Industry Committee on April 29th, 2021

[The Chair, Liberal, Sherry Romanado]

Thank you very much.

Mr. Nighbor, if you could send that information to the clerk, we'll make sure that all of the members of the committee receive it and in both official languages.

Thank you.

We will now start our second round of questions.

Our first five-minute round goes to Mr. Généreux.

[Bernard Généreux, Conservative, Montmagny—L'Islet—Kamouraska—Rivière-du-Loup, QC]

Thank you, Madam Chair.

My thanks to all the witnesses for being here with us.

Mr. La Salle, I have at least 300 questions for you. I will try to keep it brief, and I'd like to have brief answers as well. Are critical minerals and rare earths the same thing?

[Benoit La Salle]

Critical minerals include rare earths and many other things. I refer you to a Natural Resources Canada document that lists critical minerals.

[Bernard Généreux, Conservative, Montmagny—L'Islet—Kamouraska—Rivière-du-Loup, QC]

Am I wrong when I say that Canada is divided into mineral claims for all the territories that could be developed one day, whether it is oil, gas, mines, and so on? Does it still work that way?

[Benoit La Salle]

That is still the way it works.

[Bernard Généreux, Conservative, Montmagny—L'Islet—Kamouraska—Rivière-du-Loup, QC]

If I understand correctly, you have a potential option on a lithium mine in Northern Quebec. You are considering acquiring it.

Is there anything that puts you at a disadvantage to foreign buyers, as we speak?

[Benoit La Salle]

No, absolutely not. It saddens me to know that we're considering offers from Australian or American buyers, when we have a Canadian group with international expertise and all the necessary financial means. It saddens me. For the same price and with, I believe, a higher level of expertise, we're even thinking that it might be worthwhile. The Americans say that they could perhaps sell it to Tesla, but that's just smoke and mirrors. Tesla doesn't make battery components, it assembles batteries.

[Bernard Généreux, Conservative, Montmagny—L'Islet—Kamouraska—Rivière-du-Loup, QC]

Is it the same for Lion Electric, a company in which the governments of Canada and Quebec have just invested some $150 million each?

It doesn't make the batteries, but it does assemble them. Is that correct?

[Benoit La Salle]

That's right. The company assembles batteries using parts that come in from China, and then installs them in the trucks.

[Bernard Généreux, Conservative, Montmagny—L'Islet—Kamouraska—Rivière-du-Loup, QC]

Why aren't there more battery manufacturers or assemblers in Canada?

[Benoit La Salle]

It's simply because no attention has been paid to the industry in Canada yet, whereas every country in the world is focused on it.

Did you know that Volkswagen is going to have to buy 25% of the world's batteries by 2030? Canada won't even be in the running. We definitely need to get organized.

[Bernard Généreux, Conservative, Montmagny—L'Islet—Kamouraska—Rivière-du-Loup, QC]

I'm a businessman; I understand the difference between printing a document and doing what it says in the document, but I'm unfamiliar with this field. What is the difference between manufacturing and assembling?

What technology does it require? Do we have the technology in Canada?

[Benoit La Salle]

Right now, we need capital and entrepreneurs. Then we have to open a mine. As I always say, the real resource is the natural resource. When you have the ore, you can develop it at home.

You can't open an anode manufacturing plant if you don't have graphite. You have to mine the graphite first and then open an anode manufacturing plant. Then you have to open a cathode manufacturing plant, because we have nickel and cobalt.

You may not want to make batteries if there are no automobile manufacturers nearby. That's because batteries do not travel well, and you can't manufacture batteries far from the auto assembly plant. For example, you can't put a large quantity of batteries in a container, because they will form one huge battery that is likely to catch fire. So batteries don't travel well, and you need the assembly plant to be located very close to the auto assembly plant.

[Bernard Généreux, Conservative, Montmagny—L'Islet—Kamouraska—Rivière-du-Loup, QC]

We have auto assembly plants in Canada, especially in Ontario. I'm also thinking of Lion Electric in Quebec, which makes buses.

So what are the development opportunities with respect to the critical minerals and rare earths we have in Canada? Do we really have any power in that regard? You say they have none in the South, but we have them in the North. How much does Canada have; what items do we have in our inventory of critical minerals, so to speak?

[Benoit La Salle]

We have them, and that is important in itself. We have a lot of them. Quebec has a lot of lithium and graphite. Ontario and Newfoundland have nickel. We have critical minerals.

The demand is going to explode. Over the next 10 years, the demand for lithium will increase eleven-fold, while the demand for graphite will increase seven-fold. We have to be in the race. Our resources will be developed, I swear to you and I guarantee it. Will our resources be developed by us alone, or will they also be developed by the Chinese, the Australians or the Brazilians? We don't know, but one thing is certain: our resources are going to come out of the ground, and we're going to run out of them.

[Bernard Généreux, Conservative, Montmagny—L'Islet—Kamouraska—Rivière-du-Loup, QC]

Who owns the lithium mine now? Does it belong to Quebec?

[Benoit La Salle]

No, it belongs to Chinese owners who have decided to leave because operating the mine no longer meets their strategic and political objectives. They came in, they invested, and they decided to shut it down two years ago. All the employees were put out of work. They have been looking to resell the plant for almost two years, and the third round of bidding is under way.

I'm repeating myself, but I don't understand why the Canadian group isn't the preferred solution.

[Bernard Généreux, Conservative, Montmagny—L'Islet—Kamouraska—Rivière-du-Loup, QC]

Madam Chair, I haven't finished asking my 300 questions.

[The Chair, Liberal, Sherry Romanado]

You may have time to ask them in the next round, Mr. Généreux.

Our next round of questions goes to MP Jowhari for five minutes.

[Majid Jowhari, Liberal, Richmond Hill, ON]

Thank you, Madam Chair.

Thank you to our witnesses for their very informative testimonies today.

I'd like to start with Madam Bak.

My understanding is that your organization published a report back in June 2020 titled “Building Back Better with a Bold Green Recovery”. I looked at the report. Under the heading “Forward“, it highlighted that Canada already has a competitive advantage in four areas: low-carbon natural resource commodities, zero-emissions vehicles, smart buildings, and sustainably produced food.”

You also suggested a series of investments that the federal government can make to make sure that Canada is well set in this path of resilience.

Can you highlight some of the federal government ones and specifically talk about how these funds will be sourced?

[Céline Bak]

Thank you very much for the question.

The build back better plan tries to do two things. It tries to solve for carbon, so it actually puts Canada on a path that is consistent with the goal of reducing emissions by 45% by 2030, but it also tries to stimulate the economy. The plan, in its summary, includes recommendations along 11 axes.

To build on the discussion we just had a moment ago about rare earth, I think it would be helpful perhaps to speak about natural resources and EV innovation. The proposal that we make in the build back better plan is a $40-billion investment which would create a million jobs and a gross value added to the economy of about $300 billion, with an economic multiplier of two.

This proposal would take Canada's oil resources into a new realm, which would be bitumen beyond combustion. It would use organizations like GreenCentre Canada and others like Alberta Innovates to create high-value materials that are extremely light and are fundamentally important to the electric vehicle value chain.

If Canada doesn't have a strategy for its lithium and for advanced material like graphite, it's not for lack of examples in other countries. In a relatively small, poor province, Spain has a small lithium mine which was just going to be a mine. They decided to build a battery plant next to it. With advanced materials that can be produced with Canada's oil sands to create materials that are extremely valuable and that create intellectual property that can stay in Canada as part of an electric vehicle value chain, I think this, combined, is a winning proposal for Canada.

There are other areas that are perhaps less technology intensive, like building better homes and workplaces. The government did take up one of those recommendations with interest-free loans to be provided and managed by CMHC. We think there's a lot more to be done there as far as decarbonization of the whole construction supply and value chain is concerned. Again, we're seeing very strong moves in other jurisdictions to create standards to reduce emissions in the building supply value chain as well as to move towards passive houses.

The irony in the world of building is that Canada was the world leader in terms of energy efficiency for buildings and homes. The world doesn't associate Canada with the passive house. It's Germany that is seen as the originator of that, but it did come from Canada.

[Gary Vegh, Senior Environmental Toxicologist and Co-Chief Executive Officer, ERA Environmental Management Solutions]

Perhaps I could add something to this.

Our company has worked very closely in the auto sector. Right now this sector is undergoing the biggest change to electrification since the Industrial Revolution. We're also part of the Responsible Battery Coalition, looking at what we're going to do with the batteries of the EVs.

I think all this conversation about EVs and the batteries, the mines, the minerals is very important, because this is actually happening. I think for the gentlemen in Quebec, Sébastien and Bernard, I'm really surprised that Quebec is not doing more in this sector, because we are in a very good position, and it's an industry that is growing, not just the automotive but also the energy storage sector.

[The Chair, Liberal, Sherry Romanado]

Thank you very much, Mr. Vegh. You have good timing.

Mr. Lemire, you now have the floor for two and a half minutes.

[Sébastien Lemire, Bloc, Abitibi—Témiscamingue, QC]

Thank you, Madam Chair.

Mr. La Salle, I would like to learn more about the supply chain.

Let's take the example of a company like Lion Electric. We know very well that they need products like lithium, a valuable strategic mineral. If China owns the lithium mine, it will inevitably be much more expensive to supply. What does that mean for our industry?

Your consortium probably already has clients and agreements. Which Quebec and Canadian companies are involved in your efforts?

[Benoit La Salle]

You are absolutely right.

The difficulty is that the company that will mine this will be able to find ten buyers for their product. We, for example, have one of the largest graphite mines in the world, which is in Africa. Six customers buy all the production from us, and they are Chinese. Twenty other customers are waiting for production to become available, and we are being asked to increase our production.

The future owner of the mine, whether they are Chinese or Australians, will have their clients in their country. Since we don't have anode and cathode manufacturers in this country, they could invest the $200 million needed to start lithium hydroxide production and sell the products at home, in China or Korea. The sale could be done under 10- or 5-year contracts.

That's the reality, and I always say it's because of that reality that the mine owner has to be Canadian. We need, for example, Lion Electric to be able to call Benoit La Salle and ask him if he can increase his capacity to provide the 10,000 tons he needs next year or two years from now. We need to be able to talk to each other and welcome the people who come to us in Abitibi. That is the power of being together.

If we were to go to Hong Kong or Beijing for supplies, we would find that these cities are chronically short of resources. If we wanted to, we could sell everything to China right away. We could sell them our graphite, nickel and cobalt mines. They buy everything at a high price. If we refuse to sell them the mines, it means we refuse their offers.

In two weeks, China will close a nearly $1-billion deal with South America. It will buy a lithium mine from it. Why? All that ore is going to go out of South America and into China.

What Mr. Vegh was saying is absolutely true. We need to work on making anodes and cathodes. We need to work on producing components so that when Lion Electric says they have significant demands for their chips, we don't have to ask China to meet their needs. The reality...