How to Advance Canada’s Critical Minerals Industry to Win in the Energy Transition

As the global demand for renewable energy sources and electric vehicles continues to grow, so does the need for responsibly-sourced critical minerals. These minerals, such as lithium, cobalt, nickel, and rare earth elements, are essential components in batteries, wind turbines, and solar panels.

Canada, a country rich in natural resources, is well-positioned to take advantage of this global rally for critical minerals. However, the development of Canada’s mining and processing capabilities is not keeping pace with the growth of downstream industries. To truly capitalize on this opportunity, Canada must invest in and develop its critical mineral processing sector, ensuring it can meet the world’s growing demand for responsibly produced critical minerals.

Canada’s Abundance of Critical Minerals

Canada is home to some of the world’s largest reserves of critical minerals, including the third-largest reserves of cobalt, the fourth-largest reserves of nickel, and significant lithium and rare earth element deposits. These resources are essential for the production of batteries, electric vehicles, and renewable energy technologies.

For example, lithium-ion batteries, which power electric vehicles and store energy from solar panels and wind turbines, require lithium, cobalt, and nickel. Rare earth elements, on the other hand, are essential for the production of powerful magnets used in wind turbines and electric vehicle motors.

Recognizing the need to develop a strong critical minerals industry, the Canadian government announced the Critical Minerals Strategy in 2022. The strategy is backed by $3.8 billion in federal funding and aims to position Canada as a global leader in the sustainable production and processing of critical minerals, which are essential for the transition to a low-carbon economy. It outlines several key areas of focus, including enhancing exploration and production, advancing processing and refining capabilities, and promoting investment in critical mineral projects.

“Despite these investments and the country’s abundant resources, Canada’s critical mineral processing capabilities are lagging.”

As part of the strategy, the Canadian government has made significant financial commitments to support the development of critical minerals projects. One such commitment is the establishment of a $1.5 billion infrastructure fund in Canada’s 2023 budget for energy and transportation projects to develop critical mineral deposits.

Despite these investments and the country’s abundant resources, Canada’s critical mineral processing capabilities are lagging. Currently, China leads the world in the processing of critical minerals, controlling over 80% of the global supply of processed rare earth elements, and significant shares of lithium, cobalt, and nickel processing. To take full advantage of its resource potential, Canada must develop its processing capabilities to match the growth of downstream industries, such as battery and cathode production.

The Need for Responsible Sourcing of Critical Minerals

As the world transitions towards renewable energy sources and electric vehicles, the demand for critical minerals is expected to soar. According to the International Energy Agency, the demand for lithium could increase by 40 times, cobalt by 20 times, and nickel by 20 times by 2040. This rising demand has raised concerns about the environmental and social impacts of critical mineral mining and processing.

Many critical mineral deposits are located in countries with weak environmental regulations and poor labour practices, leading to significant environmental degradation and human rights abuses. For example, more than 60% of the world’s cobalt is sourced from the Democratic Republic of Congo, where child labour and hazardous working conditions are prevalent. Additionally, the extraction of lithium in South America’s “lithium triangle” has led to water scarcity and pollution issues. 

Indonesia, for example, has experienced devastating environmental effects due to its rapidly expanding mining industry. A recent article by The Wall Street Journal reported that Indonesia produced around half of all nickel used in EV batteries in 2020, up from between 0% and 5% in 2017. By 2027, this share is expected to exceed 80%.

The mining practices in Indonesia have come under scrutiny for their environmental impact, including deforestation, habitat destruction, and water pollution. In contrast, Canada offers a more sustainable and responsible approach to mining and processing critical minerals.

The sulphide nickel found in Canada is easier to process than the laterite nickel found in Indonesia, resulting in lower emissions during mining and production. Additionally, Canada has stringent environmental standards that must be adhered to throughout the mining process. Provinces like British Columbia and Quebec are powered by clean hydroelectric power, further reducing the carbon footprint associated with mining and processing operations.

“Canada, with its strong regulatory framework and commitment to sustainability, is well-positioned to meet the demand for responsibly sourced critical minerals.”

As a result, there is a growing demand for responsibly sourced critical minerals, which adhere to strict environmental and social standards. Canada, with its strong regulatory framework and commitment to sustainability, is well-positioned to meet the demand for responsibly sourced critical minerals. By investing in its critical mineral mining and processing capabilities, Canada can not only create jobs and economic growth but also contribute to the global transition towards clean energy by providing responsibly sourced minerals.

How to Develop Canada’s Critical Minerals Industry the Right Way

To take full advantage of the global demand for responsibly produced critical minerals, Canada must focus on three key areas:

1. Strengthening the supply chain: Canada should invest in the development of processing facilities and other midstream infrastructure to support the growth of the upstream mining sector. This will help to create a complete, sustainable, and competitive critical minerals value chain within the country.
2. Encouraging innovation: Research and development in mining and processing technologies can help to improve the efficiency and environmental performance of the industry. Canada should support innovation in these areas, both through direct investment and by fostering collaboration between industry, academia, and government.
3. Promoting responsible sourcing: Canada must ensure that its critical minerals are mined and processed in accordance with the highest environmental and social standards. This includes working with international partners to develop and implement certification schemes for responsible mining practices, as well as engaging with Indigenous communities to ensure their rights and interests are respected throughout the mining process.

Challenges and Opportunities for Canada’s Critical Mineral Processing Sector

Developing Canada’s critical mineral processing capabilities will require significant investment in infrastructure, technology, and human capital. One of the major challenges facing the sector is the lack of processing facilities within the country. Currently, most of Canada’s raw mineral resources are exported for processing, primarily to China. To become a global leader in critical mineral processing, Canada must invest in the construction of processing facilities, such as refineries and smelters, within its borders.

“Canada must invest in education and training programs to develop a workforce capable of supporting a growing critical mineral processing industry.”

Another challenge is the need for skilled labour in the mining and processing sectors. As the demand for critical minerals grows, so too will the need for skilled workers to extract and process these resources. To address this issue, Canada must invest in education and training programs to develop a workforce capable of supporting a growing critical mineral processing industry.

Despite these challenges, there are several opportunities for Canada to capitalize on its critical mineral potential. For example, the country’s abundant hydropower resources can provide low-cost, low-emission electricity for mineral processing operations, improving the sustainability of the sector. Additionally, Canada’s strong research and development capabilities can support the development of new technologies and processes to improve the efficiency and environmental performance of critical mineral extraction and processing.

Canada has the potential to become a global leader in the responsible production of critical minerals, but it must act quickly to develop its mining and processing capabilities. By investing in the necessary infrastructure, supporting innovation, and promoting responsible sourcing, Canada can seize this opportunity and contribute to a more sustainable and secure global supply chain for critical minerals. With the right approach, the country can play a significant role in the global energy transition while minimizing the environmental impact of the critical minerals industry.