Natural Resources Committee on Feb. 19th, 2021

[The Chair, Liberal, James Maloney]

I will call this meeting to order.

First of all, thank you all for attending the meeting on a Friday afternoon. It's our 12th meeting of the standing committee.

We're starting a new study today, on critical minerals and associated value chains in Canada, so it's a fresh start.

Before I get into introducing and thanking our witnesses, I want to let you know that there's a vote in the House of Commons this afternoon, which is expected to start at any time between five minutes from now and 20 minutes from now. As soon as the bells ring, we will have to suspend the meeting. However, if all of you are able to be available after that—the vote should probably take 45 minutes to an hour, tops—then we can come back and continue the meeting. We'll get through the vote as quickly as we can; it could be less, but that remains to be seen.

Thank you, all.

All of our witnesses are familiar with our process. I think all of you have been to committee before, so I don't need to spend any time, or certainly any length of time, explaining the process.

You're free to speak in either official language, and in fact you're encouraged to speak in both official languages. You will be asked questions, most certainly in French and English. You have translation services available. We're doing these meetings by Zoom. Sometimes that comes with challenges, such as delays and whatnot, so everybody has learned to be patient and to wait for things to click in and work.

The other thing I want to do is welcome our newest member, Mr. Lloyd. Thank you for joining the committee. I hope you will come to realize that this is a unique committee and that we get along pretty well. We do have bumps in the road from time to time, but aside from those odd occasions, things run pretty smoothly. We don't generally encounter some of the challenges that you see in other committees, and I hope that continues to be the case. I look forward to working with you.

Mr. McLean, if you and your colleagues could extend our thanks to Ms. Harder for her contribution to the committee while she was here, I would be grateful.

Let's jump in.

We have five witnesses here today. We have the Canadian Critical Minerals and Materials Alliance; the Canadian Institute of Mining, Metallurgy and Petroleum; the Department of Natural Resources, of course; the Mining Association of Canada; and, last but certainly not least, PDAC, and everybody here knows them.

Thank you all for joining.

The process is that each group will be given up to five minutes to make introductory remarks. At the conclusion of all the presentations, I'll open the floor to questions.

On that note, why don't I start with you, Mr. London, since you're by yourself?

[Bob Zimmer, Conservative, Prince George—Peace River—Northern Rockies, BC]

On a point of order, Mr. Chair, may I make a suggestion? We know that if the bells go, we have about 30 minutes. I would propose that we hear the witnesses.

Certainly if it takes longer than 30 minutes, I would understand, but let's hear from as many witnesses as possible before we jump on to the other call, instead of just suspending immediately to go to that Zoom, where we'll have to wait another 20 minutes.

[The Chair, Liberal, James Maloney]

Mr. Zimmer, I would agree with that sentiment generally. Ordinarily, if we're all sitting in Ottawa, that doesn't create a problem, because we can all walk to the House; we know how long that takes. However, in a virtual world, sometimes there are connection challenges, and given that.... I believe we need unanimous consent once the bells start anyway.

Why don't we do this? If there's a witness who is partway through his presentation, we'll let him finish. How's that?

[Bob Zimmer, Conservative, Prince George—Peace River—Northern Rockies, BC]

Thank you, Chair.

[The Chair, Liberal, James Maloney]

Okay.

Mr. London, go ahead.

[Ian London, Executive Director, Canadian Critical Minerals and Materials Alliance]

Good afternoon, and thank you again for the invitation to appear today.

The world is undergoing an economic transformation, with innovative technologies, clean technologies, driving the pace of change. Both the IEA and the World Bank stress the significant role of minerals and metals, especially non-traditional materials like lithium, graphite, rare earths, scandium and others, for a low-carbon future. China controls much of the full-value chains around these critical minerals. Governments and industrials around the world have called for reliable alternatives to secure sources of supply.

Despite Canada's vast resource wealth, our critical materials remain largely undeveloped and not strategically leveraged, primarily because of the lack of understanding of their significant climate, national security and economic benefits.

The Industry Strategy Council, the forum of experienced business leaders assembled by ISED, recently issued a report and has created a blueprint for implementation, a road map for how Canada can enable critical materials value chains to be developed.

Over the past year, C2M2A, the critical materials alliance, has proposed a suite of recommendations around policy, investment, R and D, secondary sources, education and trade.

With the limited time available today, I'll just touch on three important themes and one specific recommendation.

The first is consumer demand. Consumer demand attracts production, which attracts value-added processing, which attracts raw material supply. “Demand pull” strategies provide stronger results than those built upon “supply push” strategies, an approach we have traditionally taken. Increasing demand for electrified transportation, battery supply, advanced materials and associated manufacturing is a key measure the government needs to expedite to fulfill our clean energy aspirations and ensure that Canada is competitive in this increasingly competitive global theatre. With clarity of Canadian-branded supply, auto and parts manufacturers could be encouraged to establish some of their current out-of-country supply sources to set up shop in Canada. This demand would facilitate reliable Canadian-certified or Canadian-branded mineral development and value creation, where Canada sets the benchmark standards.

The second is clarity of supply, which I just mentioned. Canada has made progress in reducing its capital and operating costs of GHG-reducing mineral production. Canadian resource and material producers must continue to strive to meet and exceed ESG standards, essentially certifying our offerings, the demand for which is of significant interest to consumers. Critically important, though, is the necessity to build value chains local to the demand pull, and to feed components to the factories located close to assembly plants.

The third theme is technology advantage to gain leadership. I'm aware of material research in Canada that has direct implications for local supply chains in an electrified auto sector. Materials for vehicle light-weighting of body structures, traction motors and permanent magnets with reliable production closer to home are all being called for. Canada must also be prepared to deliver materials for energy storage technologies, as well as to handle the rapid changes in those technologies. Advanced materials and process development capabilities are within reach at Canada's commercial and national labs.

The question before the house—and I use that term loosely because in your case you actually have a House—is how to spearhead and champion this critical material campaign.

I'd like to suggest that Canada establish a critical materials office, led by an internationally respected business leader and effectively staffed with economic development, technical, investment and policy experts from industry, government and multidisciplinary academia. The office should be mandated to pull together and create, where necessary, enhanced critical material value chains and work with provincial authorities to ensure regulatory alignment. They should also be prepared to see that the most promising material production and manufacturing pilot and demonstration projects move forward and move towards operation.

Leadership from ISED and NRCan, in partnership with industry, is key to our collective success. This is not a government exercise alone, but we can use our unprecedented Canadian ingenuity.

For the sake of time.... We have the raw materials. We should not be selling them and then buying back processed products. Time is sadly of the essence.

Thank you.

[The Chair, Liberal, James Maloney]

Thank you, Mr. London.

As we just discussed a few moments ago, the bells have started ringing in the House.

You have completed your presentation. I'm going to suspend the meeting now, and we can pick up where we left off here after the vote.

Thank you, everybody. We'll see you shortly.

[The Chair, Liberal, James Maloney]

I call the meeting back to order.

Thank you to our witnesses, and apologies. We had a small housekeeping matter in the House that had to be dealt with, which is now behind us.

We had left off with Mr. London having completed his presentation, so why don't we move on to Ms. Espley for five minutes?

[Samantha Espley, President, Canadian Institute of Mining, Metallurgy and Petroleum]

Thank you for that.

Thank you for inviting me. As the president of the Canadian Institute of Mining, Metallurgy and Petroleum, it's my pleasure to act as a witness today for these proceedings.

Just by way of background, the CIM is a global mining powerhouse. We have over 10,000 members. We are laser-focused as an institute, and I'm really proud—and maybe you don't realize—that we have 120 years of history under our belt as an institute. That shows a lot of resilience as an organization, having endured world wars, depressions and now getting through a pandemic.

The secret to our success is really our collaborative nature, and we address the mining industry's needs. We drive innovation, we develop best practices, and we are united globally through peer groups. We have peer groups, similar institutes in Australia, the United States, the U.K., Europe, South America and others. CIM right now is very active in leading the global action on tailings for the mining industry, and we're very proud of the work that we're leading there. CIM has helped, and will continue to help, members and the Canadian mineral industry make positive impacts and obtain a competitive edge through our one CIM community, and a gateway to a world of knowledge.

We operate according to three strategic goals. Our first goal is to create, co-create and share leading-edge knowledge. We also unite and engage an entire mining community, and our third goal is to expand the awareness of the mining industry's essential contribution to society.

We know who our members are at the CIM. We have members from government, non-government, academia, industry, the supplies and service sector, OEMs—that's original equipment manufacturers, original technology manufacturers—from financial institutes, investors and indigenous peoples. Together, the CIM and all our stakeholders are represented. We have extraordinary skills. We have deep knowledge and expertise. We have entrepreneurs, visionary leaders, engineers, geologists, and the full spectrum right across the value chain for critical minerals and other products that are offered by the mining industry.

CIM knows that we can leverage our brain power, our collective effort and our energy to benefit the mining industry, to benefit the Canadian economy with good jobs, and for the sustainability of our planet. The CIM has 10 technical societies with our volunteer members. For example, we have a geological society, a management & economics society, an underground mining society, a surface mining society, an environmental and social responsibility society, and others. Each of our societies is working on their specific technical expertise and focus area to build best practices, guidelines and standards that matter to the mining industry and that are driven by the mining industry.

Most recently, we created 10 global mining guidelines. These include the battery electric vehicle guidelines for underground mining. This was made for the mining industry's objective of green mining for green metals for a green economy. This is toward the mining industry's goal of zero net carbon by 2050, or sooner.

At CIM we are proud of our mineral resource, mineral reserve, guidelines and best practices. This is for technical reporting in compliance with national instrument 43-101 disclosure, and the requirements of qualified persons.

Our MRMR guidelines are world-class. They're referenced in all other mining jurisdictions. The CIM and our members are recognized globally for our vision, our spirit and our deep knowledge and expertise in mining, from exploration through to closure and rehabilitation.

Personally, I joined the CIM when I was an engineering student at the University of Toronto. My dad was a mining engineer, and he encouraged me to join to see who's who, to learn about the industry and its enormous value to Canada, to be part of the CIM family, and to make a difference. Thirty years later, I'm the head of the family. I'm the head of the CIM and I want CIM to make a difference.

This is really perfect timing, through this work with the critical minerals, because CIM is completing a strategic plan right now. Critical minerals are an opportunity to be a cornerstone of our future efforts through the CIM.

When I reflect back on 2017, we had a pan-Canadian mining proposal being put together by representatives all around the table from different stakeholders. It was for cluster funding. It was the first time in my history that I had seen such a willingness and collaborative effort.

[The Chair, Liberal, James Maloney]

I apologize, Ms. Espley, but I'm going to have to ask you to wrap up very quickly.

[Samantha Espley]

Okay.

I would say that we weren't successful then, but the mining industry is poised and ready. We need the government's support. CIM indeed sees critical minerals as an opportunity for Canada to step up, accelerate and lead a pivotal, imperative effort for the Canadian mining industry and for the betterment of the world.

Thank you.

[The Chair, Liberal, James Maloney]

Thank you. I apologize for having to cut you off, but we have to stick to our time limits as much as possible.

Why don't we move to the Mining Association of Canada?

[Pierre Gratton, President and Chief Executive Officer, Mining Association of Canada]

Mr. Chair, members of the committee, and fellow witnesses, I am Pierre Gratton, President and CEO of the Mining Association of Canada (MAC). I’m accompanied by Brendan Marshall, Vice President of Economic and Northern Affairs.

Thank you for the opportunity to discuss the important matter of critical minerals with you today.

Increasing geopolitical uncertainty has focused attention on the precariousness of existing supply sources for many primary materials, including critical minerals classified by Canada's allies as the primary materials on which their economies and national security depend.

An increasingly uncomfortable reliance upon China for many of these commodities has led Europe, the U.S., Canada, Australia and other allies to come together to develop strategies and policy instruments to lessen this dependence.

Within Canada, there is a growing desire to source and procure locally, where possible, especially when doing so achieves better environmental and health outcomes. Recent polling data finds that almost 90% of those surveyed liked the idea of Canada being a preferred global source of critical minerals and would like to see government take a number of steps to support this approach.

The environmental, social and corporate governance leadership of mining companies operating in Canada, boosted by MAC's unique and increasingly globally recognized “Towards sustainable mining” initiative, reinforces confidence that when it comes to world-leading sustainable mining practices, Canadian mining is a leader.

The government has recognized that a resilient Canadian mining and metal manufacturing sector is essential to the 2030 climate plan's goal of establishing a domestic battery electric vehicle manufacturing supply chain. If a prosperous transition economy in Canada is contingent on the establishment of a domestic BEV supply chain, then strategic critical mineral investments are essential.

How do we make it happen? We propose two types of investments: first, programs that de-risk investments currently subject to China's market dominance, thus enabling current gaps in critical and BEV supply chains to be filled domestically in Canada; and second, investments that strengthen and enhance Canada's current levels of critical and BEV mineral and metal production.

For decades, China has held monopoly-like control over critical minerals production and distribution, rendering the rest of the world reliant on procurement and creating a level of risk that deters investors from entering these markets.

For example, who would invest in a rare earth mine with no access to a downstream facility to create value-added rare earth products? Who would invest in a value-added manufacturing facility when there is no upstream mine to source from? What advanced manufacturer would set up shop where they didn't have access to the materials they need to produce their end products—BEVs, high tech, medical or otherwise? The answer is no one, at least not without strategic government support that prioritizes economic security and autonomy enough to enable companies that play by the rules to thrive.

To address these challenges, we propose the establishment of a five-year, $250-million program to de-risk projects across the critical minerals supply chain using a two-tier approach: first, advancing pilot and demonstration projects; and second, scaling the successful ones to a level where operational independence is achieved.

Beyond plugging current supply chain gaps, government must also not compromise existing supply, with the impact of carbon pricing on remote mines being the top concern. Off-grid remote mines are virtually exclusively reliant on diesel fuel for power and haul-fleet operations for the time being. With very limited and currently uneconomic options to displace diesel, the competitiveness and longevity of these operations under the proposed clean fuel regulations and the projected $170 per tonne carbon price will erode.

Why does it matter, in the context of critical minerals? In 2018, for which we have data, 52% of nickel and 62% of cobalt shipped in Canada came from off-grid mines. Today, most EV batteries use cathodes with 60% nickel and 20% cobalt. Unless we get climate policy right, a Canadian critical minerals value chain will not materialize. Even if we plug rare earth supply chain gaps, we cannot compromise our ability to produce the materials that make up 80% of the input into batteries.

To this end, we seek your support for an industrial off-grid clean electrification fund.

COVID-19 has put into sharp focus what happens when we let industries slip away, leaving us at the mercy of global supply chains that, in times of crisis, can fail. Let's seize the tremendous opportunities before us to expand and strengthen our economic future.

Thank you very much.

[The Chair, Liberal, James Maloney]

Thank you very much, sir.

Let's move on to PDAC.

I don't know whether it's Ms. McDonald or Mr. Killeen.

[Lisa McDonald, Executive Director, Prospectors and Developers Association of Canada]

It will be me.

[The Chair, Liberal, James Maloney]

Excellent.

[Lisa McDonald]

Good afternoon, Chair and committee members. I'm Lisa McDonald, executive director of the Prospectors and Developers Association of Canada. I thank you for the opportunity to speak to the committee today.

As the leading voice of the mineral exploration and development sector in Canada, PDAC represents more than 7,200 members. Our work focuses on fostering a responsible and competitive mineral industry. Mineral exploration and mining form a cornerstone of our economy, employing over 700,000 Canadians and contributing in excess of $100 billion to our GDP in 2020. It is the largest private sector industrial employer of indigenous people on a proportional basis in Canada, and a key partner of indigenous businesses from coast to coast to coast.

Discovery of new deposits is an essential part of the mineral industry value chain. Over the last decade, more than $15 billion has been spent by companies exploring for minerals and metals in Canada. Mineral exploration is a significant economic driver in many northern and remote parts of the country through employment, procurement of services and providing development opportunities for the future. This sector is uniquely positioned to play a key role in reigniting critical parts of Canada's economy as we look beyond the COVID-19 pandemic.

The pandemic has reminded us of the resiliency of our mineral industry, as many companies were able to quickly adapt to find ways to safely operate. It has also reminded us of the value of infrastructure, and how northern and remote regions in Canada suffer from a deficit in transportation and telecommunications links. In fact, Natural Resources Canada estimates that mineral exploration in our three territories dropped by 50% in 2020 versus the year prior, whereas spending in Ontario and Quebec actually increased over the same period.

To ensure that all of Canada can recover from this pandemic, governments must focus on fiscal and regulatory frameworks that support the competitiveness of our mineral industry and development of the infrastructure needed to build back stronger. If something is not grown, it is either recycled or mined. The things that Canadians rely on each day, the inputs of modern society, come directly from the mineral industry. Our industry expertise, vast resources and potential for further discoveries mean that Canada is well positioned to become the global supplier of choice for the clean technology and renewable energy sectors, and lead our transition towards a low-carbon future.

However, mineral exploration is a complex process with low odds of success. Only about one in 10,000 mineral claims reach an advanced exploration stage, and just one in 1,000 advanced-stage projects become mines. Junior exploration companies do the bulk of this high-risk capital-intensive work, and account for upwards of 70% of all mineral discoveries made in Canada. However, new discoveries in Canada are in decline, with grassroots exploration down by roughly 75% over the last decade.

To become the global supplier of choice, Canada must encourage more investment in grassroots exploration and the search for new critical mineral deposits. To do so, we recommend that the government work with industry to improve the effectiveness of the flow-through share incentive and increase the mineral exploration tax credit from 15% to 30% in each province and from 15% to 40% in each territory, as these two mechanisms combine to generate roughly two-thirds of all funds raised for exploration in Canada.

The government also plays a critical role by facilitating public geoscience. Research by Ernst & Young in 2019 showed that every dollar in public geoscience spending by the government in recent programs has generated more than seven times that in overall economic benefit to Canada. PDAC recommends that the federal government take advantage of this value proposition by creating a new funding mechanism to support comprehensive provincial and territorial mineral resource assessments, based on geoscientific evidence, to identify and incorporate critical mineral potential into infrastructure, land management and conservation decision-making.

Thank you for your time today.

[The Chair, Liberal, James Maloney]

Thank you for your presentation. It was much appreciated.

Last but not least, we have representatives from the Department of Natural Resources.

Mr. Labonté, I see you have your mute off, so I will assume you are taking the lead.

[Jeff Labonté, Assistant Deputy Minister, Lands and Minerals Sector, Department of Natural Resources]

I am indeed, Chair. Thank you very much for the opportunity.

Ladies and gentlemen, thank you for the opportunity to discuss our role in the area of critical minerals.

I'm really pleased to join you here today with some of my colleagues from NRCan and, as previous experts have demonstrated, those from across the country.

I will start by saying that this is an extremely timely discussion, certainly one that is on the top of many people's minds and has been amplified by the pandemic. As Canada looks to rebuild the economy for the better, following the pandemic and the challenges it continues to present, this includes building a future and an economy that's greener, more inclusive and much lower-carbon.

It includes also taking action in areas in which Canada can shine and lead the way. I'll briefly cover three things that I think complement where we've been today with some of the other speakers: one, the importance of critical minerals; two, the opportunity for Canada to be a supplier of choice; and three, some of the work that we're doing at NRCan and with our colleagues to make these things a reality.

First off, as I think we would all say, but maybe it's important to underline, critical minerals go into everything from solar panels to wind turbines; from fuel cells to next-generation batteries and storage facilities for energy; from electric vehicles to robotics, electronics, health applications, defence procurement, and new and modern alloys and metals.

In the decades to come, these minerals are forecast to skyrocket, and we expect that demand will increase. For example, the World Bank has predicted a 500% increase by 2050 in the production of such minerals as graphite, lithium and cobalt just to feed the clean energy transition alone. The World Bank also estimates that over three billion tonnes of minerals and metals will be needed to deploy the clean energy needed for the world's transition to a lower-carbon future.

Here presents the opportunity, an opportunity that Canada is uniquely positioned to take advantage of in this global context. We already produce 60 minerals and metals of different varieties and are capable of producing many more. Canada is, by all estimations, a global giant in the mining and metal community. We are the fourth-largest holder of rare earth elements, behind China, Brazil and Vietnam. We are the only nation in the western hemisphere with all the minerals and metals needed to produce advanced batteries for electric vehicles.

Perhaps most important is that Canada is a world leader in the environmental, social and governance credentials in clean mining practices that are expected and that are not only important but a responsibility for Canada to promote and practise around the world.

These are our competitive advantages, and as we look at the opportunity, it is one we want to see and one in which Canada can shine, not only in getting critical minerals out of the ground, but in building the value chains—as it is identified in your study why these are important.

Let's pause for just a moment to talk about value chains. Value chains are—

[The Chair, Liberal, James Maloney]

I'm sorry to interrupt you. We'll just pause for a second.

I'm told that there may be some audio challenges. Your boom may not be in the right place.

Madam Clerk.

[The Clerk of the Committee, Ms. Hilary Jane Powell]

Mr. Labonté, could you make sure that your microphone is selected? When you look at the Zoom screen, there should be an indication at the bottom showing that your headset is selected on Zoom.

[Jeff Labonté]

That appears to be the case. Should I speak louder?

[The Clerk]

Sure, let's see. If you're able to speak a little bit louder, we'll give that a try.

Thank you very much.

[Jeff Labonté]

My apologies, Chair. My children don't think I'm soft-spoken; maybe it's just today.

[The Clerk]

Mr. Labonté, you can always try lowering your microphone a little too, just towards your mouth. Let's give that a try.

Thank you very much.