National Defence Committee on Feb. 23rd, 2026

[Jeff Gaulin]

As I indicated off the top, both operating and capital expenses are a little bit higher. Canada is a high-cost jurisdiction. Part of that is from the maturity of our geology. We've been at this for quite a long time. The easy and cheap stuff has been mined. Now we have to either go further afield in places like the Ring of Fire or go much deeper. For example, in Thompson, Manitoba, a mine that we own—

[James Bezan, Conservative, Selkirk—Interlake—Eastman, MB]

You just divested of it.

[Jeff Gaulin]

We are just selling some of it. To go to depth there would be basically 13,000 feet, four kilometres, underground. That would be the deepest mine in the world. We'd still have more minerals down there. The challenge is, how do you get there, and then how do you bring it to the surface? How do you refine it in a competitive way? We will never out-China China in terms of standards. In fact—

[James Bezan, Conservative, Selkirk—Interlake—Eastman, MB]

I'm not suggesting to compete against China. I'm talking about other free democracies, our allies in particular. However, we have to be competitive if this is a strategic asset. If this is part of national security, we have to make sure that we can do it on a competitive basis.

[Jeff Gaulin]

I think we have to find the right balance in that, because our ability to raise capital is heavily weighted in global markets on our track record of sustainable development. It needs to be traded off against the ability to raise capital for our speed to market.

[James Bezan, Conservative, Selkirk—Interlake—Eastman, MB]

High taxation and high regulation would chase away some of that investment, wouldn't they?

[Jeff Gaulin]

I think if we were to go to our bankers and say, “Let's cut a whole bunch of regulation and environmental protections”, it would be challenging for us to raise capital in global markets.

[James Bezan, Conservative, Selkirk—Interlake—Eastman, MB]

Okay.

We heard in our first panel about the necessity for stockpiling critical minerals. To the Mining Association and the Business Council, what level of stockpiling do we need, and who pays for it?

[Photinie Koutsavlis]

Stockpiling can actually serve multiple purposes. Government stockpiling provides a set price to a company for the offtake of their product, which provides certainty for that project in moving forward, provides capital to that project, provides investor confidence and de-risks that project. That's one positive aspect of stockpiling. Another positive aspect of stockpiling comes from stockpiling critical minerals or defence-related critical minerals for our defence applications and the defence value chains that we wish to be able to develop within Canada. The third positive attribute of stockpiling is being able to meet our NATO requirements for defence spending.

In sum, stockpiling provides certainty to investors and provides a project with the certainty needed to be able to move forward. It provides the capital and provides reliable supply chains into our manufacturing base, and it also provides support to our defence spending.

In terms of who pays for it, government stockpiling could be a possibility, but then that stockpile could be of interest to our allies as well, in terms of being able to sell some of that product to our G7 allies.

[James Bezan, Conservative, Selkirk—Interlake—Eastman, MB]

There's no question that stockpiles and the infrastructure to support the mining of critical minerals all come into play in that NATO 1.5%, but it has to be government expenditure. It can't be corporate purchases.

[Photinie Koutsavlis]

That's right.

[James Bezan, Conservative, Selkirk—Interlake—Eastman, MB]

You talked about how much of the processing is already handled by China and our adversaries. If you look at lithium, you see that we have no lithium-processing capability here in Canada. There's only a minute amount down in the United States, and everything else goes to China.

Then, if we're going to be a reliable ally, the big question again comes down to this: Who makes the investment into creating the processing facilities, or how do we attract capital investment to make those processing facilities happen here within Canada or within the NATO structure?

[Michael Gullo]

If I may just provide more of a general response, I don't want to underestimate the level of work that's required to understand which commodities should belong in a stockpile, but more importantly, what is Canada's role within that particular commodity? Where's the opportunity? An incredible level of effort between the public sector and the private sector needs to occur to understand where the downstream, the midstream or the upstream opportunity is. What are the tools that need to be deployed in order to access that and really go after it?

I don't mean to discourage the question, but I think it's really challenging to provide a general response—

[James Bezan, Conservative, Selkirk—Interlake—Eastman, MB]

That should be maybe a recommendation that comes out of the study here, having those conversations.

[Michael Gullo]

Absolutely. It's the commodity-by-commodity assessment that needs to be done through the companies and the government on where the value chain opportunity is. That's where the creativity around costs really comes in.

Photinie explained offtake agreements quite well, and how those can occur. There are some fiscal incentives, taxation incentives, that companies can take on board as well, in terms of discounts on taxes in order to keep certain commodities on their property versus doing what they normally do, which is sell into the market. It's very specific.

[The Chair, Liberal, Charles Sousa]

Thank you both. I've been very liberal with my time.

We'll go over to you, Mr. Malette. You have up to five minutes.

[Chris Malette, Liberal, Bay of Quinte, ON]

Thank you, Mr. Chair.

My first question is, are Canadian firms positioned to integrate into allied defence supply chains under NATO commitments at this time?

That's for whoever can answer the question.

[Jeff Gaulin]

Partially, we already are. The opportunity is where we could expand that. I don't think it's about substitution and moving away from the customers we have. How could we grow production to meet the growing demand?

[Chris Malette, Liberal, Bay of Quinte, ON]

Thank you for picking up on that.

What barriers are preventing large-scale private investment in mineral processing and refining at this point, in Canada?

[Photinie Koutsavlis]

I'll go first on this one. We'll have a tag team for it.

In terms of processing, refining, smelting and the midstream part of the value chain, you need to have the product to push through those facilities. In his opening remarks, Jeff mentioned how Vale needs to import some of that product.

The business case is certainly not there, currently, to expand our processing and smelting facilities, because we don't have that expansion of critical mineral production. We need to produce more to smelt more. If we don't have that production increasing.... The cost of building processing facilities is from $200 billion to $500 billion. It's a very expensive endeavour. We need to have the product to do this. We have processing facilities that are not operating at capacity, currently. We need to grow our feedstock into those facilities to be able to then grow the business case for additional facilities.

I'll be very quick on this. The reason is that China's smelting and processing sector has very low treatment and refining charges. Essentially, it's what a miner will pay to have their product smelted and refined into another product. Because the prices are so low, the margins are exceptionally thin, currently, for processing and smelting facilities. The economics are not there for having the product—the rocks coming out of the ground—in terms of profitability and being able to charge. In some cases, the treatment and refining charges are below zero. There are negative numbers right now.

There are difficult circumstances, currently, in terms of having additional facilities constructed.

[Chris Malette, Liberal, Bay of Quinte, ON]

That goes to Mr. Gaulin's comment on how we're never going to out-China China.

My next question is for Mr. Lester and Mr. Gaulin.

How does climate policy intersect with the mineral development needed for both clean energy and defence applications?

[Hudson Lester]

I would focus more on unreliable energy systems. Right now, up here, when it comes to climate and all that, everything is run on diesel. We have diesel dependency. All the diesel is imported, predominantly from the United States.

Diversified power sources and grid modernization reduce that vulnerability and increase operational certainty. Really, for us, it can be joint with industry and federal investments to support northern power systems, which should be recognized as strategic resilience projects, not just regional economic development.

[Chris Malette, Liberal, Bay of Quinte, ON]

To help power some of these developments, has there been any talk of small nuclear reactors in some of these areas? I know it was discussed at a morning session I attended in Halifax, at the international security conference. Is this on anyone's radar at this time?

[Jeff Gaulin]

We're blessed with abundant access to low-emitting or zero-emitting electricity sources in Canada. Of our eight mines, only one is not powered by low-carbon or low-emitting sources. That's because it's on the coast in northern Labrador and is not connected to a grid or anything else, although we are exploring opportunities to find ways to get off diesel. Wind power is not cheap or easy. Run-of-river, long-distance transmission is difficult and/or expensive. With our five indigenous communities, that's not something we're going to impose nuclear power on without their full and prior consent.

I think the challenge for us with critical minerals is that we were producing critical minerals before renewable power came by, and we will produce long after. It is a tremendous opportunity for us, particularly on the EV batteries, but we have seen a slowdown—not a turndown, but a slowdown—in the worldwide adoption of it, which just softens the demand curve for the types of products we see.

Let me give you a figure that puts it in perspective. A wind turbine is the most nickel-intensive renewable power source there is. There are two tonnes of nickel in every tower. One Canadian Coast Guard ship takes 50 to 100 tonnes. I'd have to make 15 times, or much more than that, the wind turbines for one Canadian Coast Guard ship or an icebreaker that is 400 to 500 tonnes. The volume demand is what keeps our refineries open. If the demand slips, those refineries are uneconomic. Today, I'm telling you, the fragility of the economics of our nickel refineries, let alone our copper refineries, is perilous.

[The Chair, Liberal, Charles Sousa]

Thank you both.

Mr. Kibble, you have up to five minutes, sir.