Situation critical when it comes to critical minerals in Canada

Update on the federal government’s initiatives to help the EV battery supply chain and critical minerals strategy and what Ontario is doing to help

The federal government of Canada released its 2023 fall economic statement (the FES) in November 2023, reiterating key pillars of the 2023 federal budget, namely its ambitious plans to support and grow Canada’s electric vehicle (EV) battery supply chain and critical minerals industry. The FES outlines the government’s achievements and commitments in securing major investments, cutting red tape, and improving market access for these strategic sectors, with a view to create and protect middle-class jobs, spur innovation, and enhance Canada’s competitiveness and leadership in the clean economy.

In 2022, the government committed to fund $3.8 billion over eight years to implement Canada’s first critical minerals strategy.

The government’s formal push for growth in this area officially began in April 2022 with its 2022 federal budget, wherein the government committed to fund $3.8 billion over eight years to implement Canada’s first critical minerals strategy. A key part of the strategy is to accelerate project development through faster regulatory reviews and permitting decisions. Developing a mine in Canada can take a very long time (in the range of 10-15 years on average), as compared to other jurisdictions with similar legal systems that benefit from shorter timeframes. For example, Australia has focused on streamlining and consolidating its approval process over the last few years, a much-needed focus here in Canada. As most Canadian projects are in the early stages of development, most of the minerals required for North America’s energy transition may ultimately need to come from other countries if Canada and its provinces are not aligned on improving competitiveness in bringing critical minerals to market.

In response to this issue, provincial government initiatives like Ontario’s proposed changes to its mining regulation, aimed at speeding up mine approvals, are starting to take place. These proposed changes would make it easier to obtain permits and loosen some existing restrictions without compromising environmental standards. More recently, the Ontario Ministry of Mines launched two public consultation initiatives seeking input on proposals to improve the mineral exploration assessment work regime and the exploration plans and permits regime. These initiatives aim to streamline regulatory processes and ensure competitiveness in the global mining sector, but additional measures to accelerate exploration and development of Canadian critical minerals projects are necessary and should be expected as demand continues to grow.

Demand for critical minerals has grown exponentially in recent years, significantly outpacing the rate of supply, which has become a pressing concern. By some estimates, global demand for critical minerals for clean energy technologies will double by 2030. The federal government’s most recent update to its zero-emission schedule set out that auto manufacturers and importers must meet annual zero-emission vehicle regulated sales targets. The targets begin with a requirement that at least 20% of all new cars, SUVs, crossovers, and light-duty pickup trucks offered for sale in Canada in 2026 emit zero emissions. The requirements increase annually towards 60% by 2030 and 100% by 2035.

In response to growing demand, governments, miners, and car manufacturers have started to form partnerships to secure reliable and sustainable critical mineral supply chains. Since 2020, the federal government has secured more than $34 billion in investments in the batteries and automotive supply chain, including landmark battery manufacturing facilities by Volkswagen and Stellantis-LGES in Ontario during the first and second quarters of 2023.

The federal government has placed a strong emphasis on developing domestic supply chains to reduce dependence on foreign sources and ensure a stable supply. However, the success of these supply chains will ultimately depend on the rate at which critical minerals can be extracted from the ground and supplied up the chain.

Canada has long been seen as a global mining leader, with an abundance of essential critical minerals. While Canada’s mining sector ranks second among Bloomberg NEF’s scoring of 10 leading critical mineral producers, it is essential that Canadian projects are able to move at a faster pace if we are to capitalize on what has been said to be a generational opportunity for Canada to become a leader and global supplier of choice in the clean energy transition. Put simply, to compete in this race, Canada must pick up the pace.

To that end, the federal government has announced that, by the end of 2023, it will outline a concrete plan to further improve the efficiency of the permitting and impact assessment processes for major projects, which will include clarifying and reducing timelines, mitigating inefficiencies, and improving engagement and partnerships. In Ontario, the ministry began a similar process intended to improve the local regime to boost Ontario’s competitiveness. We already have the strategy and the budget and are now eagerly awaiting details of the plan that may help propel Canada towards becoming a leader in the global race to bring critical minerals to market. Our ability to implement at this stage will be critical considering the targets and impending deadlines that have been set. Time is of the essence.

Michael Sabusco is a partner in Dentons Canada’s Corporate, Securities, and M&A groups, and the Ontario lead of the firm’s National Mining group. Greg McNab is a partner in Dentons Canada’s Corporate group and the co-lead of the firm’s National Mining group. Jaskaran Grewal is an associate in Dentons Canada’s Corporate, Securities, and M&A groups.

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