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Canada Aspires to Be Global Critical Mineral Supplier Alternative to China

Published: January 20, 2023
Canada's Prime Minister Justin Trudeau speaks with reporters during a news conference on Parliament Hill on Feb. 11, 2022 in Ottawa, Canada. (Image: DAVE CHAN/AFP via Getty Images)

On Monday, Jan. 16, Prime Minister Justin Trudeau visited a new rare earth elements processing plant in Saskatchewan while Ottawa approved a new lithium development project in Quebec. As Canada attempts to establish a foothold in a critical mineral industry dominated by China, Trudeau said Canada is the perfect alternative to China in the global market. A week ago, Ottawa also spoke with the visiting Japanese Prime Minister about cooperation in this area.

The Vital Metals plant in Saskatoon that Trudeau visited on Jan. 16 processes rare earth elements mined at the Nechalacho project in the Northwest Territories. Numerous industries, including electronics, transportation, aerospace, and the defence sector, use rare earth elements.

The Vital Metals plant is Canada’s first rare earth processing facility, which began operations last year to produce Canada’s first ingots of rare earth elements for use in up to 300,000 electric vehicles annually. In September 2022, the federal government announced a $7.5 million interest-free, repayable contribution to Vital Metals to install equipment at its plant.

A stripped down mobile phone and its parts lie on a table with minerals representing substances typically found in electronics on August 28, 2012 in Berlin, Germany (Image: Sean Gallup via Getty Images)

“People are realizing that this extraordinary transformation that’s going on in our economy towards electric vehicles, towards more high tech, advanced solutions on everything we do, is going to require access to critical minerals and rare earth elements that to this point have been dominated by China as a somewhat challenging partner at the best of times,” Trudeau said at the Vital Metals plant.

The prime minister stated that recent global supply chain disruptions caused by a variety of factors have strengthened the case for Canada to become a larger player in the global mining industry.

He said the “world is looking to Canada” because of its “incredible” amounts of rare earth elements and critical elements. According to Natural Resources Canada, Canada has some of the world’s largest reserves, estimated in 2021 at 14 million tons.

READ MORE: Is China Losing Its Hold on the World’s Rare Earths Market?

“But on top of just having the elements, we have an incredibly strong workforce, well educated, ambitious, innovative thinkers, we have reliable supply chains and trade deals with the world,” he said.

Also on Jan. 16, the federal government approved Galaxy Lithium (Canada) Inc.’s plan to build a new lithium mine in Northern Quebec. The open-pit lithium mine is expected to be in production for up to 20 years, create 280 jobs during construction, and employ 167 people on a continuing basis, the Globe and Mail reported.

Lithium is a key component of electric car batteries, along with cobalt, copper, and graphite. However, Canada is far behind the rest of the world in mining and refining lithium. At the moment, Sinomine, a big Chinese mining company with ties to the Beijing government, owns and runs Canada’s only lithium mine.

Galaxy Lithium is a privately held company owned by Allkem Ltd., an Australian lithium miner. Before moving forward with the mine project, it must also obtain approval from the province of Quebec.

Natural Resources Minister Jonathan Wilkinson said in a statement that went along with the mine approval that Ottawa is “committed to making Canada the global supplier of choice for responsibly and sustainably sourced critical minerals, from exploration and extraction to manufacturing and recycling.”

“Critical Minerals Strategy”

Globally, China is at the very top of critical mineral supply chains. It controls more than half of the world’s rare earth mining and a much larger share of processing and manufacturing. According to the International Energy Agency (IEA), China has a share of about 35 percent for nickel, 50 to 70 percent for lithium and cobalt, and nearly 90 percent for rare earth elements, in refining.

In the past, Canada did not realize the importance of its natural resources, and many miners were acquired by Chinese companies. Only in the past two years have a series of conservation and self-development initiatives begun.

This photo taken on July 20, 2022 shows a worker operating a machine on a smartphone production line at the Oppo factory in Dongguan, China’s southern Guangdong province. Phones and other electronics rely on the mining of rare earth elements, a market that has been heavily dominated by China. (Image: JADE GAO/AFP via Getty Images)

Canada released its Indo-Pacific strategy in November of last year. It sees China as an “increasingly disruptive global power” and wants to counter China’s influence in the region while also boosting its own strategic power.

Canada also announced new rules for investing in key minerals for national security reasons. These rules said that foreign state-owned enterprises couldn’t invest in key mineral projects. Three Chinese companies were then ordered to divest their investments in Canadian critical minerals.

On Dec. 9, 2022, Canada released its Critical Minerals Strategy, backed by up to $3.8 billion in federal funding allocated in Budget 2022. The strategy directs Canada’s mining and processing of critical minerals and rare earth elements. Minerals such as lithium, copper, and nickel are key to the production of electric car batteries, solar panels, wind turbines, and a variety of other technologies, and are essential to the accomplishment of the government’s energy transition goals. The government has prioritized lithium and several other critical minerals as part of its critical minerals strategy.

Streamlining the approval processes for mining projects is one of the strategy’s central points. This is because, currently in Canada, it takes “anywhere from 5 to 25 years for a mining project to become operational, with no revenue until production starts,” and this further hinders critical mineral industrial projects that require large upfront investments and may generate a slow return.

At a Jan. 17 webinar composed of experts to examine the Canadian Critical Minerals Strategy, Heather Exner-Pirot, a senior fellow of the Macdonald-Laurier Institute (MLI), emphasized that the government should improve the approval process for mining projects for critical minerals, by reducing the bureaucracy involved in issuing permits.

“This is a topsy-turvy world, and at some point, we need to make these processes easier, not just help people get through them,” said Heather Exner-Pirot.

According to Jeff Kucharski, also an MLI fellow, building an entire value chain in Canada and North America will be an extremely challenging task. “So that means that we’re going to continue to rely on China for many years to come,” he said.

Cooperation with Japan

Canada and its allies in the Group of Seven are determined to cut ties with the supply chains of authoritarian states and set up an independent supply chain for processing important minerals that doesn’t involve China.

Japanese Prime Minister Fumio Kishida visited Canada on Jan. 12, 2023. He was the first Asian leader to visit the country since the announcement of Canada’s Indo-Pacific Strategy.

According to the statement from Trudeau’s office, both leaders see China as a “central challenge,” “discussed their concerns about China’s actions in the region,” and “agreed on the importance of a coordinated approach to security in the Indo-Pacific.”

Kishida also said that as the world faces an energy crisis and countries strive to ensure a stable supply of energy, Japan is looking to Canada to “play a major role, as a resource-rich country.”

Reuters reported that Japan will send a delegation this spring to meet with Canadian battery and mining companies and potential partners, while Canada plans to send a trade mission back to Japan in October. Economic and trade exchanges between the two sides are not only for business opportunities but also to strengthen the supply chain and energy security.