As the world increasingly relies on minerals pivotal for the transition to green energy, Canada has established lofty targets to maintain its leading position in the pursuit of net-zero. The Critical Minerals Strategy of Canada aims to strengthen the supply of responsibly procured critical minerals and bolster the growth of domestic and international value chains for the green economy. The strategy is underpinned by five fundamental objectives:
- Support economic growth, competitiveness, and job creation
- Promote climate action and environmental protection
- Advance reconciliation with Indigenous peoples
- Foster diverse and inclusive workplaces and communities
- Enhance global security and partnerships with allies
Yet, Canada’s ambitious goal towards a viable critical minerals strategy needs increased involvement by the government in several areas, including addressing long winded approval processes, removing regulatory barriers, and providing far more financial support, if meaningful progress is to be made.
Long-winded permitting
Canadian mining companies are persistently challenged by the issue of overregulation. The intricate web of provincial and federal laws are often significant barriers when attempting to transition a mining project from an idea to reality. Furthermore, the sector is constantly wrestling with the obligation to engage in meaningful consultations with Indigenous groups as the world casts an increasingly critical eye on matters of ESG.
At present, it can take a staggering 15-25 years on average to bring a mine to its inaugural year of production. This timeline is excessively lengthy if Canada aims to realize its potential in critical minerals.
“With respect to regulatory delays, we must be clear that it cannot take us 12 to 15 years to open a new mine in this country – not if we want to achieve our climate goals and move rapidly through the energy transition.” Canadian Natural Resources Minister Jonathan Wilkinson said last year, when talking about Canada’s new critical minerals strategy.
Provincial and federal regulations continue to pose a significant challenge for Canadian mining projects and frequently work to prolong the process for Canada’s mining industry. Major revisions to the permitting and approval processes will be indispensable to overcome these regulatory obstacles.
“Task one is to figure out how to reduce and improve the regulatory simplicity of the mining process and reduce duplicative efforts across jurisdictions.” David Cohen, American ambassador to Canada, said in May 2023 at a First Nations Major Projects Coalition conference.
Government investment
Producers of domestic critical minerals require a lot of financial backing and assistance from governments to manage the monetary risks associated with completing a new mining project, and this is particularly true in Canada.
From 2022 onwards, the government has committed to investing C$1.5B over a span of six years in the manufacturing, processing, and recycling of critical minerals. It has also initiated the Critical Mineral Exploration Tax Credit and allocated C$25M to foster engagement with Indigenous communities.
While these advancements are a step in the right direction, they might not be sufficient to meet skyrocketing cost demands of significant mining projects. For instance, the C$1.5B fund would scarcely meet the expenses of a single proposed highway project leading to Ontario’s Ring of Fire. Moreover, despite the promising C$28B investment in electric vehicle battery production with automobile manufacturers, these projects will necessitate a consistent supply of critical minerals for successful operation, leading to a predicament.
The intricate web of provincial and federal laws are often significant barriers when attempting to transition a mining project from an idea to reality.
Capital access
Access to capital is another crucial facet of investment. Increased vigilance over certain foreign investments in the mining sector has become commonplace. However, this has further constrained the already scarce investment capital accessible to critical minerals producers. This is primarily due to the Government of Canada issuing a new policy in October 2022 on applying the Investment Canada Act (the ICA) to investments by foreign state-owned enterprises (SOEs) in Canada’s critical minerals sectors and critical minerals supply chains. The policy also applies to private investors with close ties to foreign governments.
Under the policy, review applications for acquisitions of control of Canadian businesses involving critical minerals by SOEs will only be approved in exceptional cases. Further, the policy provides that SOE participation in any investment involving a Canadian business operating in a critical minerals sector or supply chain will automatically be scrutinized on national security grounds.
Yet, despite the implementation of the ICA, earlier this year, Zijin Mining bought a 15% stake in Canadian-owned Solaris, presenting a dilemma to the ICA and Critical Minerals Strategy. Most recently, Chengdu-based Shenghe Resources also acquired a stake in Australian company Vital Metals, which owns a rare earths mine in the Northwest Territories, a deal that included buying the mine’s entire rare earths stockpile. Adding to the complexity, China’s Simonine Resource Group also purchased one of Canada’s only two lithium mines in Manitoba in 2019, a move that was left unchallenged.
The need to foster domestic and allied capital into the Canadian mining sector is still evident. The Canadian government and mining firms find themselves in a challenging predicament – they want to limit foreign investment in the interest of national security, but lack the necessary substantial domestic investment.
Looking forward
Canada is blessed with an abundance of critical minerals, but its ability to guarantee a consistent supply of critical minerals will largely rely on a combination of financial support for Canadian mining firms, streamlining approval procedures, and eliminating regulatory obstacles.
There is hope, however, in the form of impending revisions to the current regulatory frameworks, with Canada’s Minister of Natural Resources recently expressed his ambition to expedite the mine permitting process, aiming to transition critical minerals projects from idea to production within 10 years.
Alongside the federal initiative to secure these vital mineral resources, these policy changes are gradually being implemented at the provincial level. For instance, Ontario enacted the Building More Mines Act, 2023, which assigns project approval authority to a provincial minister and relaxes a wide range of mining regulations, including those related to post-closure site recovery and remediation. The government website stipulates the amendments aim to reduce administrative burden, clarify requirements for rehabilitation, and create regulatory efficiencies.
These policy transformations will be crucial for the future sustainability of Canada’s critical minerals sector.
