Financial Post writers went back to their notebooks to set the scene for budget 2023. Mining reporter Naimul Karim looks at the disconnect between the United States and Canada when it comes to mining and producing critical miner
When Justin Trudeau’s government announced plans to invest $3.8 billion to develop its critical minerals sector in the last budget, many in Canada’s mining sector believed the industry was finally going to get the attention it deserves amidst rising global demand for the minerals used to power electric vehicles.
Some had called the allocation by the federal government a “game changer,” while others described it as an “exceptionally positive” move for the industry.
A year on, however, the sentiment seems to have changed. Ottawa’s decision to clamp down on Chinese companies investing in Canadian miners due to security concerns and a perceived lack of support for companies running advanced mining projects have offset some of the enthusiasm about the global mining boom
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For instance, a number of industry leaders, including Barrick Gold Corp.’s Mark Bristow and Ivanhoe Mines Ltd.’s Robert Friedland, said earlier this year that Canada’s crackdown on Chinese investment would make it harder for miners to produce the metals needed to transition away from fossil fuels. Toronto-based TMX Group Inc., which runs the Toronto Stock Exchange, said the move appeared to create some uncertainty among miners listed on the exchange.
The government, however, said that the decision was “well-received” by Canada’s allies and that there were no such concerns regarding investments in Canada. The evidence of that lies in the deals that Ottawa inked with leading auto and battery companies such as Umicore SA, Stellantis NV, General Motors Co. and Volkswagen Group in the past year.
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Despite a flurry of such agreements, the head of Canada’s top mining association, Pierre Gratton, said earlier this month that Ottawa’s strategy to build an electric vehicle industry would fail if it doesn’t use the upcoming budget to create tax credits and other incentives to construct the mines needed to produce critical minerals that power EVs, such as nickel and lithium.
Gratton, chief executive of the Mining Association of Canada, said car companies making deals with Canada “are mistaken” if they think the country is on track to supply them with the minerals they need for their EVs, considering that a number of “shovel-ready” mining projects are struggling to raise capital to construct mines and produce the minerals.
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The mining sector was also discussed during U.S. President Joe Biden’s visit to Canada last week.
Throughout the visit, both Trudeau and Biden stressed how the partnership between the two nations have mutually benefited the countries. Towards the end of the tour, however, while discussing critical minerals, there seemed to be a difference in opinion.
When asked at a press conference whether his “Buy American” strategy would lead to some trade tensions between the two countries, Biden said that an increase in investment in the U.S. would only benefit Canadian businesses.
However, he also said: “Well, you guys — we don’t have the minerals to mine. You can mine them. You don’t want to produce — I mean, you know, turn them into product. We do.”
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Canada, though, plans to do exactly that. It wants to mine its own minerals, process them, supply battery makers and carmakers and produce the end product. It will, however, have to compete with the Biden’s Inflation Reduction Act, which encourages businesses to invest in the U.S. through tax credits and other investments.
As the competition rises, many in the mining industry will hope that they are among those targets.