Federal government announces strategy to boost critical minerals sector

Mixed reaction from Canadian resource policy experts

By Peter Caulfield

In December 2022, Natural Resources Canada Minister Jonathan Wilkinson releases the government’s critical minerals strategy (CMS).

Wilkinson said the plan would “seize a generational opportunity for clean, inclusive growth.”

The government’s rationale for the strategy is that critical minerals (also called transition minerals) are the building blocks of clean technology, and they help create good jobs and a strong economy.

Wilkinson said the move toward a global net-zero carbon emissions economy has increased the demand for critical minerals, which is creating employment and business opportunities for the exploration, extraction, processing, product manufacturing and recycling of critical minerals.

The 2022 federal budget contains proposals for $3.8 billion towards funding the strategy and The Mining Association of Canada (MAC) is an enthusiastic supporter of the CMS.

In an announcement, MAC president and CEO Pierre Gratton said the association is “encouraged and excited by the opportunities offered to Canada’s mining sector by the strategy.”

Gratton went on to say the CMS “articulates an end-to-end industrial strategy that starts with early exploration to mining through to critical manufacturing sectors essential to fighting climate change. It is arguably the most significant industrial strategy the country has seen in decades.”

Can Canada become a major producer of critical minerals?

The government’s CMS has been received by Canadian resource policy experts with great interest, but also with some raised eyebrows. 

Heather Cheeseman, KPMG Canada national mining industry leader, said she’s encouraged that Canada is recognizing the importance of critical minerals.

“Critical minerals are important in the transition to net zero carbon emissions,” Cheeseman said. “The challenge is that Canada has some deposits of critical minerals, but they need to be extracted. Mines need to come online, and mine development is very expensive, takes a long time and there are huge uncertainties involved.”

Although government can’t solve all of the challenges involved in developing a critical minerals mining industry, it can make an important contribution by speeding up the regulatory and permitting process, she said.

Cheeseman said future updates to the government’s CMS should recognize the need for a strong and diverse workforce.

“Young people should be encouraged to consider mining as a career,” she said. “Not enough of them know what a career in mining has to offer. The government can help support or offer incentives to them to join the industry.”

Heather Exner-Pirot, senior fellow at the Macdonald-Laurier Institute, says the CMS is “a serious strategy.”

“But more needs to be done to actually implement it, and to bring confidence back to the mining sector that projects can get done in a reasonable period of time in Canada,” she said.

Exner-Pirot says that although Canada has potential in all 31 elements the government deems critical, the top three mining products in Canada – gold, iron and coal, accounting for one-half of production value – are not critical minerals, and they make up the lion’s share of new exploration and applications. 

“Canada has a huge role to play in producing new sources of minerals for ourselves and our allies,” said Exner-Pirot. “The strategy is at least a recognition of that. But I don’t see how it will move the needle as fast as it needs to be moved.”

How realistic is the critical minerals strategy?

Krystle Wittevrongel, senior policy analyst and Alberta project lead at the Montreal Economic Institute, said the strategy is comprehensive, but lacking in detail.

“Its objectives are disconnected from reality,” said Wittevrongel. “There needs to be more detail on, for example, whether Canadian mining can compete for international investment dollars to explore for, produce and process critical minerals.

“We have some deposits of critical minerals, but not many, and our reserves are few and small.”

Wittevrongel says the government’s CMS document acknowledges that the regulatory process needs to be speeded up, but it offers no details on how to do it.

“There needs be an adjustment,” she said. “Canada needs more mines, and we need them soon in order to be globally competitive.”

Marla Orenstein, director of the national resource centre at the Canada West Foundation, said she’s glad the federal government “has got on board the critical minerals train.”

“Critical minerals will be essential in the future,” said Orenstein. “But the document could have been written by a robot. The strategy has nothing new in it – no details, no benchmarking, no analysis.

“It’s vague and full of generalities, just a statement of the government’s good intentions.”

If acted on as the document is now, the strategy won’t be effective or efficient, says Orenstein.

“The government says it will invest a lot of money to support the exploration for and production and processing of critical minerals, but Canadian taxpayers want the money to be spent wisely,” she said. “Without a more detailed strategy, there’s no telling if we’re getting value for our money.”

Critical minerals opportunities outside Canada for Canadian miners

According to a report by the International Energy Agency, the minerals most needed for the coming economic transition are lithium, nickel, cobalt, manganese, graphite, copper and aluminum. Those seven represent the backbone of contemporary electrical technology.

“Can Canada become a significant producer of critical minerals, as it is in oil and gas?” says Jack Mintz, President’s Fellow of the School of Public Policy at the University of Calgary. “Given the oil and gas industries’ outsized contribution to Canada’s economy, will it be possible for this country to transition to mineral mining and maintain our economic prosperity as the world moves away from fossil fuels?”

A survey of national reserve and production data for the seven critical transition minerals that appear in a recent report by Mintz and research associate Phil Bazel suggests most new production will come from abroad.

“In no case does Canada have more than three percent of world reserves,” said Mintz.  “The closest we come is our 2.9 percent of cobalt reserves.”

It follows, he says, that most of the mining investment and high-value-added mining jobs from the energy transition will be found where most of the seven key minerals are found: Asia, Africa, Australia and Latin America.

But that doesn’t mean Canadian companies will be left out in the cold.

“Canadian capital, labor and know-how can participate in the coming boom in critical minerals, but much of the work will take place abroad,” said Mintz.

Many critical mineral reserves are concentrated in just a few nations.

“Guinea, Vietnam and Australia account for 58 percent of the world’s reserves of bauxite,” he said.

Congo, Australia and Indonesia have 72 percent of global cobalt reserves; Turkey, China and Brazil, 73 percent of graphite; and South Africa, Australia and Brazil, 78 per cent of global manganese reserves.

“Canada’s best bets for domestic mining growth would seem to be cobalt, in which our current share of world production is 2.6 percent, copper (2.8 percent), nickel (6.7 percent) and zinc (6.0 per cent),” said Mintz.

Given this country’s limited share of energy transition minerals, he says, Canadian fortunes may hinge on the friendliness of our regulatory and taxation framework.

“That needs work,” said Mintz. “The government’s announcement suggests Ottawa is aware of the problem, which is progress. But fixing it will be a big job. Throwing $3.8 billion at the industry will do little if permitting continues to take decades.”