Ottawa has invested over a billion dollars in the Canadian critical minerals industry, but almost all the money has gone to large companies, including some of the world’s richest miners.
The heads of several battery metals companies are calling on Ottawa to correct what they characterize as slapdash efforts to support and fund the Canadian critical minerals industry, as the United States government considers investing in Ontario’s Ring of Fire critical minerals region.
The U.S. Department of Defense said last week that it is willing to help fund feasibility studies for mining companies across North America with promising projects. Its aim is to help alleviate shortages of some critical minerals and claw back dominance in the industry that has largely been lost to China.
The initiative is being done under the auspices of the Defense Production Act, which U.S. President Joe Biden invoked earlier this year to spur much-needed investment in critical minerals that are in short supply, such as lithium, cobalt, graphite and battery-grade nickel. All of those are essential components in electric car batteries.
Feasibility studies, which help companies determine whether mining projects are likely to be economically viable, can cost upwards of $20-million to conduct. For early-stage miners, raising cash to complete them can be a major challenge.
Roughly 20 mining companies tied to Canadian mining projects have already held talks with the U.S. government in recent weeks about funding for critical minerals projects. Among them is Ring of Fire Metals, a Northern Ontario junior mining development company owned by the Australia-based private equity firm Wyloo Metals.
“It was a pleasant surprise,” Luca Giacovazzi, Wyloo’s chief executive, said in an interview. “It wasn’t something we were banking on at all.”
Ring of Fire Metals, which was known as Noront Resources Ltd. before it was acquired by Wyloo earlier this year, is hoping its Eagle’s Nest project in the remote St. James Bay Lowlands will produce battery-grade nickel for electric cars by the end of the decade. The company is also studying the viability of building a battery processing plant in Ontario that would refine nickel for the automotive industry.
Keean Nembhard, press secretary with Jonathan Wilkinson, the federal minister of natural resources, wrote in an e-mail to The Globe and Mail, that decisions by the federal government around developing the Ring of Fire will be based on “economic, social, and environmental data, and significant engagement with the Government of Ontario and local First Nations.”
This year, Ottawa has invested over a billion dollars in the Canadian critical minerals industry, but almost all the money has gone to large companies, including some of the world’s richest miners. For example, last month Ottawa said it was willing to spend up to $222-million to help modernize a metals plant in Quebec owned by Rio Tinto RIO-N, which should dramatically increase the giant Anglo-Australian miner’s output of scandium.
By comparison, small Canadian mining companies have seen very few recent funding initiatives from Ottawa and provincial governments. What they have seen instead is their access to a major investor, China, essentially cut off.
Last month, the federal government said it would not allow any further Chinese investment in the Canadian critical minerals sector, except on exceptional grounds, because of national security concerns. On top of that, Ottawa forced Chinese state-owned enterprises to immediately sell their shares of three small Canadian battery minerals companies.
The federal government did not mandate any divestment from large Canadian critical minerals companies with Chinese state-owned shareholders. Those include Teck Resources Ltd. TECK-A-T, First Quantum Minerals Ltd. FM-T and Ivanhoe Mines Ltd. IVN-T, all of which have huge mines in operation.
Johnathan More, the CEO of Power Metals Corp. PWM-X, one of the small mining companies Ottawa recently ordered to rid themselves of Chinese shareholders, said the federal government’s actions have been scattershot, unfair and inconsistent.
“I’m Canadian. I’m all about protecting on a global scale critical metals for Canadians. If something has to be done about it, it has to be done in the right way,” he said. “Picking on us three companies – for me, this is nothing more than political posturing and gamesmanship.”
Don Bubar, CEO of Avalon Advanced Materials AVL-T, a small development firm that also recently met with the U.S. Department of Defense, in the hope of obtaining up to $4-million in funding for its Ontario lithium project, is also appealing to Canadian politicians to do better.
Senseless red tape is slowing the industry down across many provinces and territories, Mr. Bubar said. He cited the difficulties involved in sending a bulk mining sample of a critical mineral for processing abroad under Canadian regulations that date to the First World War.
Critical minerals companies should be regulated as advanced manufacturing companies, rather than as miners, Mr. Bubar said. The extraction and refining of such minerals is a chemical procedure, giving them little in common with old-school bulk minerals that are dug out of the earth by the ton and hauled away in giant dump trucks, he added.
“We’ve been working on trying to inform government about what they need to do in terms of regulatory change,” Mr. Bubar said. “The reality is these critical minerals developments are totally different than the traditional mining industry.”
Trevor Walker, CEO of Frontier Lithium FL-X, which has a lithium project in Ontario, said the company has been approached by the U.S. government, and that he hopes to have a meeting with officials there in the next few weeks. While he said he would be delighted to accept money from the U.S. to move a feasibility study along, he still believes Ottawa needs to do more.
“The federal government is playing catch-up in comparison to Washington,” he said.
He said he is hopeful that Canada might also eventually help fund feasibility studies for mining companies. But he’d also like Ottawa to consider rolling out flow-through shares more extensively across the industry.
This type of security, which is currently only issued by select mining companies, can drastically lower the cost of capital. Investors who buy flow-through shares usually pay a premium to the market price of a company’s shares in return for being able to deduct the full amount against their income.
Mr. Nembhard said in the e-mail to the Globe that the federal government continues to look into how to advance critical minerals projects in Canada, and further promote responsible and sustainable supply chains. He also cited a new exploration tax credit that was introduced in the Federal budget this year that is available to small mining companies in Canada.
Niall McGee