Digging deep into critical minerals

Lisa Raitt: Thank you for tuning in to The Raitt Stuff. I’m your host Lisa Raitt, former cabinet minister in Stephen Harper’s government from 2008 to 2015. I’m here now at CIBC Capital Markets and in this podcast, I’m going to share insights on current hot topics in the areas of public policy, politics and business with some guests along the way. Welcome back to the Raitt Stuff today I have with me an expert in critical minerals. If you read the newspaper or you watch what’s happening between the United States and Canada, or if you have any interest in supply chains, you will know that the concept and the term critical minerals is one that is widely distributed and widely talked about. So I thought I could today bring some light and information to this topic by having an expert with me from the Mining Association of Canada. I have with me today Brendan Marshall, who is the Vice President, Economic and Northern Affairs at the Mining Association of Canada. He’s got the economic affairs portfolio and the policy lead on critical minerals, climate change, energy tax and trade. Pretty much everything that’s going to be important to us as we move to a net zero Canada and net zero world. Brendan, thank you for coming on with me today. I really appreciate it, you wrote. I thought a very interesting and I would say a pretty complete article called Building Supply Chain Resilience of Critical Minerals that was in the Canadian Global Affairs Institute. It’s on the website actually for anybody who wants to take a look at it. But it caught my attention because for the first time ever, I ended up having a really good insight into what we’re actually talking about. I mean, I know the critical minerals are important. I know that Canada has a lot of them. I know the United States wants them, but that’s kind of all I know about it. Even though I’m a former minister of natural resources, I haven’t taken the time to dig deep. But your paper does dig deep, and it allowed me to have a better perspective. So I guess where we should start is what is the status of critical minerals and rare earth elements in the world where they come from? Where is the supply coming from currently?

Brendan Marshall: Thanks, Lisa, and thanks for having me on. I appreciate the opportunity to chat with you today. So Critical Minerals is kind of a vague category. And what I mean by that is, you know, different countries have different lists of critical minerals because different countries economies are unique to those respective jurisdictions. The key thing to take away is that a critical mineral for a particular country is an item or element that has been identified as essential for the proper functioning of that economy. There’s a couple of buckets of minerals and metals that are generally widely held across different countries critical minerals lists, and those include battery minerals as well as rare earth elements. And the reason why those are held in common, generally speaking, is because there is a massive forecast demand for battery materials as the transportation sector is electrified. And on the rare earth elements side, there is a significant concentration of production in China and the advanced technologies that cannot be made without rare Earth elements are many. And touch on a number of different priorities to governments, whether those are telecommunications, public health delivery or even in the transportation space such as we just spoke about. So that’s the main reason why those two sets of minerals are at greatest interest. Yeah.

Lisa Raitt: And as you say in the paper, China accounts for 80 percent of the US’s rare Earth elements and ninety eight percent of the EU’s which really does explain why the United States is making such a big drive to work with Canada on where the elements and even coming up with a memorandum of understanding between the two countries to work together on the issue.

Brendan Marshall: Yeah, absolutely, absolutely. I think the background of escalating geopolitical tensions, particularly between China and the United States, has brought into sharp relief this supply chain vulnerability. We’re seeing this play out already in certain contexts, for example, with respect to superconductors and chips in the automotive space, that supply chain is very vulnerable. Those same companies that are experiencing that disruption right now are in the process of manufacturing a supply chain for batteries. I think it’s clear that they want to do that in a way that insulates against the current challenges that they’re facing with respect to chips and conductors and governments of the same view want to insulate their supply chains for the same kind of disruptions that are happening and could happen in a number of critical sectors.

Lisa Raitt: Yeah, you mentioned that there’s going to be a great future demand, but the World Bank and the International Energy Agency actually came out and they given a bit of an idea of how much future demand. We’re talking a significant amount of demand coming in the future for these critical minerals, metals and rare earth elements.

Brendan Marshall: It’s a little bit mind boggling when you think about it, so one case study that I find helpful to manage expectations for folks that are just perhaps listening in for the first time would be Nicole. So Nicole in Canada is a major commodity. We’re the fifth largest nickel producer in the world, and the World Bank forecasts a doubling of global nickel demand by 2050. So if we look at what that means for Canada in the next twenty nine years, we’ll need to see seven new nickel mines come online to new nickel smelters and a nickel refinery just to maintain current global market share. That’s just one material, and we’re not talking about expanding market share. We’re talking about just maintaining it.

Lisa Raitt: Yeah. Governments are taking a hard look at their supply chains, as as I mentioned already, but you make a good case of why Canada really is an attractive place to obtain critical minerals from. And you talk about proximity and you talk about our higher environmental standards. So what’s the pitch on why Canada is the right place to come to?

Brendan Marshall: Sure. So in my view, there’s two policy priorities that have taken shape around critical minerals. The first is security of supply. And the second is broader ESG considerations, with a premium being placed on on low carbon intensity. And so the first piece on the security of supply, as you mentioned, you know, China has the largest production of rare earth elements. They also have the largest production of refined battery electric materials. Sourcing those inputs from Canada over a land border from a trusted neighbour creates a greater level of confidence in that supply that’s currently absent vis a vis China. And of course, because Canada has such an abundant clean electrical grid, the production of those materials are amongst the lowest carbon intensity anywhere in the world. So the security supply peice and the sustainability piece with broader ESG performance, which is also recognised, makes Canada a great potential source to diversify away from current supply reliance on China.

Lisa Raitt: Yeah, I’m going to dig a little deeper on one aspect that you just brought up now, and that’s batteries. And the reason being is that if you live in Ontario, you’ll know that there’s a lot of discussion right now about how Ontario is going to make sure that in terms of auto manufacturing, they’re still part of the supply chain, given the fact that the Biden administration has indicated they’re going to have a pretty significant subsidy for buying American cars, American made cars, labour made cars in the United States. But my question is what has to happen to the nickel as it comes out of the ground for it to be in a form that can be utilised in the end product of putting it into a vehicle? Just give us an idea of what the steps and the process are so we can understand what is happening in China versus what is happening in Canada.

Brendan Marshall: Sure. So in Canada, we produce nickel from mines, so we extract it. We then smelt it and then we refine it. The next stage would be to create a high purity nickel called nickel sulphate, and that material is a key component to go into creating the chemistries that make up the basically internal components of a battery. So we’re we’re one stage away from the supply chain on the nickel side to be able to create that product. And we have a number of other materials that are, you know, reasonably advanced projects for the other components and other battery grade materials that will go into a manufactured product. The mid-tier is really where Canada’s sweet spot is. I think there’s increasing recognition that the raw material space is the advantage that Canada has to bring to the table vis a vis the United States. And I think it’s also something that people are recognising presents a huge value add opportunity for the country as well. Building out things like cathode and anode manufacturing present a huge opportunity for meaningful long term, low carbon employment opportunities for the country, and that’s not something to to baulk at. So even despite the tensions between the Canadian government and the American government over buy American provisions and Biden tax credits that shouldn’t be interpreted broadly as there’s no opportunity for Canada to benefit or participate in the supply chain. My personal view is that building out a reliable, low carbon battery material segment of the supply chain provides a lot of confidence for long term investments in cell assembly cell manufacturing, which I think is what the original target for the government has been. For me, it’s not an either or this is a both end opportunity and tailoring policies in a way that recognise that I think will serve Canada better in the long run.

Lisa Raitt: Ok, so if if we know the demand is there, we know that Canada has a great product to sell, a great story to sell. How are we hurting ourselves internally to not allow us to be fully developing this opportunity? What’s happening on the Canadian policy side?

Brendan Marshall: Sure. So I think the Canadian government has done quite a bit to put policies and put a frame in place. I think what’s lacking at this point is we haven’t sufficiently identified what success looks like, and we haven’t been as strategic or refined as we could be about deploying those tools in as targeted a way as is necessary. I think in light of the recent Three Amigos summit, there is a greater recognition of the need to do that, and I anticipate that some of those measures and some of those refinements will be forthcoming and perhaps as early as the fall economic statement or even budget 2022. So it’s not a horse’s left the stall moment, but we are, you know, we do need to put the refine policy in place to secure this opportunity before too much time runs out.

Lisa Raitt: Yeah. And your paper reminded me that the last mine that was built in Canada was Boise Bay, and it took 13 years to get up into production. We don’t have 13 years to wait for for these kinds of mines to come online.

Brendan Marshall: I don’t think that’s right. Well, it was the last nickel mine to to come online, and it is indicative of how long it takes from discovery to production. And that’s a, you know, that’s another really important consideration, right? Just because you can buy it doesn’t mean that you can build it. And regulatory confidence is a really important part of creating that business investment confidence. And so ensuring that investors understand what their obligations are under federal as well as provincial permitting to bring major projects online is going to be a real determinant for Canada’s success in the long run.

Lisa Raitt: Amazing. Well, the good news is, I think Brendan is that I do see cooperation between the provincial governments and the federal governments and across the border with the U.S. on this issue. I think they are seised with it and they are trying to do their best to get out in front of what can be an amazing opportunity for Canada.

Brendan Marshall: Yeah, absolutely. At the end of the day, I don’t think that the Western alliance can fragment and win on this. I think this is a call for a deepening of engagement, a deepening of partnership, and that includes economic partnership right at the end of the day. We need a broader North American approach on electric vehicles. Canada has strengths to bring to the table, the United States as well. Working in partnership is the greatest opportunity we all have to achieve those respective goals.

Lisa Raitt: Well, thank you so much, Brendan. I really appreciate it. That was Brendan Marshall, who is with the Mining Association of Canada. Thanks so much for tuning in. Now, if you have any questions or comments or even requests on topics to discuss. Drop me a line at Lisa [email protected]. Your interactions actually will make this better. I’m your host, Lisa Raitt, and this has been the Rait stuff I’ll talk to you next week.

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