Natural Resources Committee on Feb. 25th, 2014

[The Chair, Conservative, Leon Benoit]

Thank you.

Mr. Cashin.

[Peter Cashin]

Most of our conversations have been with non-Chinese entities, Europeans as well as North Americans. Although there is a recognition that pricing mechanisms for rare earths out of China are competitive, the non-Chinese entities are concerned about further disruptions of the supply chain and are willing to accept a premium to alternative sources for those rare earths.

[The Chair, Conservative, Leon Benoit]

Thank you all for your very concise answers.

Thank you, Mr. Trost.

We go now to the official opposition, Mr. Gravelle, for up to five minutes. Go ahead, please.

[Claude Gravelle, NDP, Nickel Belt, ON]

Thank you, Mr. Chair.

First of all, before I start my questioning, I'd like to thank my colleague, Ms. Moore, for bringing this rare earths study to the attention of the natural resources committee. Unfortunately this study is by far too short. Today we've heard from nine witnesses, and that doesn't give us a chance to really explore the rare earth issue.

I want to start my questioning with Mr. Shefsky.

Mr. Shefsky, if you had a vision for rare earths in Canada, and you had two or three wishes that you could ask of the government, what would they be?

[Al Shefsky]

First, it's important that Canada come out and absolutely declare its commitment to developing this industry in Canada and to providing the support necessary to do that, and to do so in a timeframe that will allow it to win the race. We have to be mindful of the fact that there are other countries that are investing heavily to support the development of critical rare earths in order to supply their own strategic needs.

Second, Canada ought to prioritize its financial and technical support to emerging developers of critical rare earth deposits who can supply the market within three to five years and whose development plans are aligned with Canada's interests; those developers who are able to produce critical rare earths in Canada that can be separated in Canada to support downstream value-added opportunities here in Canada.

Then, to make all of that possible, Canada ought to provide logistical support for a strategic alliance. We need to bring the separation here into Canada. There are companies out there that know how to do this. Rather than try to reinvent the wheel, we ought to be working together with people who have the experience, who can come to Canada to build and operate a separation plant so that we can leverage the resources we have here in Canada to build a very strong engine of economic growth and to have access to those downstream value-added opportunities. Separation is that critical link.

[Claude Gravelle, NDP, Nickel Belt, ON]

Thank you.

You mentioned in your statement that this has to happen as quickly as possible, before it's too late. How much time do we have to develop rare earths in Canada?

[Al Shefsky]

That's an excellent question. In my opinion, we are already far too late to be just thinking about these questions. Other foreign governments are already investing heavily to protect their own security of supply. Canada has really procrastinated on this issue. It needs to act immediately. There is no time to waste. This is a race. For Canada to compete, it has to get involved immediately.

[Claude Gravelle, NDP, Nickel Belt, ON]

Do you have any idea what this would mean to our GDP if we were to develop rare earths in Canada?

[Al Shefsky]

I believe a study has been completed on that. It was referred to in an earlier hearing. I don't have access to that study, but the economic impact would be very dramatic. I hope that REITA, the organization.... Perhaps Dr. King could elaborate a bit on that. They've done an economic study and that information hasn't been made public yet, but just intuitively, we're looking at enormous economic impacts. The economic activity, the employment opportunities are going to be enormous, and perhaps Dr. King could elaborate on that.

[Claude Gravelle, NDP, Nickel Belt, ON]

Dr. King—oh, sorry.

Mr. Shefsky, how many jobs does your company create in Canada, and if we had value-added jobs, how many jobs would that create in total in Canada?

[Al Shefsky]

For Pele Mountain Resources, the mine and milling operations to produce the mixed rare earth concentrate would be about 350 jobs on site in Elliot Lake. We've not completed the studies yet to show what the spinoff benefits from that are. Bringing a separation plant into Canada would add a lot of jobs. The important thing is by bringing a separation plant into Canada, you would create that link between the resources and the downstream value-added industries. You're talking about an enormous boost to economic activity and employment.

[The Chair, Conservative, Leon Benoit]

Thank you, Mr. Gravelle.

Mr. Regan, you have five minutes, please.

[Geoff Regan, Liberal, Halifax West, NS]

Mr. Shefsky you said the big challenge is how to compete unsupported in a market dominated by a national government, of course that being China. Given what we've heard from Mr. King about the kind of support and commitment the U.S. government has made to this and what he's told us about the investment by the U.S. government, isn't it clear that the government here doesn't realize this race has begun?

[Al Shefsky]

Unfortunately, I believe they may realize that the race has begun but they haven't taken action yet to support the development of this industry in Canada. There is significant investment by.... China of course has really dominated this industry. They saw decades ago that this was going to be important and they moved to make sure they would be the dominant player in the industry. Other countries have been faster out of the blocks in realizing they need to invest to support their own strategic interests.

We see the United States, Korea, the European Union, and Japan combine their investing, literally hundreds of millions of dollars. Just in the last couple of days, France has announced a major initiative. The State of Alaska has announced the issuance of a bond, or they're planning or considering issuing a new bond of $145 million. There are major investments by governments around the world to secure their strategic interests with regard to the rare earth supplies. Here in Canada, so far, that investment has not been forthcoming.

[Geoff Regan, Liberal, Halifax West, NS]

We heard at a previous meeting of this committee that it would be very helpful if the Prime Minister followed the lead of President Obama and declared the sector to be a national priority for Canada. What are your thoughts?

[Peter Cashin]

To start, I think Canada has a significant advantage in that it does host a vast majority of the critical rare earth element oxides, notably the heavy rare earth. Obviously from the U.S. government's standpoint, they're looking at the development of a hub or a North American silo rare earth supply chain. Obviously Canada has something to offer the United States operators in that the U.S. does have rare earth resources, but they're generally devoid of heavy rare earths, whereas the advanced projects in Canada tend to be quite nicely endowed in the heavy earth.

[Geoff Regan, Liberal, Halifax West, NS]

Mr. Gauthier, in your view, what role must the Government of Canada and exploration companies play in consultations with first nations?

[André Gauthier]

In our view, the important thing is that the federal government has implemented a new environmental process. Previously, companies in Quebec were only subjected to the regulations of the Quebec ministry of the environment. Now, they must work with the Canadian Environmental Assessment Agency. We think it is a very good idea to have different points of view. We know that the agency is focusing on first nations. That is fairly significant. We think the new environmental process set up by the federal government is rather significant, since it makes it possible to have a better picture of Canada's environment.

[The Chair, Conservative, Leon Benoit]

Thank you, Mr. Regan.

I just want to say that this has been a fascinating overview of this industry, which holds so much potential for Canada.

I do thank all of the witnesses who have appeared before our committee over the last few meetings. In particular, I want to thank all of the witnesses who are here today: from Matamec Explorations Inc., André Gauthier, president and chief executive officer, and Michael Roche, marketing director; from Quest Rare Minerals Ltd., Peter Cashin, president and chief executive officer; from Pele Mountain Resources Inc., Al Shefsky, president; and from Critical Materials Institute, Alexander King, director.

Thank you very much to all of you for being here today for too short a time. Certainly, we have been given a good overview of the industry in the past few meetings.

The meeting is adjourned.