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Why critical minerals are such a big deal for Canada’s economy

Natural resources minister discusses LNG, hydrogen and critical minerals
Natural Resources Minister Jonathan Wilkinson announced $344 million in funding for critical minerals at PDAC.

There is still a role for Western Canada to supply Asia with liquefied natural gas (LNG) and longer-term opportunities for Canadian producers to supply Europe with hydrogen.

But it’s critical minerals where Natural Resources Minister Jonathan Wilkinson thinks Canada’s biggest opportunities lie in a world transitioning to cleaner energy sources.

“This really, if we get this right, is kind of a generational economic opportunity for this country,” Wilkinson said. “Not just extracting minerals, but processing and refining them here. Building the batteries, building the electric vehicles and other products. This is an opportunity for Canada to really have a very strong core of its industrial base underpinned by the work we’re doing in critical minerals.”

Wilkinson spoke to BIV about energy and mining Friday, following his address earlier this week at the Prospectors and Developers Association of Canada (PDAC) conference.

“The tone of PDAC this year was, I think, very optimistic,” he said. “People really see the opportunities that are before us, particularly in the area of critical minerals, but in mining more generally.”

With its abundance of energy, and a nascent LNG industry, Canada has been seen as a potential supplier to Europe, which has lost most of its Russian natural gas supplies. But in recent visits to Canada, European leaders have been sent home largely empty handed. Despite attempts to develop LNG export terminals in Eastern Canada, none are being built there, unlike the West Coast, where at least one large LNG terminal is being built.

European leaders have been given assurances that, though Canada has no LNG to offer, it may be able to supply hydrogen at some point, leading some to wonder if the enthusiasm the Trudeau government once showed for a Canadian LNG industry has begun to wane.

“There is an opportunity for LNG as a transitional fuel,” Wilkinson said. “But that’s mainly a West Coast opportunity – like LNG Canada. That will actually help Europe. It will displace – in Japan and other countries – LNG that will go back onto the world market that will be available to countries in Europe to acquire.”

The challenges to developing an LNG export industry in Eastern Canada are even bigger than in Western Canada. There may be better opportunities for hydrogen production and exports in Eastern Canada.

Wilkinson pointed to one project, EverWind Fuels, which has a $6-billion plan to build wind farms and a green hydrogen and ammonia production and export terminal in Point Tupper, Nova Scotia. It has already signed offtake agreements with German buyers and is aiming to be in production by 2025.

“On the East Coast, it’s advancing quite quickly,” Wilkinson said of hydrogen projects.

“Hydrogen is not something that’s going to be a huge export market in the short-term,” he added. “It will be a huge market down the road, so we have some time to work our way through, and we are working our way through those issues right now.”

Just how much focus the federal and provincial governments will place on LNG, or hydrogen or mining will soon be revealed in an action plan from regional energy and resource tables that the federal government set up with the provinces last year. 

The B.C. table is focused on critical minerals, sustainable forestry, clean fuels (including hydrogen), electrification, carbon capture and regulatory processes.

“British Columbia is the most advanced of all of the provinces with respect to those bilateral conversations,” Wilkinson noted. 

He said he is hoping to see an action plan unveiled in a month or two.

New funding announced for critical minerals

Canada’s critical mineral strategy is essentially an industrialization plan for a net zero economy – one that aims to develop industries like electric vehicle battery production and secure a domestic source of key inputs -- from copper and nickel, to lithium and cobalt. 

Last year, the Trudeau government announced $3.8 billion in funding for the strategy. This week at PDAC, Wilkinson announced how $344 million of that will be spent:

  • $144.4 million for the Critical Minerals Technology and Innovation program for research, development, demonstration, commercialization and adoption of new technologies;
  • $79.2 million for critical minerals geoscience and data to better identify critical minerals reserves;
  • $70 million for a global partnerships program to improve international collaboration on critical minerals;
  • $40 million for a Northern Regulatory Initiative; and
  • $10.6 million for the Critical Minerals Centre of Excellence.

Wilkinson also announced $14 million in funding for specific initiatives by Canadian companies, including two B.C. junior exploration and development companies.

Search Minerals Inc. (TSX-V:SMY,OTC:SHCMF) will receive $5 million to help it build a demonstration plant for rare earth metals extraction and recovery. 

FPX Nickel Corp. (TSX-V:FPX, OTCQB:FPOCFwill receive $724,871 to demonstrate the economic feasibility of producing battery-grade nickel sulphate and cobalt hydroxide for electric vehicle batteries from its Baptiste Nickel project in B.C. The Baptiste project is within the Decar Nickel District near Fort St. James.

Canada is blessed with many of the critical minerals needed to build electric car batteries and electrical infrastructure. But one need only look at what is happening – or not happening – in Northern Ontario’s Ring of Fire to see that good geology alone isn’t enough to get new mines approved, financed and built.

The Ring of Fire region is rich in certain metals, like chromite, cobalt, nickel, copper and platinum. But building new mines there will require hundreds of kilometres of new roads, which would need to be built through peatlands and several First Nations territories. Mine proponents are facing years of difficult provincial and federal environmental approvals, so a lot of patient capital may be needed if that region is ever to develop into a major mining district.

Given the challenges companies face in Northern Ontario, Wilkinson suggested exploration companies might want to focus their efforts somewhere else in Canada.

“From a geological perspective, there certainly are some interesting deposits up there,” Wilkinson said. “But I often say to folks in Ontario, there are so many different areas that are simpler than the Ring of Fire to go after. I always wondered why everybody focuses on the Ring of Fire.

“There are many … Indigenous communities up there, some of whom have concerns. It’s also in one of the most ecologically sensitive areas of Canada. It is an area that is peat, and peat is a big carbon sink. So if you disturb all the peat, you actually release more carbon dioxide than probably you’re saving when putting the critical minerals in cars. 

“So you have to find a way to develop infrastructure up there in a manner that actually is acceptable to the Indigenous communities and doesn’t actually disturb the peat areas. So it will take a bit longer to figure out how to do that than many other deposits [people] are looking at. But it’s still something that, clearly, we’re interested in working on with the Government of Ontario.”

As for B.C., one critical mineral that it has in relative abundance is copper. But like the Ring of Fire, there are challenges for some of the better deposits. Wilkinson cited Galore Creek as one significant potential copper mine that may need help from the federal government.

Galore Creek – said to be one of the largest undeveloped copper deposits in the world – is jointly owned by Teck Resources Ltd. (TSX:TECK.B) and Newmont Corp. (NYSE:NEM). One of the challenges with Galore Creek is lack of infrastructure, including electricity.

“That is something that we are interested in discussing and trying to help to support the work that would need to be done to bring electricity to sites like that,” Wilkinson said.

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