Canada needs to act with a sense of urgency on critical minerals

What will it take for Canada to reach its ambitious critical minerals goals? I was asked that question in Houston at a conference attended by lawyers from across the world on the future of energy.

My answer was that Canada’s preliminary steps towards a viable strategy will require much more significant involvement by the government, including financial support, streamlining approval processes, and removing regulatory barriers, if meaningful progress is to be made.

The following three areas that need prompt attention:

• Reducing overregulation.
• Far greater investment by all levels of government.
• Responding to geopolitical tensions and protectionism.

Overregulation

The issue of overregulation continues to be among the most difficult for Canadian mining companies to overcome. Companies must navigate the complex legal landscape of provincial and federal regulations to take a mining project from concept to production. In addition, the mining sector continues to grapple with the requirement to meaningfully consult Indigenous groups affected by proposed mining projects.

Currently, it can take on average up to 15-25 years to get a mine to its first year of production. This is far too long if Canada wants to fulfil its critical minerals potential.

Canadian mining firms continue to face a complex series of overlapping provincial and federal regulatory hurdles for mining projects. These complex regulatory regimes will continue to contribute to a drawn-out process for the mining industry in Canada. Substantial overhauls to permitting and approval processes will be necessary to clear these regulatory hurdles. A “one project, one assessment” policy should be the norm, not the exception.

More investment

Domestic critical minerals producers need greater investment and support from the Canadian government to be able to shoulder the financial risks of carrying a new mining project through to completion.

Since 2022, the government has pledged $1.5 billion over six years to be invested in the manufacturing, processing, and recycling of critical minerals; launched the Critical Mineral Exploration Tax Credit; and provided $25 million in funding to engage with Indigenous communities.

These developments are positive, but much more is needed. $1.5 billion would barely cover the cost of a single proposed highway project to Ontario’s Ring of Fire. And while Canada’s $28 billions of investments in EV battery production with auto manufacturers are encouraging developments, these projects will require a steady supply of critical minerals to succeed.

Another aspect of investment is access to capital. While increased scrutiny over certain foreign investments in the mining sector is crucial for Canadian national security, this has further restricted the already limited supply of investment capital available to critical minerals producers. The impacts of such measures must be balanced through both ongoing investment in Canadian producers and by encouraging investment from international firms not deemed to present security risks.

Geopolitics and protectionism

Supplies of many critical minerals are currently concentrated in the hands of countries Canada has deteriorating international relations with, particularly China and Russia. Many other governments are reevaluating their own mining regimes, leading to a wave of mineral lease renegotiations, ownership rights cancellations, and state-implemented nationalizations. These realities paint a concerning picture for Canada’s ability to continue to rely on international sources of critical minerals and underscore the need for domestic investment in exploration, extraction, and production.

However, Canada is well-positioned as a location for international mining investment relative to many other countries because of the stability and consistency of its legal frameworks and its strong emphasis on property rights and the rule of law. These factors largely eliminate the possibility — often considerable in many other mineral-rich jurisdictions — that a mining company’s ability to extract mineral resources might be granted and later rescinded because of shifting political landscapes and changing governments. That legal dependability removes a significant source of investment anxiety present in many other areas of the world, making Canada an attractive jurisdiction for international mining capital.

The Critical Minerals Strategy going forward

Unlike many of its international allies, Canada is fortunate to have reserves of many of these minerals beneath its soil. Our ability to ensure a stable supply of critical minerals is largely a matter of providing increased financial support to Canadian mining companies while streamlining approval processes and removing regulatory barriers.

Certain overhauls to current regulatory regimes are on the horizon. Recently, Canada’s federal government announced its “Critical Minerals Strategy,” which aims to increase the supply of responsibly sourced critical minerals. Beyond the strategy itself, Canada’s natural resources minister also recently announced his intention to work toward an accelerated mine permitting process that would see critical minerals projects go from concept to production within a decade.

In addition to the federal push to secure these critical mineral resources, these policy shifts are beginning to be adopted provincially. For example, Ontario has passed the Building More Mines Act, 2023, which places responsibility for project approval in the hands of a provincial minister while easing a wide range of mining regulations, including those surrounding post-closure site recovery and remediation.

Such policy shifts will be essential to the future viability of Canada’s critical minerals sector. It remains to be seen how far the federal and provincial governments will go to follow through on these promised regulatory overhauls.

Abbas Ali Khan is a partner at Bennett Jones.

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