RNNR Committee Report
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In February 2021, the House of Commons Standing Committee on Natural Resources (the committee) decided to undertake a study on critical minerals and associated value chains in order to make recommendations to the Government of Canada to help this industry reach its full potential in Canada.
Over the course of six meetings, the committee heard testimony from a wide range of experts on the role critical minerals play in manufacturing numerous cutting-edge technologies and supporting the energy transition; the economic, environmental and supply issues relating to critical minerals in Canada; the development of value chains associated with critical minerals in Canada; and the current challenges to fully realizing the sector’s potential. The committee is pleased to present its final report, which summarizes the findings of its study and makes recommendations to the Government of Canada.
Critical Minerals: Resources for a Transforming Economy
A number of recent technological advances, in fields such as low-greenhouse gas (GHG) emissions energy and electric vehicles and in high-technology sectors such as medicine, electronics, aerospace and defence, all depend on a more traditional industry—mining. These leading-edge technologies are often made up of several types of minerals, including some critical minerals that are needed for these transforming industries.
The committee learned that some critical minerals are produced by only a handful of countries. Canada has reserves of these minerals, but few deposits are currently being mined. Growing global demand for critical minerals gives Canada an opportunity to develop a domestic critical minerals industry and associated value chains. The jobs and economic benefits of such an industry could be a key part of the economic recovery from the COVID‑19 pandemic. As outlined in this report, a number of witnesses painted a portrait of the current situation in Canada and suggested measures that governments should take to enable Canada’s mineral exploration and development, mineral processing and advanced manufacturing sectors to expand and take advantage of the global need for critical minerals.
Strategic Importance of Critical Minerals
The term “mineral” includes non-metallic and metallic minerals (also known as metals). Minerals are considered “critical” based on various criteria: their role in the modern economy, including in the manufacture of advanced technologies, such as those needed for the energy transition; their supply, which is limited and concentrated in a few countries; and their importance to energy and national security.
Canada produces over 60 minerals, including some critical minerals. Jeff Labonté, Assistant Deputy Minister of the Lands and Minerals Sector at Natural Resources Canada, explained that Canada is “the only nation in the western hemisphere with all the minerals and metals needed to produce advanced batteries for electric vehicles.” These minerals include copper, cobalt, rare earth elements, graphite, lithium, manganese and nickel. These resources are found in multiple regions of the country.
In March 2021, the Government of Canada published a list of 31 critical minerals that are found in Canada, including some that are already being mined. This list is reproduced in Figure 1. These minerals have strategic value for Canada because they are essential to the country’s economic security, necessary for the transition to a low-GHG economy and crucial to Canada’s economic partners as a sustainable source of minerals. Other countries have also made lists of critical minerals for their economy, including Australia, South Korea, the United States (U.S.), Japan and the European Union. For example, the U.S. lists 35 minerals deemed critical for similar reasons to those cited by Canada, except for the addition of national security concerns.
Figure 1—List of Canada’s Critical Minerals (2021)
Source: Figure from Natural Resources Canada, Critical Minerals—Canada’s list of critical minerals.
The committee heard that Canada already produces some critical minerals, but that production levels vary widely depending on the mineral. For example, Canada is an important producer of such critical minerals as aluminum, cobalt, copper, graphite, nickel and uranium. However, other “emerging” minerals are at an early or advanced stage of exploration. This is true of lithium, for which a number of exploration projects are underway. Canada does not yet produce rare earth elements, but it has significant known reserves, and some mining companies have launched exploration projects. The committee learned of several projects at a more advanced stage of development, including the BlackRock Metals Inc. vanadium project and the Torngat Metals Ltd. rare earth elements project in Quebec. However, Ian London, Executive Director of the Canadian Critical Minerals and Materials Alliance, noted the following:
Despite Canada’s vast resource wealth, our critical materials remain largely undeveloped and not strategically leveraged, primarily because of the lack of understanding of their significant climate, national security and economic benefits.
Multiple Uses and Growing Global Demand
A number of witnesses told the committee about the multiple uses of critical minerals in manufacturing cutting-edge technologies. As shown in Figure 2, these minerals are used in technologies from sectors such as energy production and storage, medicine, electronics, defence, aerospace and automobile manufacturing. The minerals used in these technologies may vary with the model, size and use of the product. For example, many types of batteries are used in electric vehicles, each with a different composition.
Figure 2—Example Uses of Critical Minerals
Source: Figure prepared by the Library of Parliament.
Increased use of advanced technologies, notably in the energy sector and the electrification of transportation, will spur global demand for critical minerals. Jeff Labonté provided forecasts from the World Bank:
For example, the World Bank has predicted a 500% increase by 2050 in the production of such minerals as graphite, lithium and cobalt just to feed the clean energy transition alone. The World Bank also estimates that over three billion tonnes of minerals and metals will be needed to deploy the clean energy needed for the world’s transition to a lower-carbon future.
Simon Moores, Managing Director of Benchmark Mineral Intelligence, stated that demand for critical minerals is “growing at a pace that no one alive has seen. This is an order of magnitude over ten years that could be anywhere from a four to ten times demand change within that time period, depending on the battery raw material that you’re looking for.” In addition, Jeffrey B. Kucharski, Professor at Royal Roads University, pointed out the following:
The Indo-Pacific region, driven by continued economic and population growth, will lead global demand for energy and critical minerals in the coming decades. According to the International Energy Agency, the region will account for approximately 60% of a [sic] global growth in energy demand by 2040, which will require more than $1 trillion U.S. in annual energy infrastructure investment.
Leading-edge technologies that are made of numerous minerals and enable advances such as GHG-free electricity and transportation electrification are under development around the world. Statistics from Bloomberg New Energy Finance outlined by Daniel Breton, President and Chief Executive Officer of Electric Mobility Canada, show that the rise of electric vehicles (electric cars, light and heavy trucks, and buses) will be “exponential” over the coming years. Mr. Breton noted that global annual sales of new electric vehicles “are expected to reach 8.5 million in 2025 and 26 million by 2030. New EV sales should grow from 2.7% in 2020 to 28% in 2030, and 58% in 2040.”
Accordingly, soaring global demand for critical minerals presents new opportunities for producer countries, but also supply and environmental challenges.
To produce various technologies, countries are seeking to secure their supply of critical minerals by either procuring resources abroad or developing domestic production when these minerals are available within their borders. The committee learned that some critical mineral supply chains are dominated by a few countries. This control over production levels can create market instability, with periods of shortages as well as large surpluses that can lead to price volatility and pose supply and demand risks. Jeffrey B. Kucharski explained the situation to the committee:
We need to recognize there are risks to the stability and security of strategic resource supply chains. In the case of critical minerals, limited global supplies, the digital revolution and decarbonization efforts are driving resource scarcity and thus competition to secure uninterrupted access to CRMs [Critical Raw Minerals]. The principal risk is disruption of supplies, whether through shortages, embargoes, trade wars, conflicts or, as seen more recently, global pandemics.
Unstable Supply Dominated by a Small Number of Countries
Concentrated production by one or a few countries can increase the risk that other countries, including Canada, will not have access to a stable and predictable supply of these minerals. The committee heard that this situation creates “uncertainty” and that many countries often rely on precarious sources of supply.
A number of witnesses emphasized the major role that China currently plays in producing the global supply of critical minerals. Pierre Gratton, President and Chief Executive Officer of the Mining Association of Canada, said that China has “monopoly‑like control over critical minerals production and distribution, rendering the rest of the world reliant on procurement and creating a level of risk that deters investors from entering these markets.” Robert Fung, Chairman of Torngat Metals Ltd., pointed out that “China supplies in excess of 80% of world demand” for rare earth elements. In addition, Jamie Deith, Chief Executive Officer of Eagle Graphite Corporation, related the difficulties his graphite mining business in British Columbia experienced in finding potential investors to expand its operations, as “[s]upply chains… seemed mostly content with heavy reliance on a single nation,” namely, China.
China can also use this market concentration for certain critical minerals as “a tool of economic leverage” or as “political leverage against countries with whom it has disagreements,” explained Jeffrey B. Kucharski, recalling China’s decision to stop supplying rare earth elements to Japan in 2010. He also stated that
[n]ot only can critical minerals be used as a tool for political leverage, but also demand itself within China is going to reduce the supply of critical minerals from the country going forward. It's that much more important that we here in Canada, working with our partners and allies, develop these supply chains so that our industries, including the defence industry and the clean energy sector, are not starved of these important materials, which would put in jeopardy our industries here at home.
Pierre Gratton noted that Canada’s private sector could be at a disadvantage when competing against state-owned enterprises that invest for strategic reasons. With regards to China, Mr. Gratton stated:
Our sector has a complicated relationship with China. They're the largest consumer of minerals and metals. Our industry is enjoying buoyant commodity prices more or less across the board right now, and it's largely because China's economy has rebounded, but it's also true that they don't play by our rules when it comes to investing in the mining business. They're not a market-based economy. They're state-run enterprises and they invest for strategic reasons. We have members that compete with them around the world, and it's hard to compete with them. I've heard many stories from many of our members of just how tricky that is, because in other parts of the world it's a government-to-government relationship that they engage in, whereas we're the private sector trying to compete using private sector rules.
China is also investing abroad, as Simon Moores explained:
The way China does it is that it goes in and either owns part of the mine or takes over a company, or it does long-term contracts in supplier states. The one thing China does do is it goes to other countries and puts money into the ground and therefore it guarantees the raw materials for its own economy.
While some witnesses expressed concerns about foreign investment in the Canadian mining sector, others said that some foreign companies have an entrepreneurial spirit and are open to working with Canadian businesses. Jeffrey B. Kucharski suggested that the federal government’s list of 31 critical minerals could serve as a “filter” for reviewing applications for investments in critical industries.
Developing a Canadian and Continental Supply Chain
To reduce this dependence on foreign markets, Jeffrey B. Kucharski believes that “[d]eveloping a viable supply chain for critical minerals in Canada will be the first priority.” He also added that “[a]ccess to critical mineral resources is a national security question for many countries and is increasingly vital to economic growth, peace and security.” A number of factors could enable Canada’s mining industry to effectively position itself in the eyes of consumers and on global markets, including its high environmental, social and governance (ESG) standards. However, some witnesses stated that the competition is often from countries that sometimes disregard ESG standards, which enables them to keep their cost of production lower. For instance, Ken S. Coates, of the University of Saskatchewan, made the following remarks:
We also have to address, in Canada, that we’re not alone in this game and that there are many supply options, particularly in the developing world. Those areas have more complex issues and sometimes less favourable environments for human rights protections, environmental protections and what have you.
Other witnesses suggested a “continental” approach to securing a supply of critical minerals. Such an approach would entail cooperation between the provinces and territories, but also with the U.S. Dale Austin, Head of Government Relations at Cameco Corporation, and Jeff Labonté mentioned the work already underway under the Joint Action Plan on Critical Minerals Collaboration between Canada and the U.S. Mr. Austin described the strategy as follows:
A continental approach to improving critical mineral security, minimizing the effects of state-owned players in the critical minerals space and ensuring the future competitiveness of Canadian and U.S. minerals industries should assist in attracting investment to Canadian exploration and mining projects, and spur job creation and economic growth post-pandemic.
According to Roderick G. Eggert, Professor at the Colorado School of Mines, this cooperation between Canada and the U.S. could also encompass labour force training, research and mining waste recovery.
Benefits and Growth Opportunities
Higher demand for critical minerals could boost economic growth and create jobs in Canada’s mining and mineral processing sector. This sector is already a significant contributor to the Canadian economy. Lisa McDonald, Executive Director of the Prospectors and Developers Association of Canada, presented the following data:
Mineral exploration and mining form a cornerstone of our economy, employing over 700,000 Canadians and contributing in excess of $100 billion to our GDP in 2020. It is the largest private sector industrial employer of Indigenous people on a proportional basis in Canada, and a key partner of Indigenous businesses from coast to coast to coast.
The Saskatchewan Mining Association informed the committee that Indigenous people make up 21% of the province’s mine employees and that the mining sector is also “the largest customer of Indigenous-owned businesses in Saskatchewan, annually purchasing over $650 M in goods and services.”
Multiple witnesses stated that Canada’s mining sector has many advantages that could enable it to become a major supplier of critical minerals for advanced manufacturing, including those used in the energy sector and transportation electrification. These advantages include the abundance of mineral resources in Canada, the potential for new discoveries, recognized expertise and a skilled workforce, the safety of mining operations, technology (automation and electrification), the availability of low-GHG and renewable energy, an effective and rigorous governance framework, and a stable and predictable geopolitical environment.
Pierre Gratton pointed out that the Mining Association of Canada’s Towards Sustainable Mining initiative is spurring mining companies in Canada to adopt practices that are sustainable in environmental, social and governance terms and reinforcing “confidence that when it comes to world-leading sustainable mining practices, Canadian mining is a leader.” Mining company representatives also told the committee that these principles have been or will be integrated into their mining practices, enabling companies operating in Canada to stand out on the global stage.
Significant Involvement of Indigenous Communities and Governments
The Canadian mining sector operates mainly in remote regions and has a major impact on the communities in these regions. This is particularly true of many Indigenous communities across Canada. A number of critical minerals projects are located within Indigenous traditional territories. Grand Chief Abel Bosum of the Cree Nation Government outlined the various lithium mining projects underway on the traditional territory. He remarked that his region could “actually become the battery of the north,” meaning that it could provide minerals that are vital to battery production.
Consulting Indigenous communities and governments that may be affected by a mining project is a fundamental part of project development. This requirement is rooted in the duty of governments in Canada to consult and, if necessary, accommodate Indigenous peoples if a project could adversely affect potential or established Aboriginal or treaty rights. Samson Hartland, Executive Director of the Yukon Chamber of Mines, explained that this consultation must be “effective and meaningful.” Nigel Steward, Head of Group Technical—Processing at Rio Tinto, stated that “building trust with all of the stakeholders involved” makes projects easier to complete, in part because it results in obtaining permits more quickly. This relationship of trust and cooperation with Indigenous communities and governments is critical to mining in Canada. Grand Chief Abel Bosum summarized his perspective as follows: “the full recognition of Indigenous rights is not a threat to development. Instead, it is the necessary condition for orderly and sustainable development to take place.” In addition, Ken S. Coates rejected some preconceived notions about mining projects being delayed by Indigenous communities.
According to Professor Coates, delays are in fact the result of “the regulatory burden and the time to development,” which also add cost. Other witnesses endorsed this argument, pointing out that delays are more likely to be caused by the complexity of project assessment processes, which may be split among different levels of government. Pierre Gratton mentioned that “the timelines that it takes to get mines through both federal and provincial processes present a real risk to our ability to take advantage of this opportunity.” Some witnesses said that timelines for obtaining a permit in Canada range from three years to ten years, and even up to 15 years in some cases.
Grand Chief Abel Bosum explained that the “Cree Nation of Eeyou Istchee has spent many decades struggling with both the province and the federal government to secure acknowledgements of [its] Indigenous rights and [its] treaty rights.” He told the committee that the James Bay and Northern Quebec Agreement, signed in 1975, is the treaty that enabled the Nation to “gradually expand the role and the jurisdiction of [its] communities within [its] traditional territory, while at the same time improving the living conditions of [its] people.” Under the treaty, any natural resource development project must go through the social and environmental impact assessment process that it sets out and must be socially acceptable to the community. Consultations must take place very early in the process, at the exploration stage, which encourages knowledge and information sharing and helps build trust between the parties. Once a project is approved, in addition to environmental monitoring, community members can obtain employment, training, contract grants and financial benefits. The “Grande Alliance,” signed in 2020 by the Cree Nation and the Quebec government, aims to implement some of the requirements of the treaty and to help strike a balance between developing and protecting the traditional territory.
A number of agreements have been signed between mining companies and Indigenous communities and governments in Canada to address the impacts and benefits of mining projects, including revenue sharing and Indigenous communities’ involvement in projects. While there are still many challenges to be overcome in order to foster an increased and meaningful participation of Indigenous communities, sustainable and responsible development of critical minerals could be an opportunity to enable this kind of cooperation and ensure the benefits are shared. Donald S. Bubar, President and Chief Executive Officer of Avalon Advanced Materials Inc., argued that “new critical minerals supply chains offer a tremendous opportunity for active involvement by Indigenous communities in the north in building these new supply chains.” Dale Austin added that the “critical minerals sector in Canada must recognize the importance of Indigenous partnerships for future success.”
Challenges to Canada’s Mining Industry
The Canadian mining sector faces multiple economic and environmental challenges. The COVID‑19 pandemic has also affected the entire sector, disrupting operations and reducing production capacity, and even forcing some mines to close to prevent the spread of the virus. The evidence heard during this study shed light on the current situation and the challenges relating to exploration and mining operations that the critical minerals sector must address.
Identifying the Potential of Critical Minerals
Multiple witnesses underscored the importance of properly ascertaining the availability of critical minerals in Canada and their potential for exploitation. Critical minerals are often more difficult to discover, are located in remote regions to which access is limited and consist of smaller-scale deposits containing small concentrations of mineral. Jovette Godbout, Executive Director of the Research Institute of Mines and the Environment, noted that Canada’s critical minerals sector remains undeveloped because the industry does not have the financial resources to support research in this area.
Federal programs such as the Geo-Mapping for Energy and Minerals (GEM) program and the Targeted Geoscience Initiative (TGI) currently provide a geoscience knowledge base for the mining industry. However, Jeff Killeen, Director of Policy and Programs at the Prospectors and Developers Association of Canada, explained that there is a genuine need for further geoscience work, through greater cooperation with the provinces, to better identify the most promising areas “for infrastructure to be developed that maybe can help to bring some of these smaller deposits together and create that upstream production potential that may be lacking right now.” Moreover, according to Ken S. Coates, governments could play a larger role in identifying “no-go zones” where conflicts may arise, such as hunting grounds or cultural sites.
Lack of Infrastructure in Remote and Northern Regions
In Canada, exploration and mining provide economic benefits and create jobs in many communities, including those in remote and Northern regions. Lisa McDonald told the committee that, although mineral exploration companies have spent more than $15 billion over the past decade, “mineral exploration in our three territories dropped by 50% in 2020 versus the year prior, whereas spending in Ontario and Quebec actually increased over the same period.” Yet, as Pierre Gratton noted, the southern part of Canada has been mined for decades, and the potential for new “world-class” deposits lies in the North.
Some witnesses pointed out that the lack of infrastructure in remote and Northern regions, such as the road and highway network required to reach isolated resources, and the lengthy construction timelines for building it are limiting the expansion of mineral exploration in these regions. Samson Hartland described an initiative jointly funded by the federal and Yukon governments and the industry that was launched three years ago: the Yukon Resource Gateway Program. This project was designed to address the lack of infrastructure for resource access, but, according to Mr. Hartland, “very little [has been] spent to date.” Grand Chief Abel Bosum said that, to address these challenges, the Cree Nation Government will “work together with the [Quebec] government to develop a 30‑year infrastructure plan so that [its] people will know exactly what’s likely to happen.” This long-term plan would provide more certainty for natural resource development projects.
Despite the prospect of new markets, the mining sector also faces economic challenges, including barriers to investment. First, the volatility of resource prices and especially the persistent weakness of prices can hold back investment in new mines. These factors deter investment, as there is no “incentive price to bring on a new supply,” explained Simon Moores. Likewise, Nigel Steward said that a key principle for Rio Tinto is not investing unless it knows it has “a mine with a long life and a low cost…. [Otherwise] it wouldn’t survive during any trough in commodity prices.” To avoid this price volatility, Rio Tinto instead attempts to determine whether critical minerals can be found in existing deposits and extracted as by-products.
Juan Merlini, Head of Sales and Marketing at Vale Canada Limited, explained that developing new deposits requires significant capital and a great deal of time may pass between discovery of a viable deposit and commercial production. Competition for capital among critical mineral mines in other countries was another issue cited. Pierre Gratton reported that there has been “over the past decade a gradual decline in [Canada’s] percentage share of mineral exploration spending.” He also noted that Australia, one of Canada’s competitors, “has boosted its attractiveness” in part because it adopted a mining exploration tax credit targeting small minerals exploration companies in Australia. Some witnesses pointed out that exploration is typically done by small companies and few projects go into production. Lisa McDonald made the following comments in this regard:
mineral exploration is a complex process with low odds of success. Only about one in 10,000 mineral claims reach an advanced exploration stage, and just one in 1,000 advanced-stage projects become mines. Junior exploration companies do the bulk of this high-risk capital-intensive work, and account for upwards of 70% of all mineral discoveries made in Canada. However, new discoveries in Canada are in decline, with grassroots exploration down by roughly 75% over the last decade.
Moreover, Sean Cleary, Chairman and Chief Executive Officer of BlackRock Metals Inc., remarked that critical mineral projects “are not well followed by the capital markets [and] ha[ve] to be financed privately and with public-private partnerships.” The committee heard that more government support is needed to encourage investment in critical mineral exploration. For example, the scope of Canada’s Mineral Exploration Tax Credit (METC) and flow-through share system could be expanded or revised to reflect the specific circumstances of mining companies that are exploring new deposits of critical minerals, “including the fact that they can be more challenging to discover, and they can be of smaller scale”, according to Jeff Killeen. Liz Lappin, President of the Battery Metals Association of Canada, said that incentive measures or tax advantages could help attract capital to Canada for projects that have been “validated.”
Other witnesses said that emerging mineral mining should start at a smaller scale. Donald S. Bubar argued that it is “best to start out at a more modest scale and make sure your process flow sheet works” and then gradually scale up production.
Path Toward Sustainable and Responsible Development
Multiple witnesses asserted that Canada’s critical minerals sector will be vital to achieving the Government of Canada’s GHG emissions reduction target for 2030 and the goal of net-zero emissions by 2050. The Canadian mining industry’s goals are consistent with those of the federal government and the Paris Agreement.
As noted above, the critical minerals sector makes a key contribution to manufacturing the advanced technologies that will enable a transition to a low-GHG economy. To realize the environmental benefits of using these technologies, such as solar panels, wind turbines and batteries for energy storage or electric vehicles, the environmental footprint across the life cycle of the mines and production of the technologies, including mineral extraction processes, must be taken into account.
Mining and mineral processing can be water and energy intensive, and some toxic mining effluent may be released into soil and water. The committee learned that the mining industry could improve its environmental performance and better manage resources by using more renewable and low‑GHG energy, electrifying its mining vehicle fleet and increasing recycling and reuse of some minerals.
An important element in the continued sustainability of the critical minerals sector life cycle is the final decommissioning and restoration of mines and mineral processing facilities. It is important that the costs of cleaning up these sites not fall on Canadians. As Dr. Raphael J. Heffron told the committee, a common practice is to require companies to set aside funds to prevent, “…a company's disappearing in some type of bankruptcy and not fulfilling its decommissioning obligation.”
Increased Use of Renewable and Low-GHG Electricity
The mining sector can reduce its GHG emissions by using more renewable and low-GHG electricity. Some mines already have access to this kind of electricity, including hydroelectricity and wind and solar power, which are available in many parts of Canada. As a result, some Canadian mining operations have the lowest GHG emissions in the world, including certain nickel mines in Ontario and aluminum production and its scandium oxide by-products in Quebec. However, Canada’s mining industry is mainly situated in remote regions that are not connected to the country’s electrical grids. Pierre Gratton made the following comments:
Off-grid remote mines are virtually exclusively reliant on diesel fuel for power and haul‑fleet operations for the time being. With very limited and currently uneconomic options to displace diesel, the competitiveness and longevity of these operations under the proposed clean fuel regulations and the projected $170 per tonne carbon price will erode.
While he supports carbon pricing, Pierre Gratton suggested that this measure should come with government support. His colleague Brendan Marshall, Vice-President, Economic and Northern Affairs, at the Mining Association of Canada, argued that it is important “to be sensitive that a one-size-fits-all solution isn’t apportioned equally in all shapes and sizes.”
Other economic factors, such as the cost of some low-GHG energy sources, could also hamper this energy transition. Jeffrey B. Kucharski stated that “there could be some tax provisions provided to this industry to help reduce the costs of energy, should that be a significant factor or a barrier to its development.” Still, innovative projects are moving forward in Canada, such as BlackRock Metals’ use of hydrogen in its mining and metallurgy operations. Sean Cleary explained that BlackRock Metals “is a commercial hydrogen user and early adopter. It is uniquely designed to use grey hydrogen and is enabled for the conversion to green hydrogen once it is commercially available.”
The electrification of mining operations could also reduce the industry’s GHG emissions. Samantha Espley, President of the Canadian Institute of Mining, Metallurgy and Petroleum, explained to the committee that her organization has developed global mining guidelines that encourage the use of battery electric vehicles in underground mining in order to promote “green mining” and a “green economy.” However, Jamie Deith said that his graphite mine is “amenable to becoming an all-electric operation [only] once haul vehicle technology advances far enough.”
Increased Use of Mining Waste and Recycling
The mining industry is using new methods for extracting critical minerals that have potential and could reduce mining’s environmental impact. Besides ore extraction, critical minerals can be obtained by other means, such as oil field brines, tailings from closed mines or by-products of existing mines that are currently considered waste.
Recovering minerals from wastes and tailings that would otherwise be worthless offers a number of benefits, as it amounts to extracting all possible value from deposits that have already been mined. Termed “full-value mining” by Nigel Steward, using this waste creates economic value and could reduce the sector’s environmental footprint. Ian London told the committee that China is already active in extracting from secondary sources and the country’s rare earth elements “actually came out of their biggest, richest deposits [as] an off-product from iron ore mining.”
In Canada, these extraction methods could also deliver economic and environmental benefits. According to Donald S. Bubar, “[m]any of these sites now offer opportunities to go back and create a new plan, reprocess the tailings that track critical minerals, and fully remediate the long-term environmental liability while you do it.” A number of issues must nonetheless be resolved to make these methods viable: access to closed mining sites, management of a mine’s environmental liabilities, the financial assurance bonding requirements for companies and new mining technologies that reduce the amount of waste generated.
In addition, Jeff Labonté pointed to the potential for the mining sector to develop a “circular economy” that would involve the use of mining waste and mineral recycling. Mr. Labonté informed the committee that the Department of Natural Resources is working with its provincial and territorial counterparts to determine “where that value can be extracted from recycling activities” and has research programs currently examining how to extract the critical mineral value from some of the tailings that are currently being produced by mining operations. As Nigel Steward noted, it is crucial to consider the life cycle of a mine when issuing its operating permit; the environmental impact must be considered “in a holistic way.”
From the Development of Critical Minerals to Value-Added Processing
The committee heard that, in addition to developing its domestic capacity to produce critical minerals and the associated supply chains, Canada could also transform critical minerals into value-added products, thus creating its own value chains. Such an industry would create wealth in Canada by giving rise to Canadian secondary (or intermediate) and tertiary processing companies, developing domestic expertise in critical mineral processing and advanced manufacturing, creating skilled, well-paid jobs and reducing the country’s dependence on foreign supplies of value-added products and cutting-edge technologies.
A number of value chains can be developed from critical minerals: some low-GHG energy production technologies (such as wind turbines, photovoltaic solar panels and nuclear energy), batteries and computer chips for electric vehicles, energy storage batteries and various uses of critical minerals in many other leading-edge sectors such as medicine, electronics, aerospace and defence.
From Mines to Mobility: Battery Manufacturing
Multiple witnesses cited the value chain for manufacturing batteries for electric vehicles as a way of decarbonizing the Canadian and global economies by electrifying transportation. This value chain could be significant for Canada, as it possesses all the minerals needed to make these batteries. However, some links in this chain do not currently exist in Canada.
A number of witnesses referenced the concept of “mines to mobility” to describe all the links in the battery manufacturing value chain. As shown in Figure 3, the value chain is separated into the many steps required to make batteries, with some variations.
Figure 3—The Battery Manufacturing Value Chain
Source: Figure prepared by the Library of Parliament.
This series of activities must be carried out by different sectors with different expertise in order to provide the market with a value-added product, such as batteries for electric vehicles. These activities include mineral exploration, extraction and processing (such as smelting and refining), the transformation of these elements into products that can be used to make batteries (chemicals, anodes, cathodes) and the assembly of the battery components into a finished product. While still in the developmental stages, recycling the minerals used to manufacture batteries is the final phase in the battery life cycle and would create a “circular economy” in this industry. According to multiple witnesses, developing this kind of value chain could create many business opportunities for Canadian companies, support Canada’s economic and national security and foster the adoption of technologies that reduce GHG emissions.
In some parts of the world, the battery manufacturing industry is growing rapidly. Simon Moores told the committee that a number of battery “megafactories” or “gigafactories” have been built in China and Europe in recent years, allowing for large‑scale, low-cost production. Mr. Moores also pointed out that a number of countries are investing significant resources in their battery production chains and that China will account for 67% of global battery capacity by 2030, compared with 18% for the European Union and 12% for North America. The European Union has also launched a battery strategy and announced €3 billion in funding to support research and innovation in the field of electric vehicle batteries at every link in the value chain.
Batteries and electric vehicles will be a very large global market in the years and decades to come. On this point, Nancy Concepcion, Executive Manager and Global Product Marketing Manager at Vale Canada Limited, offered the following assessment:
the EV industry has clearly passed a point of no return for the auto industry. Over $300 billion has been invested into the development of EV models, and battery producers have contributed roughly $130 billion of investment…
Some witnesses asserted that, if Canada becomes a significant and reliable supplier of critical minerals, it would draw businesses that process these minerals and make various technologies to the country. Others emphasized that creating an ecosystem to expand manufacturing of these technologies will first require stimulating demand for these products in Canada.
An Opportunity for Canada Despite Current Challenges
The committee heard that many benefits could be garnered from developing value chains associated with critical minerals in Canada, but that some challenges will need to be overcome to do so. The evidence heard during this study revealed some of the current gaps in the industrial ecosystem required to develop a value-added critical minerals industry in Canada.
A Weak Link in the Value Chain: Intermediate Processing
Between mining and technology manufacturing are intermediate processing stages to refine the ore and make the value-added products needed in advanced manufacturing. This work may include processing minerals through smelting and refining, transforming refined minerals into chemicals and inputs such as cathodes, anodes and oxides, which are used in cutting-edge technologies, such as batteries in electric vehicles (see Figure 3).
A number of witnesses pointed to this “intermediate” (or secondary, or downstream) processing as a key part of the value chains associated with critical minerals that remains undeveloped in Canada. Jamie Deith reported on the situation in the graphite industry: “At the moment, there is no further processing domestically that we can sell to, so there is no value-added processor that we could sell to.” Furthermore, Karim Zaghib, Strategic Advisor to Investissement Québec, explained that Canada does not make the machinery required to do this processing, so it has to buy it from other countries, such as China or Japan.
To remedy this situation, a number of witnesses argued that the priority should be developing the value-added critical minerals ecosystem and making the machinery required for these processes, two missing components that prevent processing from occurring in Canada. This processing is also lacking in sectors other than emerging critical minerals. Nigel Steward cited the aluminum industry as a sector where the production capacity for high-value-added products is underdeveloped in Canada because this work must be done close to customers, which are mainly in the United States. Some witnesses suggested that governments play a role in supporting the development of critical minerals processing facilities domestically, as these projects require large amounts of capital, which can discourage some industry players from investing in Canada.
Yet the various links in value chains are well developed in Europe and Asia, and a number of countries have opened up a lead in the value-added critical minerals sector. This has occurred even though some of them have few or no primary resources. This is not true of China, which has the resources, including some in significant quantities, and also dominates the processing industry at every stage of the value chains. According to Bloomberg New Energy Finance data presented by Daniel Breton, “China presently controls 80% of the refining” of the materials needed to produce electric vehicles, electronics, gas vehicles and military equipment, and “77% of the world’s battery-cell manufacturing capacity.” This figure grows to 96% for Asia as a whole if the battery production capacity of South Korea and Japan is included. Jamie Deith offered the following example:
In the extreme case of natural graphite for lithium-ion batteries, fully 100% of the intermediate-stage processing was taking place in China, and still is. This positioning is intentional. China has been investing in electric vehicles since at least 2009 and openly seeks global dominance in the sector.
Rare earth elements are another instance of China’s market dominance: Robert Fung reported that it carries out 75% to 80% of all rare earth oxide production. Similarly, Ian London noted that China built a complete ecosystem for processing this mineral, from extracting the primary resource to making magnets to manufacturing commercial products that use electric motors (refrigerators, car engines and washing machines) and are purchased by Canadian consumers. However, Simon Moores pointed out the following:
Despite the common misnomer, only 23% of all battery raw materials are mined in China, but 80% of battery chemicals are refined there. Having huge midstream capacity ensures these key raw materials flow into China to be value-added. It also translates into creating trillions of dollars of value in downstream industries.
Despite the lead some countries have in this sector, Canada has a number of advantages to help it develop domestic value chains. First, the country has significant critical mineral reserves and a large supply of renewable and low-GHG electricity. Referencing the aluminum industry, Robert Fung said that the processes for turning some critical minerals, including rare earths, into value-added products can be energy-intensive. Having low-cost, low-GHG energy sources such as hydroelectricity is an asset for developing the industry. Indeed, Torngat Metals’s rare earths project in Quebec will use environmentally “sustainable” mining powered as much as possible by wind energy. Finally, another advantage Canada has for developing the varied activities of these value chains is proximity to primary resources and the associated logistical benefits.
Potential Solutions for Developing Value Chains in Canada
Despite the missing links in Canada, which include the intermediate processing of critical minerals and the capacity to produce advanced technologies using those minerals, Canada still has an opportunity to develop a critical minerals and value-added processing sector. Sarah Houde, President and Chief Executive Officer of Propulsion Québec, described this opportunity as follows:
this is a unique chance to rebuild our economy on a new and promising foundation for the future by integrating best practices in circular environmental and social responsibility, particularly with respect to the recycling of these batteries and the development of industrial residues; we can also increase transparency, for example, by integrating the traceability of battery supply chains.
Witnesses offered the following suggestions to make the most of Canada’s potential in the various industries that use critical minerals.
Develop a Canadian Value-Added Critical Minerals Strategy
To take full advantage of Canada’s potential in the critical minerals sector, multiple witnesses proposed identifying the key factors for its development. These factors could include building a viable and integrated supply chain; creating a circular economy; ensuring GHG and source traceability; developing capacity and expertise; enacting the regulatory framework necessary for sustainable and effective resource management according to economic, environmental and social criteria; and developing government policies and programs to support the industry.
Some witnesses stated that a Canadian critical minerals strategy could set out the possibilities and identify what the industry needs to reach its potential. Some industry stakeholders are already mobilizing to chart a path forward for the country. For example, Ian London said that the Industry Strategy Council “recently issued a report and has created a blueprint for implementation, a road map for how Canada can enable critical materials value chains to be developed.”
Measures to facilitate and attract investment should also be considered to ensure the success of a coordinated and integrated strategy. Canada could draw on initiatives from other parts of the world that are leaders in this sector, as Australia did with its critical minerals strategy and its new government office specializing in critical minerals, which helps Australian businesses in the sector secure funding. Robert Fung explained to the committee that “[a]ny small Australian company can go to this particular government office and it will assist them to get funding.” He further stated that “[t]he Australians have been moving very quickly to get their supply chain in place, as a competitor to Canada.”
Witnesses said it would also be appropriate to foster cooperation and partnerships between the sector’s various stakeholders, which could stimulate innovation and investment. These stakeholders include the federal, provincial and territorial governments, Indigenous communities and governments, academics, research institutions, technology and value-added product manufacturers and their customers. Some witnesses even proposed a “pan-Canadian approach” that could harness the advantages of each Canadian region; some collaborations are already underway and could be brought to bear, including in the automobile industry.
A “continental approach” involving the U.S. may also be necessary to compete with other regions that are major players in the sector, namely, Asia and Europe. The foundation for a collaborative framework is already in place with the creation of the Roadmap for a Renewed U.S.–Canada Partnership, in which the countries’ leaders committed to working together
to build the necessary supply chains to make Canada and the United States global leaders in all aspects of battery development and production. To that end, the leaders agreed to strengthen the Canada-U.S. Critical Minerals Action Plan to target a net-zero industrial transformation, batteries for zero-emissions vehicles, and renewable energy storage.
Roderick G. Eggert proposed that cooperation between Canada and the U.S. could encompass the following:
information sharing and broad, forward-looking strategic analysis related to raw materials, university to university co-operative programs and exchanges for students and faculty [as well as] government-to-government collaborations to assess unconventional primary resources, the recovery potential of valuable materials from processed waste streams from both historical and ongoing mining, and the potential for circularizing material life cycles.
Support the Development of Intermediate Processing in Canada
Identified as the weakest link in Canada’s critical minerals value chain, the intermediate processing sector merits attention. Simon Moores argued that this sector, which sits between mining and advanced manufacturing, offers the “biggest leaps in value.” He gave the example of lithium-ion batteries, which make up 25% of the cost of an electric vehicle, but whose inputs—the minerals and chemicals used to make them—account for 80% of their cost.
A number of witnesses suggested that governments need to create incentives in order to develop an intermediate processing industry. For example, according to Samantha Espley, such incentives would support research and development work on new technologies and innovative new processing methods, including modular technologies that could be used by multiple companies. Some countries or regions have already set up supports for their industry. For instance, the European Union has its strategy and €3‑billion investment to establish a battery value chain in its member countries, and Australia gives its critical minerals sector access to its A$1.3‑billion Modern Manufacturing Initiative, which is designed to help Australian manufacturers produce at scale and commercialize their products. Robert Fung explained that this fund is accessible to Australia’s critical minerals manufacturing sector and suggested that Canada should adopt a similar approach.
Setting up demonstration-scale facilities could be another key to developing the value‑added critical minerals processing industry. Donald S. Bubar laid out the following explanation:
This has been one of the key reasons that these supply chains have not yet been established in Canada. There’s a lack of downstream processing facilities needed to, first of all, do the piloting work to establish an efficient flow sheet that can make the product that’s needed in the market. In most cases, you have to be able to produce trial quantities of the product, show them to your customers and get them to verify that it will meet their required specifications.
The Saskatchewan Research Council is moving forward with a demonstration facility, but Mr. Bubar believes that “there’s still a role the federal government could play here in creating some more of these demonstration-scale pilot facilities for aspiring new producers to get access to in order to be able to prove their processes.”
In addition, developing a novel industry in Canada would mean starting fresh on a new foundation that takes account of economic, social and environmental factors. Dan Blondal, Chief Executive Officer of Nano One Materials Corp., said that Canada’s lack of a critical minerals processing industry is an opportunity to develop value chains that do not use “legacy” production methods that have a serious environmental impact and instead “to be a better technology and value chain leader.”
Focus on Industries that Decarbonize the Economy
To stimulate the supply of and demand for advanced technologies in Canada, especially those that produce low-GHG energy, the country must adopt a strategy to “decarbonize [the] economy.” Christian Brosseau, Vice-President of Investment, Strategic Capital, Energy and Environment, at the Fonds de solidarité des travailleurs du Québec, pointed out that this strategy should encompass not only technologies to electrify light vehicles, but also heavy transportation and industrial processes, which are “major GHG consumers and emitters.” This strategy could encourage projects such as one mentioned by Sarah Houde involving a prototype 100% electric truck, which will be tested next year at the Nouveau Monde Graphite mining site. Ms. Houde said this is a good example of “a 100% Canadian, locally manufactured, locally developed with Quebec expertise truck, which will be tested here and then could be exported around the world.”
An electrification strategy would also deliver environmental, social and economic benefits. It would boost locally produced low-GHG energy, reduce GHG emissions from other energy sources and reduce pollution that affects human health. Regarding the economic and employment benefits, Daniel Breton, President and Chief Executive Officer of Electric Mobility Canada, cited an analysis his organization did in 2020, which found the following:
a Canadian transportation electrification strategy modelled on those in British Columbia, Quebec or California could generate up to $200 billion in revenue between 2021 and 2030, and create tens of thousands of new jobs.
Some witnesses discussed the challenges the industry faces in setting up this value chain in Canada. For instance, Canada’s mining sector may not be able to provide a sufficient supply of the minerals and inputs needed to produce leading-edge technologies such as batteries and charging infrastructure. In those circumstances, the automobile industry might have to use foreign sources of supply to meet its needs. To overcome this challenge, Roderick G. Eggert suggested “establishing public-private partnerships to incentivize and accelerate technology deployment and commercial activity in a specific, more narrowly defined, supply chain.”
Electrifying transportation could also result in higher demand for electricity across the country. However, some witnesses argued that this issue should not prevent the introduction of more electric vehicles or disrupt the supply or cost of electricity. Moreover, electric vehicles could open up new opportunities, including their potential to store energy, which could be useful in meeting demand during peak periods. Karim Zaghib pointed out that the transition to electric vehicles must be done in a way that does not “upset” consumers.
Develop Expertise and Train a Skilled Workforce
The value chains associated with critical minerals will require new expertise and training programs. According to Jovette Godbout, developing a critical and strategic minerals industry in Canada will increase the need for training at every link in the value chain:
There will definitely be a greater need for training for individuals who are going to work in our industry and help us develop the field, particularly in terms of clean technologies and processes to extract, treat, process and recycle these substances in an environmentally responsible manner.
Simon Moores asserted that the priority is “building active capacity in the midstream of the supply chain and encouraging new minds to then tap into the supply chain.” It may also be possible to leverage expertise from other industries that make use of similar skills. Daniel Breton pointed to workers at Ford, Chrysler and GM assembly plants in Canada, who “will be retooling and will be retrained so they can start assembling electric vehicles.” Electrifying transportation will provide a new set of jobs in a number of areas, including research, mining, sales, maintenance, infrastructure and materials recycling. Roderick G. Eggert stated that training could focus on “the important inputs to commercial activities.” Daniel Breton argued that government assistance is needed to support workers looking to enter these new industries. Finally, some witnesses noted the work being done to foster a more diverse workforce—for example, by increasing the number of women and people from diverse backgrounds at mining companies by providing them with technical training and selecting them to serve on boards of directors.
In light of the testimony heard during this study, the committee believes that Canada has many of the assets required to develop an internationally competitive critical minerals industry. Rising global demand for advanced technologies gives Canada the opportunity to become a premier source of the minerals necessary for the energy transition and modern technologies and to develop its value-added processing industry.
To achieve these goals, Canada must catch up to other countries in developing a critical minerals supply chain and the associated value chains. Some challenges will need to be overcome, including ascertaining the availability of critical minerals in Canada, attracting the investments needed to develop Canada’s critical minerals sector, building the infrastructure the industry needs, reducing the environmental impact of mining and processing activities, creating a value-added critical minerals processing sector, and developing expertise and training a skilled workforce.
Lastly, Canada must focus on cooperation and partnerships between the critical minerals sector’s various stakeholders to ensure successful value chain integration. Of particular importance is the meaningful participation of Indigenous communities, which is a key to the success of Canada’s critical minerals industry.
 According to the International Energy Agency, low-emissions energy sources include solar, wind, traditional use of biomass, modern bioenergy, hydro, other renewables and nuclear, and can also include natural gas, oil, and coal with the condition that they are equipped with carbon capture utilisation and storage technologies.
 House of Commons Standing Committee on Natural Resources [RNNR], Evidence, 2nd Session, 43rd Parliament [Evidence]: Ian London (Executive Director, Canadian Critical Minerals and Materials Alliance); and Karim Zaghib (Strategic Advisor, Investissement Québec).
 In Canada, the provinces have legislative jurisdiction over non-renewable natural resources, including mineral resources. Some exceptions apply to uranium mines, which are subject to both provincial mining laws of general application and to federal regulatory requirements. Mining operations by federal Crown corporations, on federal lands or in offshore areas are also under federal jurisdiction. However, the federal government can support the mining industry in a number of ways, such as research and development, labour force training, the international and interprovincial aspects of mineral resource management and certain environmental regulations.
 RNNR, Evidence: Austin (Cameco Corporation); Robert Fung (Chairman, Torngat Metals Ltd.); Raphael J. Heffron (Professor, Global Energy Law and Sustainability, Jean Monnet Professor in the Just Transition, As an individual); Jeffrey B. Kucharski (Professor, Royal Roads University, As an individual); London (Canadian Critical Minerals and Materials Alliance); Nigel Steward (Head, Group Technical – Processing, Rio Tinto); and Zaghib (Investissement Québec).
 RNNR, Evidence: Grand Chief Abel Bosum (Cree Nation Government); Donald S. Bubar (President and Chief Executive Officer, Avalon Advanced Materials Inc.); and Liz Lappin (President, Battery Metals Association of Canada).
 RNNR, Evidence: Austin (Cameco Corporation); Ilan Bahar (Managing Director and Co-Head, Global Metals and Mining, BMO Capital Markets); Bosum (Cree Nation Government); Bubar (Avalon Advanced Materials Inc.); Fung (Torngat Metals Ltd.); Labonté (NRCan); London (Canadian Critical Minerals and Materials Alliance); Juan Merlini (Head, Sales and Marketing, Vale Canada Limited); Steward (Rio Tinto); and Zaghib (Investissement Québec).
 RNNR, Evidence: Ken S. Coates (Johnson-Shoyama Graduate School of Public Policy, University of Saskatchewan, As an individual); and Pierre Gratton (President and Chief Executive Officer, Mining Association of Canada).
 RNNR, Evidence: Austin (Cameco Corporation); Bahar (BMO Capital Markets); Lisa McDonald (Executive Director, Prospectors and Developers Association of Canada); and Natural Resources Canada, 10 Key Facts on Canada’s Minerals Sector, 2020.
 RNNR, Evidence: Bahar (BMO Capital Markets); Bubar (Avalon Advanced Materials Inc.); Gratton (Mining Association of Canada); Samson Hartland (Executive Director, Yukon Chamber of Mines); Sarah Houde (President and Chief Executive Officer, Propulsion Québec); Labonté (NRCan); Lappin (Battery Metals Association of Canada); McDonald (Prospectors and Developers Association of Canada); Moores (Benchmark Mineral Intelligence); and Steward (Rio Tinto).
 The Junior Minerals Exploration Incentive (JMEI) “encourages investment in small minerals exploration companies that carry out greenfields mineral exploration in Australia. The scheme allows these companies to convert a portion of their tax losses into credits that may be passed onto investors of newly issued shares as either a franking credit or refundable tax offset. This acts as an incentive to attract new investment”. Since the start of the incentive in 2018, about A$100 million were allocated. On 5 May 2021, the Australian Government announced that it will invest an additional A$100 million over four years to extend the JMEI to the end of June 2025.
 According to Natural Resources Canada, “the Mineral Exploration Tax Credit is a 15% non-refundable tax credit on eligible exploration expenses. Investors can apply it against the federal income tax that would otherwise be payable for the taxation year in which the investment was made.” Also, “a flow-through share allows a principal business corporation to obtain financing for expenditures on mineral exploration and development in Canada.”
 RNNR, Evidence: Austin (Cameco Corporation); Daniel Breton (Electric Mobility Canada); Deith (Eagle Graphite Corporation); Labonté (NRCan); and London (Canadian Critical Minerals and Materials Alliance).
 RNNR, Evidence: Breton (Electric Mobility Canada); Brosseau (Fonds de solidarité des travailleurs du Québec); Deith (Eagle Graphite Corporation); Houde (Propulsion Québec); Lappin (Battery Metals Association of Canada); Moores (Benchmark Mineral Intelligence); and Zaghib (Investissement Québec).
 RNNR, Evidence: Blondal (Nano One Materials Corp.); Bubar (Avalon Advanced Materials Inc.); Deith (Eagle Graphite Corporation); Fung (Torngat Metals Ltd.); Simon Thibault (Director, Regulation and Public Policy, Propulsion Québec); and Zaghib (Investissement Québec).
 RNNR, Evidence: Blondal (Nano One Materials Corp.); Bubar (Avalon Advanced Materials Inc.); Fung (Torngat Metals Ltd.); Lappin (Battery Metals Association of Canada); and Zaghib (Investissement Québec).
 RNNR, Evidence: Houde (Propulsion Québec); Lappin (Battery Metals Association of Canada); London (Canadian Critical Minerals and Materials Alliance); Moores (Benchmark Mineral Intelligence); and Zaghib (Investissement Québec).
 RNNR, Evidence: Blondal (Nano One Materials Corp.); Cleary (BlackRock Metals Inc.); Houde (Propulsion Québec); Kucharski (As an individual); Labonté (NRCan); London (Canadian Critical Minerals and Materials Alliance); Moores (Benchmark Mineral Intelligence); and Zaghib (Investissement Québec).
 RNNR, Evidence: Deith (Eagle Graphite Corporation); Fung (Torngat Metals Ltd.); Kucharski (As an individual); Lappin (Battery Metals Association of Canada); and Brief submitted by the Saskatchewan Mining Association.
 In March 2019, the Australian government released a critical minerals strategy that targets actions in three key areas: promote investment into Australia’s critical minerals sector and downstream processing, provide incentives for innovation to lower costs and increase competitiveness and connect critical minerals projects with infrastructure development.