National Defence Committee on Feb. 23rd, 2026

[Jeff Gaulin]

Nickel is typically found with cobalt. In combination, they make a superalloy necessary for almost every type of military platform or piece of equipment that needs to move at high speed and at high temperature. They provide structural support and allow things to move. That's everything from jet fighters and missiles to submarines and drones.

I wouldn't want to leave out copper, because, in an era of electrification, nothing moves without copper. Whether defence or economics, it's probably the basis of everything.

If you think about it, Sudbury supplied the Allies during World War II with 95% of the Allied effort's need for nickel. The Allies would not have won World War II if not for the Sudbury basin and its nickel. The fact is that, in Canada, we have eight nickel mines. The United States has one, and it's going to close in four years. We have three nickel refineries; they have zero. Seventy per cent of Canada's refined nickel goes to support the United States. Roughly 80% of their aerospace sector and in excess of 60% of their defence sector depend on Canada's critical minerals and Canadian nickel.

[Viviane LaPointe, Liberal, Sudbury, ON]

Thank you.

Am I out of time?

[The Chair, Liberal, Charles Sousa]

I'm sorry. You're out of time.

Mr. Lester, do you want to intervene before I pass it on to the next member?

[Hudson Lester]

Yes. If I may, Mr. Chair, I'll address Mr. Kibble's question.

In the north, we've been trying to get a north of 60 mineral tax credit, mainly because mining in the north is two to two and a half times the cost.

If we're discussing the critical minerals list that Mr. Gaulin just referred to, whether it's defence-related or defence/economic-related, Nunavut has 23 of these critical minerals, but most of the time we're shoved off to the side.

When it comes to regulatory streamlining, on average, I think it takes about 14 years to create a mine in Nunavut. That's due to the regulatory red tape and the bureaucracy. Being able to streamline that would be useful. Not separating northern infrastructure from security infrastructure, just based on the current geopolitical climate and how things are transpiring, critical minerals should—

[The Chair, Liberal, Charles Sousa]

Thank you, Mr. Lester. It's a good point. We appreciate that.

Monsieur Savard-Tremblay, you have up to six minutes, sir.

[Simon-Pierre Savard-Tremblay, Bloc, Saint-Hyacinthe—Bagot—Acton, QC]

Thank you, Mr. Chair. Let me start by thanking you for your kind words at the beginning of the meeting.

I would also like to thank all my colleagues who have checked up on me and shared encouraging words from the beginning. I appreciate that. Thank you, everyone.

I'd also like to thank the witnesses for being here and for their presentations.

My first question will be for you, Mr. Gullo. As you know, the big unknown is obviously the review of the Canada—United States—Mexico Agreement, or CUSMA. In principle, the Canadian and U.S. administrations share a willingness to create a North American supply chain. I say “in principle”. Former prime minister Justin Trudeau signed an agreement with former president Joe Biden at the beginning of his term so that there would be mutual access to businesses in each country. Even though there have been changes, a new prime minister in Canada and a shift of government in the United States, the willingness is still there.

Would the CUSMA review be an opportunity to negotiate and incorporate a chapter dedicated exclusively to critical minerals?

[Michael Gullo]

It's an excellent question.

Given the long-standing history and the economic integration of Canadian, U.S. and Mexican economies, broadly speaking, I'd say there's genuine interest, not only from the Business Council and its members but also from our partners in the U.S. and Mexico, to ensure that North American competitiveness and North American energy security, inclusive of energy commodities, critical minerals, nuclear, uranium, etc., are nurtured through this period and enhanced in the years to come.

In terms of the specific wording around CUSMA and where we're going with the review, there are obviously a lot of moving parts at the moment. We have new proposals coming from the U.S. for consideration. We're well advanced in this area, on account of the agreement that you referenced between our previous prime minister and the previous president. There's also a specific element in play on critical minerals co-operation, which was signed under the first Trump administration.

As we look at this broad package and go into the review, the question of whether a stand-alone chapter is warranted will be part of the discussion and the negotiation in the debate. However, I think we need to be very careful about the benefits of having an exclusive chapter versus the potential consequences down the road.

[Simon-Pierre Savard-Tremblay, Bloc, Saint-Hyacinthe—Bagot—Acton, QC]

Then you think it deserves to be considered, but, at the end of the day, you don't know exactly where the balance would tilt between the advantages and disadvantages. That is more or less what I understand.

[Michael Gullo]

Given the pre-existing structures and agreements we have, the creation of a new chapter on its own would have to be reviewed in terms of benefits and potential consequences of moving in something that's stand-alone. Photinie may have a line of sight on this through her membership, who are central to the sector.

[Simon-Pierre Savard-Tremblay, Bloc, Saint-Hyacinthe—Bagot—Acton, QC]

You also mentioned China. Too often, I feel like it's being ignored.

You talked about dependence on the Chinese supply chain. We know that most of the future mines will be Chinese and centred on Asia. We want to break free from that addiction. I think we're moving in that direction.

Now, is there also another danger, namely Chinese penetration in the critical minerals sector in North America? We know that the United States has been pointing the finger at Canada for a long time, saying that its lax approach has undermined their trust in Canada.

Do you think Chinese investments in this area should be monitored more closely?

[Michael Gullo]

Without question, we have to be mindful of all the risks that threaten Canadian economic and national security. We have really strong provisions in place.

Back to my opening remarks about the defence industrial strategy, I think we have an excellent starting point to build out our parameters and our security functions as they relate to foreign actors and the threats they can pose to the Canadian economy and everyday living. In my opening remarks, I advocated for an effort with NATO allies, where we would have a partnership of like-minded countries that share our values and our commitments in a number of different areas.

I think if we look at these types of frameworks of broadening our relationships with our trading partners and our allies, and if we understand the strategic importance of Canadian minerals in this context, we can have a very strong rebuttal that mitigates risks posed by China and other foreign actors.

[Simon-Pierre Savard-Tremblay, Bloc, Saint-Hyacinthe—Bagot—Acton, QC]

When we talk about defence, we think about preparing for a conflict. Obviously, we don't want to have a conflict. We even hope that defence will first and foremost have a deterrent effect that will be so strong that it will prevent any conflict. That's in the best of all possible worlds.

It seems to me that if there is one area where we cannot depend on anyone else, it is defence. Isn't dependence on foreign refining capacity another unknown? Indeed, in the event of a conflict, wouldn't that de facto neutralize Canada's defence industrial base?

[Michael Gullo]

It's a serious risk that underscores the basic thesis of the proposal that we've put forward of why we need to be leaning into the NATO community at this important juncture and why we need to offer our critical minerals to our allies and partners in this space and really fast-track our efforts to build resiliency within our defence and national security policies.

[The Chair, Liberal, Charles Sousa]

Thank you, Mr. Savard‑Tremblay.

Ms. Gallant, you have five minutes.

[Cheryl Gallant, Conservative, Algonquin—Renfrew—Pembroke, ON]

Thank you.

Thank you for all the questions.

Specifically, what tax instruments does the U.S. have that Canada does not have that speed up extraction and make the refining more affordable for companies?

[Michael Gullo]

I can speak to the capital side. Photinie has more expertise on the regulatory aspects and the approval processes.

I mentioned to Mr. Kibble in my response to him the One Big Beautiful Bill Act that came forward and its very generous provisions around expenditures and how they're treated within the first year of spend. That's a very powerful capital attraction tool.

[Cheryl Gallant, Conservative, Algonquin—Renfrew—Pembroke, ON]

Mr. Gaulin, what plans, if any, do you have to ramp up extraction? How quickly can that occur?

[Jeff Gaulin]

One challenge with existing mines is that you have no surge capacity. You don't just ramp it up or ramp it down; it is long-term capital lead time.

The second thing is, where is the market for our products? In our case, for class 1 nickel, the military and battery-grade nickel that we produce, the world is already oversupplied with nickel. For the type of specialized products we would have, there would have to be a strong demand signal from the customer side. We don't produce it just to make it.

[Cheryl Gallant, Conservative, Algonquin—Renfrew—Pembroke, ON]

Nickel is apparently one of the critical minerals that Communist China does not have an overt influence over. How are Chinese-controlled companies or firms looking to enter the Canadian nickel market?

[Jeff Gaulin]

I'd say there are two ways. One is physical product, either refined or coming in, or access to physical product purchased out of Canada. The second is, as we've heard about, through investment, which can be either direct or indirect and obscured.

I think one of the considerations for the committee is that there are often restrictions on what are called rules of origin, where a product comes from. What that obscures and what that misses is the rule of ore. Where does it come out of the ground? For example, Russia is one of the leading producers of nickel in the world, competitive to Canada, to Sudbury. It processes and refines that in Finland, and it is then deemed to be Finnish nickel. That's why 99% of the German defence sector gets Finnish nickel, which comes out of Russia.

[Cheryl Gallant, Conservative, Algonquin—Renfrew—Pembroke, ON]

Should critical minerals like nickel be included in the safeguards with respect to the strategic partnership that the Prime Minister made with China?

I'll throw that out there to anyone who has an answer.

[Photinie Koutsavlis]

That would be a very difficult proposition, simply because the Investment Canada Act, as it was updated a couple of years ago, prevents any kind of investment in or acquisition of mining operations in Canada, except in exceptional circumstances. The Government of Canada has made it very clear that Chinese investment will find it very difficult to penetrate into Canadian mining companies. They've also imposed conditions, blocked investment and unwound investments as well.

Through the Investment Canada Act, there are two tests. There's the net benefit test to Canada: Essentially, is it in the economic interest of Canada that this investment occur? The next test is a national security test.

[Cheryl Gallant, Conservative, Algonquin—Renfrew—Pembroke, ON]

The PRC has frequently sent civilian research vessels to the Arctic to survey for natural resource deposits. Which critical minerals would the PRC particularly be looking for in the Arctic? Is there any way our seabed could already be harvested by the PRC?

[Photinie Koutsavlis]

Hudson would probably be best placed to answer that question in the north.

[Hudson Lester]

Thank you.

From what we're seeing, a lot of the focus is on copper. Even though those two tests that Photinie talked about exist, there are two companies that do have state-owned involvement. We also have the original Hope Bay when TMAC had it. It was almost purchased by China but was secured by Agnico Eagle instead, a Canadian company.

It's usually nickel and copper. Those are what we know so far.