationship between China and Canada has not returned to normal.

The oil-rich province of Alberta exported C$4.5 billion worth of goods to China in 2020, making it the Canadian province’s second-biggest export market. Some of China’s large state oil companies expanded into Alberta before the collapse of oil prices in 2014.

A person aware of the fund said that the $10 billion target was for marketing purposes and the first stage of the investment was no more than $1 billion.

A person added that Exim Bank started looking into the structure of the fund “after it suffered big losses” and they sent a representative from Beijing to divest on certain projects.

The CCGRF was set up in 2013 as part of a bilateral discussion between the governments of Canada and China to encourage investments of public and private capital into Canada’s natural resources sector.

The rift between the two countries widened since Meng’s arrest. Last year, Canada forced three Chinese state investors to sell out of Canadian critical mining companies, as it tries to wean off its dependency on China in its critical mining sector.

This month, Canada froze ties with the China-led Asian Infrastructure Investment Bank (AIIB) as it launched a probe into allegations that the institution was dominated by the Chinese Communist Party.