The E3 Lithium booth at the PDAC mining convention in the Metro Toronto Convention Centre on March 5.Laura Proctor/The Globe and Mail
Ah, there’s nothing like being courted by the French.
France is increasingly eyeing Canada as a key partner for the supply of critical minerals amid heightened concern about China’s dominance in the production and processing of raw materials needed for the clean energy transition. It remains to be seen whether Western countries, including France, answer Canada’s call for co-ordinated tariffs against China and Indonesia for distorting the global nickel market.
Waging a trade war, however, will do little to further Canada’s ambitions to become a major supplier of critical minerals, especially now that lower prices for some metals, including nickel, are spooking investors.
Canada’s two-year-old critical minerals strategy is facing a serious test. Now more than ever, the mining sector needs proactive industrial policy and patient capital to win the long game. That brings us back to France, which has its own reasons for wanting Canada’s critical minerals revolution to remain on track.
Increased Franco-Canadian co-operation on critical minerals is certainly a win-win. Not only would it shore up Paris’s supply at a time of growing industrial demand in France, but it would also scratch Ottawa’s itch to diversify more of Canada’s trade away from the United States.
“Everybody is talking about electric vehicles,” said Benjamin Gallezot, interministerial delegate for strategic metals and minerals supply, during an interview at the Prospectors & Developers Association of Canada’s annual convention in Toronto. “All the French industries, they need these critical minerals.”
France, for instance, has already launched the first of four planned gigafactories that will make lithium-ion batteries for electric cars. President Emmanuel Macron aims to have two million electric vehicles made in France by 2030 and critical minerals are required to achieve that ambitious production goal.
Critical minerals are also used by French companies in other sectors such as renewable energy and aeronautics, Mr. Gallezot said. France is focused on more than just ensuring strategic stocks of minerals. Its interest also lies in extraction and refining, innovation and forging international partnerships.
“Canada is first the country with whom we signed an international partnership,” Mr. Gallezot said.
There are various reasons, he said. Canada, of course, is blessed with an abundance of natural resources. But it also has the right technology, a skilled work force, strong capital markets and the required industrial capacity to be a reliable partner. “Other countries in the world also have good geology. But Canada is an industrial country, an industrial powerhouse,” he said.
France is also spending heavily to achieve its goals. Paris is contributing €500-million to a €2-billion investment fund for critical mineral projects that will be run by French private equity firm InfraVia Capital. The fund will take equity stakes in projects, including those in Canada, that involve extraction, refining of metals and recycling.
InfraVia is also seeking out financial partners in Canada to invest in the fund. Pension funds, which make long-term investments, are ideally suited given the fund’s 35-year timeline and environmental, social and governance standards, Mr. Gallezot said.
“Part of the investment will be in Europe. Part of the investment will be here in Canada, so it’s kind of a geographical diversification,” he added.
France is also exploring other funding opportunities, including providing public guarantees for banks that finance critical mineral projects that will supply metals to French companies. Government backstops reduce the lending risk borne by banks. Canadian banks would also be eligible for that support, he said.
French Ambassador Michel Miraillet, meanwhile, is encouraging more Canadian students to study at French universities to spur academic collaboration. Part of the plan is to develop double diplomas that are recognized in both countries, he said.
“We need to push Canadian students to fly to France for their studies,” Mr. Miraillet said.
Canada, too, needs to show the critical minerals sector more love. Next month’s federal budget is the opportune time for Ottawa to build on its previous investments and to disclose to taxpayers how it plans to measure economic success.
Providing big subsidies to electric car manufacturers is not enough, especially if there is falling consumer demand.
The federal government must also fix obvious gaps in its critical minerals strategy. For instance, as critics point out, Ottawa still needs to address the issue of intellectual-property ownership and protection.
What’s more, the Trudeau government should heed the advice of John McKenzie, chief executive of stock market operator TMX Group Ltd. X-T, and expand the flow-through share program to encourage new investment and provide investors with clarity on climate-related disclosures.
We also need federal leadership on dismantling interprovincial trade barriers – a task that was first assigned to Deputy Prime Minister Chrystia Freeland back in 2019. We already know that internal trade barriers contribute to Canada’s prosperity problem by driving up compliance costs and by impeding labour mobility.
Other countries, including France, have complained that interprovincial trade barriers also create hurdles to foreign direct investment in a variety of sectors.
To its credit, the Trudeau government has acknowledged that Canada needs to get critical mineral projects built faster.
But the problem goes far beyond issuing permits in a timely manner. Ottawa must also create the conditions to encourage more private-sector investments, including from friendly foreign investors, to get the job done.