Industry Committee on Feb. 4th, 2022

[The Chair, Liberal, Joël Lightbound]

Now we go to Madame Lapointe for five minutes.

[Viviane LaPointe, Liberal, Sudbury, ON]

Thank you, Mr. Chair.

Thanks to all the witnesses for being here with us today.

My first question is for Monsieur Gratton.

In your opening statement, you said that, to position ourselves for success, we need good government policies with equally good policy outcomes. Can you expand on what industry needs from policy-makers and government to help drive innovation and investments?

[Pierre Gratton]

Sure. Thank you for the question. It's nice to see you, Viviane.

I've touched on the METC and public geoscience already, so maybe I'll leave those two issues aside. I've also touched on the need to focus on accelerating the regulatory process. Let me, then, skip further downstream and talk about the fact that we don't produce the right kind of nickel. We produce a lot of nickel, but it's not the nickel that's used for batteries.

I think one part of the strategy is figuring out how we entice industry that is producing different types of nickel, for which they have customers and no compelling need to change their customer base, to switch and start producing nickel sulphide for the battery market. That's an interesting policy question, I think. There's room there for government to say, “Look, it's in Canada's interest that you start producing this type of product. Our auto sector needs it and our whole critical mineral strategy needs this gap filled, so how can we convince you, as a partner, to change gears?” I think that's really important. You come from Sudbury. In that area, you have two large nickel mines that produce nickel and sell nickel worldwide. How do we convince them to set up a nickel sulphide plant in Canada? I think that is a really good question. I'm hopeful we'll get some answers in the near future. That would be another example of the kinds of policy steps I think we need.

I would also make the point that, in our view, there is a tendency to fixate on the battery itself, whereas there is an awful lot of economic opportunity from the exploration all the way through to the battery-grade materials that go into a battery. My concern is that if we focus only on trying to attract a battery plant, that battery plant will be importing materials from around the world. We haven't solved the problem we're trying to fix, which is being overly reliant on China. We need to build from the bottom up and plug the gaps we currently have. If we do that, then the battery manufacturers will want to set up shop in Canada because they'll have what it takes. I think there's a preponderance of focus on that final battery plant as the be-all and end-all, but I don't think that's actually where the focus should be.

[Viviane LaPointe, Liberal, Sudbury, ON]

Thank you, Mr. Gratton.

Mr. Walker, it's great to see a fellow Sudburian here today.

I want to explore sustainability in the industry. In your estimation, is Canada well positioned to not only support domestic supply for the mineral requirements of carbon neutrality, but also support an increased global demand?

[Trevor Walker]

I would say we're positioned very well. With regard to previous comments and your question, our advice, especially to the Ontario government, has been simple: Let's begin somewhere with some action where we have some leverage. Let's work with what we have. We're blessed with great resources. We are blessed in Canada with auto OEM production, for example. How do we leverage those things?

We've seen investment downstream, but I agree with Mr. Gratton that we need more emphasis on some support and policy change to really leverage the front end of the supply chain to fill in those missing links. I agree that if we don't fill them in, we will be cutting cheques to downstream OEMs forever. When we get our act together on the front end of the supply chain, they will want to be here and to have access to the North American market. We believe we have the resources and the ability to scale, with some support.

In conclusion, we have to act. Government is always hesitant to pick horses. In this case, we have to be really sharp about which horses need to be bet on so we can make some truly meaningful progress in the short term.

[Viviane LaPointe, Liberal, Sudbury, ON]

Thank you.

[The Chair, Liberal, Joël Lightbound]

Thank you very much, Mr. Walker.

Go ahead Mr. Lemire; you have six and a half minutes.

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

Thank you, Mr. Chair.

I would once again like to thank all the witnesses for their testimony. Their rigour and their work are remarkable. I would particularly like to thank Dr. Lilly for her contribution.

I'll continue with Mr. La Salle so that we can benefit from his expertise.

Mr. La Salle, do we have enough mining expertise in Canada for it to be fully integrated?

How then can we help the industry to become more integrated?

[Benoit La Salle]

First of all, Canada is recognized around the world for its state-of-the-art mining expertise. We work everywhere around the world. We are highly versatile. There are therefore no concerns from that standpoint. We have no difficulty operating mines ourselves.

We need to integrate so that we can work towards producing value-added products, whether hydroxide, carbonate or graphite, which is the raw material that goes into anode manufacturing. Indeed, graphite is only the starting point. It needs to be processed before it can be transformed to make the anode. Most of that is currently being done in China, even though we have the expertise needed to do it here. North American Lithium has just been sold to the Australians, even though a processing plant had just been installed right beside it and never put into operation. There is no doubt at all that we have the required expertise.

That's where the Canadian government could provide support, particularly in the form of financing loans. Internationally, the French have a development agency and provide lots of support. The Chinese have a lot of support mechanisms. So do the Americans. We have Export Development Canada, the EDC, which is often overcautious. If the government were to support secondary processing, the expertise would definitely be there, from the mine to primary and secondary processing. We could then allow battery manufacturers to come and set up shop here, and then automobile manufacturers could decide whether or not they wanted to build plants. However, the first step is required, because that's what will determine the eventual direction taken.

Europeans are on a war footing at the moment, particularly in Germany, in a quest for raw materials to process at home in Europe for use in vehicle manufacturing. We need to do what the Europeans are doing.

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

I get it. So we need to change how we do things.

Thank you.

[The Chair, Liberal, Joël Lightbound]

Thank you Mr. La Salle and Mr. Lemire.

Mr. Masse has the floor now for two and a half minutes.

[Brian Masse, NDP, Windsor West, ON]

Thank you, Mr. Chair.

I've long believed that we need a national auto strategy like many other countries have.

Mr. La Salle, I would like to go back to the original part of your testimony on the increase of prices with regard to not only lithium but also other components. Can you detail that a little bit more? When did you really see a surge take place? I know this is speculative, but do you anticipate that there will be sustainability with that in the years to come? That's going to be really important, I think, for the investment. Could you perhaps shed a little more light on that, please?

[Benoit La Salle]

Mr. Masse, I'm going to answer the question in French, given that I began my comments in French.

You're absolutely right. There was a pause at the beginning of the COVID-19 pandemic, and prices collapsed, particularly for graphite and lithium. There was definitely a slowdown in the auto industry in terms of energy storage, a sector that is almost as important as the auto industry itself. About eight months ago, it looked like the industry was picking up again and the price of cobalt began to rise gradually, along with the price of copper.

Eight months ago, we thought this was bound to happen for lithium too. All the lithium projects were moribund. Nemaska Lithium et North American Lithium went bankrupt. Montblanc International decided to stop production because the price was too low. We made an offer, feeling that the price would make impressive gains. Eight months ago, the price of hydroxide increased by 500% and the price of carbonate by 700%. That's going to continue.

Benchmark Mineral Intelligence understands that it's a question of supply and demand. There's a huge gap for graphite, lithium, nickel and copper. You don't hear talk about copper, but if everything needs to be connected, copper cable will be needed. Demand for copper is staggering.

Prices are going to continue to rise. We, the entrepreneurs and project developers, do not need funding to conduct research and exploration, because we have the means. We're going to operate the mine on our own and then do the processing in partnership with the government to make finished products.

At the moment, there are no financial problems in the mining sector. We simply need the freedom to make sure our projects are discovered by us, developed by us and sold by us.

BHP, An Australian company, has just opened an office in Toronto with a view to buying projects in Canada.

[The Chair, Liberal, Joël Lightbound]

Thank you, Mr. La Salle.

I'm sorry, but there is no more speaking time.

We'll go back to Mrs. Gray for five minutes.

[Tracy Gray, Conservative, Kelowna—Lake Country, BC]

Thank you, Mr. Chair.

I have a couple of questions for Mr. Dahn, and then I might turn it over to my colleague, Mr. Généreux, depending on the time.

Mr. Dahn, you've previously been quoted stating how Canada is pulling above our weight when it comes to research and development on lithium-ion batteries. We can all agree that this is a good thing, but it's also important to protect our intellectual property. Based on your experience in this field, where do improvements need to be made to ensure Canadian IP in critical minerals is protected and expanded?

[Dr. Jeff Dahn]

I'm not an expert on IP and critical minerals. In terms of critical materials that are derived from the mineral, that's more up my alley.

[Tracy Gray, Conservative, Kelowna—Lake Country, BC]

Fair enough.

Do you have any thoughts on creating a patent box, such as they have in Quebec, which reduces corporate tax rates on patent royalties? Do you have any thoughts on that?

[Dr. Jeff Dahn]

No.

[Tracy Gray, Conservative, Kelowna—Lake Country, BC]

Okay.

Maybe I'll ask the same questions of Dr. Lilly, then. Perhaps she might be able to answer those two questions.

[Dr. Meredith Lilly]

Thanks for the question.

I'm not an expert on IP beyond issues in international trade, where a number of countries are currently working on the improvement of intellectual property. We have this reflected in most of our trade agreements. In the new NAFTA, as well as TPP, we have fairly advanced IP protections.

Beyond that, I don't think I can answer your question.

[Tracy Gray, Conservative, Kelowna—Lake Country, BC]

Thank you very much.

I will turn it over to my colleague, Mr. Généreux.

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

Thank you, Ms. Gray.

Mr. La Salle, I understand that the relationship between supply and demand is important, but apart from that, why did the price of lithium increase by 700% in eight months?

Is it solely a matter of supply and demand?

[Benoit La Salle]

It's the law of supply and demand. I'm repeating myself, but the Benchmark site reports that the company is building 240 plants at the moment, when it doesn't have the raw materials.

Volkswagen announced a few months ago that it would have to buy 100% of the graphite produced outside China in 2024 for its battery plants. As they don't have the raw materials, they will have to turn to us and others.

There has been a slowdown with respect to lithium during the COVID-19 pandemic. People felt that the raw materials were not available. Tesla and Volkswagen very clearly stated that they would need different batteries for different categories of cars.

As Professor Dahn was saying, there were variations—more nickel, less nickel, more graphite, more lithium—and then there was a big surge in demand. It was also felt that the South American projects were taking a very long time to develop because they mine brines, in a complex process that generates pollution.

Demand for electric vehicles also surged. As demonstrated by data around the world, demand is getting much stronger.

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

Thank you.

Ms. Houde, on this topic, at a previous meeting of the committee—last year, I believe, Mr. Lemire could confirm this for us, and it may have been Mr. La Salle who mentioned it—it was pointed out that 21 permits had to be obtained before opening a mine in Quebec.

Will the requirement for numerous technical documents, like building permits, environmental permits and authorizations from governments, slow down future mining operations that could otherwise put us in the forefront in these sectors in Quebec, and Canada more generally?

[Sarah Houde]

I don't think so. That's not something that will slow us down. Our mining standards in Canada are even an asset because that's what will set our batteries apart from others, such as Chinese batteries. We won't be competing with the Chinese on price, but on the fact that our batteries are greener, more environmentally responsible. Although Canada's environmental standards in the mining sector are as strict as they come, I don't think this will be harmful to us. Quite the contrary. It will be something that makes our batteries distinctive.