Canadian governments are enthusiastically looking to capitalize on growing demand for electric vehicles (EVs) and the minerals they require. While Canada’s mining and manufacturing sectors stand to benefit from these trends, not all stages of the mine-to-market value chain are being adequately addressed.
Governments have supported the extraction of key critical minerals, including lithium, cobalt, nickel, manganese, graphite and copper. Of late, Ottawa and provinces have also committed billions to lure international players to engage in downstream manufacturing.
What’s missing is the middle step. Canada has not similarly invested in mid-stream projects that process these critical minerals into a product that downstream manufacturers can use.
Right now, this crucial middle step takes place largely in geopolitically fraught locations. The cost and environmental impact of transporting minerals is a strike against the economic and environmental goals articulated by governments to justify their investments in upstream and downstream projects.
Processing takes place overseas
On the upstream side, nearly a decade ago Ontario committed $1 billion to further the development of the Ring of Fire in the province’s north. The region is home to commercial-scale mineral deposits, including those required in EV production.
Premier Ford’s government remains in negotiations with Ottawa and Indigenous communities to secure a complementary commitment to move mines and infrastructure — such as access roads and electrical grid tie-ins — forward.
On the downstream side, in July, the federal government and Ontario confirmed they will provide Stellantis-LGES with up to $15 billion to support the company’s EV battery plant, which is currently under construction in Windsor, Ontario. They also pledged another $13 billion to Volkswagen to build a new facility in St. Thomas, Ontario.
A month later, Ottawa and Quebec City announced a $644 million investment in a new $1.2 billion battery materials production site in Bécancour, Quebec, to be built by Ford Motor Co. and two South Korean firms.
In order to be suitable for use in automotive plants, ores and other raw materials require upgrading, smelting, refining or other value-added processing. Governments have not similarly committed billions at the processing stages of the value chain.
Currently, such activities overwhelmingly take place overseas: primarily in China and often using raw ores shipped from around the world via ocean tankers subject to lax emissions and environmental regulations on international waters.
According to the Energy Intelligence Group, an energy consultancy, “China’s reach is already wide in critical minerals processing and refining. It refines 68 per cent of nickel, 40 per cent of copper, 59 per cent of lithium and 73 per cent of cobalt — while holding 78 per cent of the world’s cell manufacturing capacity for EV batteries and 75 per cent of the world’s lithium-ion battery mega-factories.”
In Canada today, the top four minerals mined by value are gold, coal, iron ore and potash. If the mining sector is to transition its focus to EV opportunities, investments in both mining and processing of critical minerals will be required to realize the vision of a fully capable domestic value chain.
Canada does have refining and upgrading capacity for nickel (three facilities) and copper (two facilities). But more than 50 per cent of the country’s copper is produced from five mines in BC, far from the two Glencore processing sites located in Quebec, making Asia the top destination for mined production.
‘Part of the funding equation’
Toronto-based Electra Battery Materials (EBM) is currently developing a cobalt sulfate refinery in Northern Ontario — the first in North America. However, it has recently faced cost and scheduling challenges and has no announced timeline for completion. Management has identified securing capital as key to completing the project.
On the company’s Q2 earnings call in August, EBM CEO Trent Mell hinted that governments may be able to help bridge the funding gap.
“We’re anticipating funding decisions… there’s a number of government agencies, whether it be Canada, US, federal, provincial that we’re working with,” Mell said.
Mell clearly hopes that government investment in downstream opportunities will be extended to midstream providers such as EBM. “We’re hopeful, looking at the acceleration of downstream investments, that they’ll be an ‘in kind’ reflection of that in the coming months,” he said.
Going on to underscore the comment, he added, “There’s no reason Electra shouldn’t be a part of the equation as well.”
Minor investments
Canada’s lack of vertical integration in the critical mineral industry has been known to governments for years.
A 2021 report from Parliament’s Standing Committee on Natural Resources recommended that Ottawa “support the development of value-added processing in Canada in order to increase the number of markets for critical minerals in the country and build a domestic industry and domestic expertise.”
In July, the Department of Innovation, Science and Economic Development (ISED) provided eligibility criteria for a $1.5 billion fund to target development of 31 critical minerals including lithium, graphite and cobalt.
While some minor investments have been announced relating to the processing of these minerals — including a small lithium production project in Alberta — the scale pales in comparison to what has been directed downstream.
Asked about the discrepancy, a spokesperson for Natural Resources Canada commented that the department “is assessing additional proposals focused on late upstream (i.e., early-stage processing) and mid-stream activities.”
Of the 31 minerals identified in the department’s Critical Minerals Strategy, lithium, graphite, nickel, cobalt, copper and rare earth minerals are cited as having the highest potential for Canadian economic growth. These minerals feed into the “priority supply chains” of advanced manufacturing, clean technologies and zero-emission vehicles — areas where the government feels Canada possesses a competitive advantage.
It is evident Canada is keen to capitalize on a coming boom in critical mineral production and use. Will government policy address this missing middle? As we wait for an answer to this question, the balance of the year may be ‘critical.’
