Natural Resources Committee on Feb. 13th, 2014

[Dr. Vladimiros Papangelakis]

I just wanted to add, as mentioned by Ms. Luisa, $120 million has been invested by the Department of Energy in the United States to create the Critical Materials Institute. I'm aware of something similar, although I don't know the exact magnitude of funding, in the European Union. The European Commission in Brussels has funded the creation of a European network, industry-academia, to pursue rare earth metal development within the European Union.

[Ryan Leef, Conservative, Yukon, YT]

You said that there's a race to supply going on. Considering that, and considering that the rough projection right now is that Canada has 50% of the rare earths outside of China, what does it do...? Is Canada in that big of a crunch? I guess what I'm trying to ask is this. You have other countries that have much smaller resources for rare earths. I can see them being in a real race to get to that first before Canada really exposes the market, but does that put us in a position where we really need to race to get to this? If we're not part of that race and we don't beat everybody to the punch, so to speak, what does that do to our industry? How does that impact us in the longer term, considering we do still have about 50% of the resources?

[Dr. Luisa Moreno]

What does that do? I'll start with the second part of your question. Canada will continue to be dependent, basically buying these elements for automotive manufacturing as well as green technology, as it emerges.

But what is happening most importantly and what I tried to indicate is that there is a willingness to develop infrastructure outside China, to separate these elements, and to build the supply chain outside China. In the next few years, that will be happening, whether it's in the United States, Brazil, or Russia. It will happen, and I think Canada should start pushing to get into that race so that they attract the funding necessary for that.

[Dr. Steven Wilson]

If I may, think of this in the traditional metals supply-and-demand cycle. As the Chinese exports decreased, metal prices spiked, and interest in the technology went through the roof. That has all kind of moderated a little bit within the last year or two, but I believe that there is a very real race to be in that early-stage production. As it becomes obvious that companies outside of China are going to be successful producing these materials, the prices will start to tailor back, and the opportunity to develop an economic investment or a hugely successful economic investment in the country will be delayed many years and will respond, as it is delayed, with a much thinner margin and a much tougher success rate.

I think we have the need to exploit the fact that we have the resources and we have the skills. You asked about the speed with which other companies are developing. The reality is that most of those companies outside of China are actually coming to Canada for the early-stage process development already. We need to be positioned to take the back-end process development effectively and to focus on some of our local project opportunities to truly win the marketplace there.

[Ryan Leef, Conservative, Yukon, YT]

Mr. Wilson, in your first presentation you talked about the training requirements for your highly qualified field—

[Dr. Steven Wilson]

Persons—

[Ryan Leef, Conservative, Yukon, YT]

You did outline quite a complex chain to even get to identifying your rare earths and then, of course, we have the mining side, the production side, and the distribution side.

In your mind, where is the focus required in the training aspect? What would the investment look like? What would the training look like, and is there something right now that the Government of Canada is doing or that industry is doing already that's meeting some of those needs?

[Dr. Steven Wilson]

Certainly some of those needs are being met, and Dr. Papangelakis may have some comments as well, just because of the interactions with universities. In the conventional mining space, Canada is already very good at supporting the development of mining engineers and of metallurgical process engineers and scientists who are doing those things.

We have the technical skills and the capabilities to understand and to do the back-end piece. Part of what really is missing is the combination of industry project work, as Vlad talked about, because many of these companies are still potential producers, not actual producers. They're in an environment where they have capital constraints and fairly significant cashflow restrictions. So they're not in a place where they have an economic opportunity to fund upfront research or to get into the really long-term development opportunities. That's an area where we could as a government add some support and some access through organizations like NSERC or the CFI to continue to develop those areas of expertise.

[The Chair, Conservative, Leon Benoit]

Thank you for your answers, and thank you, Mr. Leef.

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

[Claude Gravelle, NDP, Nickel Belt, ON]

Thank you, Mr. Chair, and thank you to the witnesses.

I have many questions. I'm going to try to do it as quickly as I can.

We heard from the Department of Natural Resources when they were here that the further we go in the separation process, the more it adds value-added jobs. Can most of the grinding, milling, and smelting, the whole process be done in Canada? If it can or if it could, what would be the potential value-added jobs for Canada?

[Dr. Steven Wilson]

The answer to the first part of your question is yes. Certainly the science, the technology, and the infrastructure exists to do all of those front-end processing steps inside of Canada now.

I do not have a good feel for the number of staff that would represent or the number of associated jobs.

I don't know, Luisa, if that's something you could speak to.

[Dr. Luisa Moreno]

I think as you go down the supply chain, and you start actually producing magnets and parts that go into automotives and so forth, there is an increase in the number of jobs.

I believe REITA, which is a rare earth association, is currently doing a study. We actually had a slide that had to be taken out because the study has not been published.

The estimates we have are in the hundreds of thousands of potential jobs being associated to the various industries that use rare earth metals. If our forecasts are correct the demand for rare earths is going to increase because there's going to be an increased demand for not just the green technologies but a demand for cars as well in emerging markets and other technologies.

I think if Canada can produce these elements for national consumption as well as for exports there will be more jobs, but we don't have the exact numbers. Hopefully when REITA puts the report out, you will be able to have access to that. But the indication again is that those numbers are higher as you go—and you're correct—down the supply chain.

[Claude Gravelle, NDP, Nickel Belt, ON]

So there's a potential for I think I heard you say hundreds of thousands of jobs if this is....

[Dr. Luisa Moreno]

If we actually are able to attract, again, the infrastructure that needs to be built to be able to separate these elements to produce metals, to produce the parts and so forth.... It's basically to do what China did in the last few years, which is they made it harder and harder to export the rare earths, and they attracted a number of....

[Claude Gravelle, NDP, Nickel Belt, ON]

How important is it to create a Canadian rare earth alliance?

[Dr. Luisa Moreno]

From the technical perspective, I think it's very important, because like I said, many companies are working as individual, isolated islands, and spending millions of dollars trying to develop technologies. Some of them are very similar.

When you talk about separation, or the refining of purity of elements, maybe you can comment on that.

[Dr. Vladimiros Papangelakis]

Sure. The difference among the companies is due to the fact that each one is dealing with a different mineral deposit. So the front end is different for every company; that is, how you do the chemistry to put these rare earth elements into the solution.

But once you put them into the solution through the so-called leaching process, then the separation is common for all these companies. I'm aware of some discussions about the creation of a toll refinery where all companies put their rare earth solutions into a centralized facility. The facility is doing the separation for everybody and returning back the equivalent benefits depending on the amount of inputs going into the centralized facility.

But again my sense is that there is competition among companies. Each one is working independently. It is very important. That's why CREEN has been developed to bring all these companies together, identify technology issues that are common to all of them, and discuss with universities to identify, as a consequence, a common research project to help universities and private laboratories develop the common technology needed to address this for the sake of efficiency and speed rather than each one of these companies working on their own, in which case they don't have the resources anyway to complete the job.

[Claude Gravelle, NDP, Nickel Belt, ON]

So how advanced is CREEN in bringing these companies together? Are we getting close?

[Dr. Vladimiros Papangelakis]

It's unfortunate that Ian London is not with us today to speak about that, because he has been the workforce in bringing CREEN members together.

CREEN does have a number of companies. Not every company but at least the companies that are at the most advanced production stage are members of CREEN, and there have been coordinating discussions. What is missing as the next step is for CREEN to catalyze the definition of common science projects for the universities to embark on. This is the next step that CREEN is planning to do. As I mentioned, CREEN will host a workshop here in Ottawa to sort this out, hopefully by the end of next month.

[Claude Gravelle, NDP, Nickel Belt, ON]

I believe I heard Dr. Moreno say that other governments are supporting rare earths development in their own countries. How is the Canadian government helping the development of rare earths in Canada or are they investing at all in rare earths?

[Dr. Luisa Moreno]

I'm embarrassed to say that I don't know.

Can you help?

[Dr. Steven Wilson]

I think at this point the answer is that we are just at the stage inside of CREEN where we are trying to decide what the ask should be and how we could provide an appropriate invitation to government to participate. Those conversations have started to happen, but we're not at the point where we've identified something. Certainly in some other countries governments have responded sooner, but we have tremendous opportunity here to move forward.

[The Chair, Conservative, Leon Benoit]

Thank you, Monsieur Gravelle.

Mr. Regan, you have up to five minutes. Go ahead, please.

[Geoff Regan, Liberal, Halifax West, NS]

Thank you, Mr. Chairman.

Thank you to the witnesses for joining us today.

I'm sorry Mr. London couldn't be with us. I had the pleasure of meeting with him in Toronto a few months ago. After talking to him, I understand that, in terms of the importance of this industry and the potential for this industry in Canada and the impact of rare earth minerals on industry in Canada, rare earth chemistry and the products that come from that support something like $31 billion in economic output in this country and that the companies that do this employ nearly 84,000 people with a payroll of $4.2 billion.

So I would have liked to see something in the budget of the Government of Canada showing a little more support for the development of this sector. You've talked already about the kinds of products that are made from and that rely on these minerals, and if in fact we don't have access to these minerals, the problems are obvious.

Ms. Moreno, you said you'd like to see the government do more. What would you recommend the government do? What policies should it implement to help the sector develop and what should the government avoid?

I'd also like Mr. Wilson to comment on that.

Ms. Moreno.

[Dr. Luisa Moreno]

I think the professor indicated that it is important for the government to make this public, even if they didn't necessarily support them. If the Minister of Natural Resources or the Prime Minister were to acknowledge that rare earths are important and critical as well as strategic elements and that Canada has these elements, and if they were to watch them and find ways to study them to help in the future, I think that would be good. I think the capital markets would receive that well and the potential partners of Canadian institutions that are developing these elements would receive that well also.

In terms of policies, there are many. For instance, in the U.S., there has been a focus on the fast-track permitting process for mining companies. So maybe we could revisit that, in the case of those projects that are not as advanced.

Again, having a budget that could support R and D and support investments in manufacturing of products that use rare earths would be very positive to promote the rare earth industry in Canada.