Dreaming of a critical mineral Christmas
Canada's first ever Critical Minerals Strategy
If you ever wonder whether the Canadian government has the capacity to dream, you need only look at the Critical Minerals strategy published on December 9.
https://www.canada.ca/content/dam/nrcan-rncan/site/critical-minerals/Critical-minerals-strategyDec09.pdf
The strategy dreams many dreams. Of boldly facing and meeting a “generational opportunity.” Of accelerating the extraction of critical minerals, creating domestically anchored critical mineral value chains, ensuring environmental sustainability while the extraction and processing acceleration is underway, and of respecting the rights of indigenous peoples on whose land critical mineral resources lie.
A final dream is that building this new critical minerals enterprise will take place within a circular economy that truly respects recycling and reuse.
Our lead Ministers are not shy about THE DREAM. Jonathan Wilkinson, the Minister of Natural Resources, says “Canada is in the extremely fortunate position of possessing significant amounts of many of the world’s most critical minerals” as well as the know- how to take advantage of them. His counterpart at Innovation, Science and Industry (when did the name change from Innovation, Science and Economic Development?), Francois-Philippe Champagne, brightens the dreamscape still further, by suggesting that “thanks to our wealth of critical minerals, our excellence in mining, our skilled labour and our innovation ecosystem, Canada will become the world’s green supplier of choice for critical minerals.”
(Forewords, The Canadian Critical Minerals Strategy, pp. 1-3)
There is no question that critical minerals will be at the heart of a transition to a green economy, including through zero-emission vehicles, wind turbines, solar panels, advanced batteries, hydrogen fuel cells, and small modular reactors. Dreaming the dream of Canada as a righteous, critical minerals powerhouse is not a bad thing. It is just that a chasm separates the dream from the current reality.
The current reality is that many of the critical minerals on which the green transition depends rest in the ground in Canada. We have scarcely begun to work at finding and extracting them, much less creating value chains through processing and manufacture.
Another reality is that even if Canada was not a historical laggard in developing its critical minerals sector, our natural resource endowment is comparatively limited on a global scale. Supply chains will have to depend on imports. Some key potential suppliers are hardly like-minded countries (China, Russia, the Democratic Republic of Congo etc.) Creating resilient and reliable supply chains is going to be a huge strategic challenge in the face of the realities of geopolitical conflicts. This is not the previous generation’s friendly globalization.
Many critical minerals require extraction methods that will pose steep challenges for maintaining strong environmental protections. Indigenous peoples will face difficult choices between labour and wealth creation opportunities through mining, and the prospects of serious environmental and cultural damage.
Maybe it is also important to mention the challenges of cooperation between the feds, provinces and territories, not least on regulatory matters around impact and environmental assessments. A recent policy paper by Philip Bazel and Jack Mintz at the University of Calgary’s School of Public Policy, argues that “Canada’s participation in the energy transition mining market may hinge on the shape of its regulatory and taxation framework for mining companies.”
https://www.policyschool.ca/wp-content/uploads/2022/12/ERG30-ComingEnergyTransition.Bazel_.Mintz_.pdf
When it comes to plotting THE DREAM, the Critical Minerals strategy begins to come down to earth (pun intended). The strategy notes the need to substantially expand geoscience and exploration to find the critical mineral resource base. It understands there will be a need to develop innovative extraction and conversion processes once the minerals are found—in plain language the technologies will have to be created, because they don’t currently exist. Money and tax credits (a 30% critical mineral exploration tax credit) will flow to these future-oriented endeavours.
More money will flow (up to $1.5 billion) to address infrastructure challenges, especially transportation and electricity corridors/alternative power to remote mining sites.
But let’s face it, for a country that prides itself on being a global mining powerhouse, we are playing come from (way behind) catch up. That reality needs to guide the dreaming.
China, for one, has gobbled up the market for some of the key critical minerals on which the future green economy in the West depends. With regard to key components for electric vehicle batteries, here are the raw stats. For graphite, China produces 79% of total world output. North America, which in this case means Canada and Mexico, between them produce 1.2%. For lithium, over 50% of the world’s reserves are to be found in the so-called lithium triangle in South America (Bolivia, Argentina, Chile). Australia is the leading mine producer at just over 50% of the world’s production, followed by Chile (26%) and China (14%). Canada is nowhere in the world tables. For rare earth elements (REE), China possesses huge market dominance, with mine production amounting to 60% of the world’s output. The U.S. share of mine production was 15%. Canada had no mine production of REE in 2021. Its not a pretty picture.
For these and other stats, see the invaluable United States Geological Survey, Mineral Commodities Summaries, 2022, https://pubs.usgs.gov/periodicals/mcs2022/mcs2022.pdf
Canada has even aided the process of Chinese market strength by blithely ceding control of some Canadian critical mineral start-up companies to Chinese state-owned enterpises. That practice needs to stop and may do so if the government’s new approach to controlling foreign investment proves to have teeth.
See my previous substack column on “Protecting Economic Security”
For all the talk about Canada’s “extremely fortunate” position, the reality is that we don’t have great critical mineral resources or capabilities to draw on. Sure, there may be more to be found and that is where the emphasis on geoscience and exploration comes in. But if we take the top six critical minerals that the Canadian strategy identifies, we are currently, as demonstrated above, nowhere with three of them: lithium, graphite and rare earth elements. We are somewhat better place with the other three: cobalt, nickel and copper. But our share of the world’s known reserves and of global production is extremely modest. For cobalt it is 2.9% of global reserves and 2.5% of production. The global leader is the Democratic Republic of the Congo with a whopping 71% of production. For nickel, once a Canadian strength, we now produce 4.8% of the world’s production. The powerhouse here is Indonesia, with 37%. For copper, we own 2.8 % of global production. Chile is at 10 times that number; China at 3 times.
(Thanks again to the United States Geological Survey, Mineral Commodities Summaries, 2022, https://pubs.usgs.gov/periodicals/mcs2022/mcs2022.pdf
The reality (I keep using that anti-dream word) that we have to face is that Canada is not a critical minerals powerhouse. The strategic key for Canada, as we try to ramp up some domestic extraction and production, will rest in partnerships with allies, and in building reliable and resilient supply chains based in the first instance on access to overseas sources.
On partnerships we have made a start, with bilateral cooperation agreements with the United States, the European Union and Japan. The Critical Minerals strategy recognizes the importance of expanding global cooperation with like-minded countries , but also suggests some fear that cooperative arrangements might compromise Canada’s “ability to deliver on domestically focussed programs and priorities.” I have no idea what this means. Can it be part of the dreaming?
On building reliable and resilient supply (or more broadly “Value”) chains, the strategy is entirely focused on creating domestic capacity. While this is important, a domestic capacity will never meet Canada’s needs. More dreaming. We will need a global value chain strategy.
The policy centre for pushing Canada’s ambitious dreaming is housed at Natural Resources Canada’s “Critical Minerals Centre of Excellence.” It is going to need a lot of juice—talent, resources, industry stakeholder connections, research access, global partnerships to really make a difference. Above all it is going to need a real understanding on the part of our political class of just how far Canada is behind in this race.
An Annex to the strategy, entitled “Canadian Critical Mineral Success Stories in 2022” tells the tale. It is all about start-ups, junior miners, memoranda of understanding, future plans, pre-feasability and feasability studies. Here is one example of a “success story” from October 2022:
“Mercedes-Benz finalizes a supply agreement with Canadian-German start-up Rock Tech Lithium Inc, to secure battery grade lithium hydroxide, sourced from Rock Tech Lithium’s Georgia Lake lithium project in Ontario and produced from a planned lithium, converter facility in Germany.”
This sounds good, but actually the Rock Tech mine in the Georgia Lakes area north of Thunder Bay is still in a feasibility study phase, with production decisions coming in 2023. Production decisions, not production.
https://www.newswire.ca/news-releases/rock-tech-lithium-completes-pre-feasibility-study-for-its-georgia-lake-project-832189550.html
See what I mean. Canada better lean very hard into the future.