Natural Resources Committee on Feb. 22nd, 2021

[The Chair, Liberal, James Maloney]

I call to order meeting number 13 of the Standing Committee on Natural Resources.

I'll start by saying I appreciate Mr. Lloyd's enthusiasm. I can assure you that it's shared amongst all members of this committee regardless of what province we're from.

To our witnesses, thank you for coming. I'm going to do some formal introductions of you and the process in a moment, but if you don't mind bearing with me and the committee for a few minutes, we have some outstanding matters from our last meeting that I would like to deal with.

Members, I'm referring to Mr. McLean's motion and Mr. Simard's proposed amendment, and Mr. Lloyd's objection to the amendment.

On Friday, as everybody will recall, we postponed this issue to be dealt with this morning because we didn't have the documents in front of us and there were some issues with respect to translation. By now, everybody should have received a copy of Mr. Simard's proposed amendment in both official languages. Hopefully, you have that in front of you.

I've had a look at it. I've had a further look at Mr. McLean's motion. I've given consideration to Mr. Lloyd's objection. I've had a look at rules of procedure.

Mr. Lloyd, I'm going to rule that the proposed amendment is acceptable and appropriate.

That being the case, barring any objection to that, what I propose to do is continue our debate on the amendment. Then, once we have disposed of the amendment by way of vote, we can continue our debate and discussion on Mr. McLean's motion either as amended or as it currently stands. That's my plan.

Mr. Lloyd, I see you have your hand up, as does Mr. McLean.

[Dane Lloyd, Conservative, Sturgeon River—Parkland, AB]

I will defer to Mr. McLean, but I'd like to have an opportunity to respond right after him.

[The Chair, Liberal, James Maloney]

Go ahead, Mr. McLean.

[Greg McLean, Conservative, Calgary Centre, AB]

Mr. Chair, I wonder if this would be better dealt with if we set aside 15 minutes at the end of the meeting for this matter: hear the witnesses for an hour and three-quarters and then deal with this at the end.

Would that be a more appropriate way to get through our agenda today, as long as it's clearly defined?

[The Chair, Liberal, James Maloney]

Yes, Mr. McLean. Thank you for that. I'm more than happy to proceed in that fashion. I just didn't want you or any of your colleagues to think I had decided not to deal with the issue as I had committed to doing on Friday. Thank you for proposing that.

Assuming there are no objections from any of the members, we can jump into the meeting. I see none. I see thumbs-up and heads nodding. That's good.

To our witnesses, welcome and thank you. This is our second meeting on a very important study dealing with critical minerals and supply chains in Canada, and we are very grateful for your taking the time to be here today.

In terms of some of the rules of the road, we are conducting this meeting by Zoom, which unfortunately carries with it some challenges. What I ask is for people to wait until others have finished speaking before taking their turn to speak, so that the interpreters and members can clearly understand everything that's being said.

The process will be that each group will be given up to five minutes to make an oral presentation, following which the floor will be open to questions from the members. You are welcome and encouraged to speak in either official language. You have headsets provided for you. On your screen, you should see a little symbol at the bottom that provides for translation. If you are having any troubles in that regard, please speak up and let me know and we will take steps to rectify it.

As I said, you have five minutes each. I welcome all our witnesses.

We have Avalon Advanced Materials Inc., the Battery Metals Association of Canada, Benchmark Mineral Intelligence, Eagle Graphite Corporation and the Yukon Chamber of Mines.

Madam Clerk, do we have everybody present now?

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

We are still waiting for our last witness, the Yukon Chamber of Mines, so I will monitor when Mr. Hartland joins. We might need to do a quick test with him, depending on how his headset is, but in the meantime, as he is last on the list, we can proceed.

[The Chair, Liberal, James Maloney]

Thank you. Perhaps you can give me a little nudge when he arrives and we can deal with it at the time.

Let's get started with Mr. Bubar from Avalon Advanced Materials.

Sir, you have the floor for up to five minutes.

I should forewarn everybody that, as unpleasant as it is, one of my jobs is the chief interrupter. If people are going beyond the time allocated, I have to stop you. Sometimes that occurs in mid-sentence. I try to avoid it, but try to be conscious of the time. Thank you.

Go ahead, sir.

[Donald Bubar, President and Chief Executive Officer, Avalon Advanced Materials Inc.]

Thank you very much for the invitation to be a witness here today.

I'll give you a little bit of my background information. I'm a geologist. I've been involved in mineral exploration and development in northern Canada for 45 years now. For the last 26 years, I've been president and CEO of Avalon. For most of those years, we have been looking at opportunities to start these critical minerals supply chains in Canada—notably, lithium, rare earths, cesium, tantalum, tin, indium and others. It's been very challenging. It's not simple getting these non-traditional commodities started into production, but now there is certainly interest, and we're delighted to see that new opportunity is there.

One opportunity I'm particularly excited about is that this will create enormous new economic development opportunities for indigenous businesses and communities in the north. I have been an advocate for this for many, many years. Some of you who read The Globe and Mail may have seen that I got an opinion piece published two weeks ago in the report on business. It was co-authored by my good friend and former national chief Phil Fontaine. We pointed out how these new critical minerals supply chains offer a tremendous opportunity for active involvement by indigenous communities in the north in building these new supply chains.

I'm keen to be able to create some positive examples of that myself. With our lithium project, we're now at the stage of trying to get a lithium process refinery to make the battery material products from the mineral concentrates that are your feedstock at a location in Thunder Bay, Ontario. We think it's ideal because of its location with respect to existing transportation infrastructure and the proximity to new markets emerging in eastern Canada.

Part of the dialogue there is that there's lots of interest in Thunder Bay in having that facility there, including with the Fort William First Nation. They are keen to partner with us, to work with us on getting this refinery established on their land and at the same time create many new opportunities for other first nations to begin to create the supply of lithium minerals as feed for that refinery going forward. That will allow us to increase production over time, because we know that there will be an increase in demand over time. That's our vision for getting that supply chain started in that sector.

The other thing I would like to mention briefly is that there are many other circumstances where you can look at trying to recover these critical minerals from unconventional situations. You're going to hear about one from E3 Metals later, I guess, on the recovery of lithium from the oil field brines in Alberta. Another very unappreciated opportunity is going back to historic mine wastes that are closed mine sites. They were developed decades ago to produce a traditional exchange-traded commodity, but the resource may have had many other elements in it that had no value or interest decades ago [Technical difficulty—Editor]. Many of these sites now offer opportunities to go back and create a new plan, reprocess the tailings that track critical minerals, and fully remediate the long-term environmental liability while you do it.

There are lots of opportunities, including some for lithium. We had a project in southwestern Nova Scotia, a past-producing tin mine called East Kemptville. Tin mines are not just tin deposits. There's lot of stuff in them, including lithium, tin, indium, gallium and germanium. Lots of potentially important critical minerals are there in the wastes and the tailings. There are new opportunities to recover them and remediate the site, but it's never easy to do. There are always issues in terms of access and managing the liabilities from the historically poor understanding of what sort of opportunities are available there now.

Plus, there are a lot of innovative new technologies being created now to allow for more efficient extraction processes that just don't generate the waste that traditional mining operations used to.

All of those things are possible, and I would love to be able to get some of these situations started, create a positive precedent and show the rest of the world how we can provide real leadership on recovering these critical minerals in these non-traditional circumstances. Plus, I'm looking at one for rare earth.

In northern Ontario, we just disclosed last week a really interesting opportunity to get the rare earth supply chain started quickly and easily, just by processing historic mine waste.

[The Chair, Liberal, James Maloney]

Thank you, Mr. Bubar.

I'm going to have to stop you there, but I appreciate your presentation. Any time anybody mentions Thunder Bay, my ears perk up because I was actually born in Thunder Bay, and Mr. Weiler, who is a member of this committee, has ancestors who hailed from Thunder Bay. In fact, my birth certificate actually says Fort William, which is more a reflection of my age than anything.

Let's move on to the Battery Metals Association of Canada.

Ms. Lappin, you have five minutes.

[Liz Lappin, President, Battery Metals Association of Canada]

Good morning. My name is Liz Lappin, and I am the president of the Battery Metals Association of Canada, or BMAC for short. In addition to BMAC, I also work for E3 Metals Corp., just recently mentioned by Mr. Bubar. We're working to develop a first-of-its-kind lithium project in Alberta. Thank you for the opportunity to present today.

Development of the battery metals sector, from mines to mobility, is essential to support the continued expansion and adoption of clean tech as the world transitions to a low-carbon future. Relative to the EU and Asia, the Canadian battery metals supply chains are currently in their infancy. However, with surging demand for battery metals to feed the expanding EV supply chain, the market opportunity for Canada is growing.

BMAC was formed to help develop the united industry voice. Through a collaborative approach, we're working to connect, align and advance the industry so that it can meet its full potential for Canada. Our community is predominantly based in western Canada; however, our vision is pan-Canadian.

This brief is divided into three sections that outline recommendations for the sector.

The first area of focus is support for critical minerals project development. The World Bank and a host of forecasters anticipate greatly increased global demand for critical minerals in the years ahead. While Canada has an abundance of resources, they have been slow to develop due to a variety of challenges. Examples include high volatility in emerging pricing, competition for capital against established critical minerals jurisdictions, the highly complex nature of battery metals production, and delays in regulatory and policy development. Canada needs to move swiftly to support the needs of its domestic economy.

To support critical minerals development, BMAC recommends financial support for qualified domestic battery metals companies that are capable of demonstrating viable prospective projects; promoting exploration and identification of resources by amending the Income Tax Act to ensure that lithium brine resources are eligible for flow-through shares; encouraging provinces to rapidly develop responsible yet industry-friendly mineral policy and regulations to accelerate critical mineral resource development; and promoting streamlined tenure and regulatory frameworks to incentivize responsible development. Finally, we recommend prioritizing innovation funding for industry cluster applications, which would incent Canadian collaborations and strengthen connections along the supply chain.

Our second area of focus is investing in value-added manufacturing. To avoid simply being an exporter of raw materials, Canada needs to further develop its domestic value-added industries across the country. Developing a complete, made-in-Canada, end-to-end, coast-to-coast supply chain is key to ensuring that Canadians have access to the resources and products they need, including batteries for electric vehicles and energy storage. To do this, we recommend prioritizing investment in the battery component and cell manufacturing sector as part of Canada's “build back better” strategy, developing policy and financial incentives to support Canadian industry and government to buy local, and, finally, harnessing the purchasing power of government, public institutions and publicly owned businesses to provide scale.

Our third and final focus area is developing a cohesive strategy. To borrow an analogy from the arts, it is commonly said that in order to play a symphony, you need an orchestra. Today what I hear are a variety of notes of music or even sometimes a few lines of music strung together. If the entire orchestra—including government, industry, academia and stakeholders—can all get organized behind a conductor, or essentially an overarching strategy, we could play some pretty incredible music. A symphony, like art, can be transformational, and a successful build-out of this industry in Canada can also be transformational, but only if we can all get behind that strategy, acting as a system rather than as individual actors or musicians just playing our own parts.

Canada is on the cusp of a rare, once-in-a-generation opportunity to develop its critical mineral industry and compete in this major new market. The global pandemic, in particular, has laid bare the shortcomings in Canada's ability to produce critical goods needed for our country. We do not wish to face similar circumstances in the resources, components or products that will deliver a greener future to Canadians. While it's true that Canada has fallen behind in this respect, it can still catch up, particularly as the sector continues to evolve to meet Canada's own needs.

BMAC believes that by acting swiftly, together, efficiently and responsibly, we will realize the abundant opportunities before us.

Thank you.

[The Chair, Liberal, James Maloney]

Thank you very much—right on time, too.

Before we move on to Mr. Moores from Benchmark Mineral Intelligence, I understand that Mr. Hartland has arrived, so perhaps we could do a quick sound check, and I could explain to Mr. Hartland what we're doing.

Sir, I'm assuming you can hear me. Each witness group that's here today is given up to five minutes to present. When all the groups are done, we're going to open the floor to questions. We've started, and have heard from two witnesses so far. There will be two more, and then we'll reach you.

Perhaps the clerk can do a quick sound check with you before we carry on.

[The Clerk]

Certainly.

Mr. Hartland, if I could ask you to say a sentence or two, we want to make sure that our interpreters are able to hear you.

Thank you very much.

[Samson Hartland, Executive Director, Yukon Chamber of Mines]

Good morning, everybody.

I am Samson Hartland, the executive director of the Yukon Chamber of Mines. Apologies for the late appearance.

[The Clerk]

Perfect, thank you very much.

[The Chair, Liberal, James Maloney]

Thank you, Madam Clerk.

We'll move on to Simon Moores, from Benchmark Mineral Intelligence.

Mr. Moores, you have the floor.

[Simon Moores, Managing Director, Benchmark Mineral Intelligence]

Good morning and good afternoon from London, U.K.

We are in the midst of a global battery arms race, where the world's major economies are building a base to the energy storage revolution. The lithium-ion battery is the platform technology to unlocking the vast potential that energy storage holds for our world through electric vehicles and stationary storage systems. This race to build global battery capacity has seen a number of megafactories or gigafactories in the pipeline go from three in 2015, to 192 today.

China and Europe have led this charge, but North America is just beginning its journey. The importance of these battery megafactories cannot be underestimated. They not only provide the necessary lithium-ion battery cells at scale and low cost to tap into this mega trend, but these supersized battery plants are becoming physical embodiments of a country's industrial and technological ambition.

Due to significant investments made today, by 2030, China and Europe will hold the sway of this industrial power, accounting for 67% and 18% of the world's battery capacity, respectively. North America will presently hold just 12%, a fraction of what it needs today, and a number that's at odds with its global energy and automated position.

Access to low-cost lithium-ion batteries will be one of the factors in determining which economies come out on top in the race to decarbonize the world. However, this is not just a battery game, but one of supply chain dominance. As it's known to all of our Canadian customers and friends, this begins in the ground at mine level.

While 25% of the cost of an electric vehicle is the lithium-ion battery, 80% of the cost of the battery is the minerals, metals and chemicals that go into it. In the end, a fundamental limiting factor is access to quality raw materials and chemicals at a stable long-term price. While the world's governments and automakers focus on building EVs and battery plants, a true leader has yet to emerge in building the supply chains to feed them. At Benchmark, we call this the great material disconnect between those making the EVs and the miners and chemists building the specialty materials to go into them.

Canada is a country built on understanding the importance of these supply chains. Your country has some of the richest resources of EV minerals and metals, such as lithium, nickel, cobalt, graphite, manganese, copper and rare earths. Just as importantly, you have the people, the know-how, and the technology to be able to access these resources in a responsible and economic way. As a result, Canada holds the potential to create the upstream blueprint for this global energy storage revolution.

While the world looks one way to build EVs and battery cells, Canada should look the other way, upstream, to not only ensure the basic supply of raw materials for this revolution, but add the value, make the chemicals, the anodes, the cathodes, even maybe 100% Canadian lithium-ion batteries from mine to sale.

This has been China's approach. China has built dominance in the supply chain from more than a decade of investments. Despite the common misnomer, only 23% of all battery raw materials are mined in China, but 80% of battery chemicals are refined there. Having huge midstream capacity ensures these key raw materials flow into China to be value-added. It also translates into creating trillions of dollars of value in downstream industries.

This is a game of raw material musical chairs, and with no country willing yet to take a leadership position, the music will stop and with it, the electric cars and the energy storage systems needed to decarbonize the world will grind to a halt.

Canada holds the ingredients to solve this problem. To make this happen, Canada needs to align policy, legislation and funding at both the federal and provincial levels.

The European Union recently invested three billion euros into the battery supply chain, which will spark three times the amount of private investment. The United States, investing $20 billion into the semiconductor supply chain last year, is also an apt example. The world's major economies are rapidly realizing that their economic security is national security, and that the lithium-ion battery supply chain is the battleground.

I would like to thank the committee, Chairman James Maloney and Vice-Chair Greg McLean for inviting me to speak on this subject.

Thank you.

[The Chair, Liberal, James Maloney]

You are very welcome. We thank you.

Mr. Deith, the floor is yours, sir.

[Jamie Deith, Chief Executive Officer, Eagle Graphite Corporation]

Thank you. I deeply appreciate your inviting me to share some thoughts.

When I accidentally bought a graphite mine 15 years ago, I had no idea just how lucky I was to have stumbled on our project. Here was a graphite quarry that was already built and permitted and had already produced graphite.

The project was and is an environmental dream, with no acid contamination to worry about, and not even any tailings, because there is a market for all the material that isn't graphite. It has hydroelectric power for processing, and it's amenable to becoming an all-electric operation once haul vehicle technology advances far enough. The graphite itself is indispensable for a number of clean energy technologies, and it is the carbon that reduces carbon footprint.

The project enjoys overwhelming community support, including support expressed by all political parties, provincial and federal. It is staffed by loyal and talented people who became experts by actually making graphite, producing some of the highest-quality graphite in the world and doing so on an unbelievably low budget. Before long, we successfully qualified as a supplier to some key customers, and all we had to do was scale up production capacity to meet their orders.

On reflection, we had stumbled into no ordinary project, but one whose features are globally unique. Compared to all my peers who had also unintentionally purchased their own graphite mines, I was clearly the most fortunate of the bunch.

However, I had no clue just how much pain we were in for in trying to further develop this project.

Natural graphite is the poster child for minerals dominated by China and, in the face of a near monopoly wielded by one of the most powerful governments in the world, no combination of attributes could convince prospective sources of capital to invest in required expansion. Supply chains around the world seemed mostly content with heavy reliance on a single nation.

In the extreme case of natural graphite for lithium-ion batteries, fully 100% of the intermediate-stage processing was taking place in China, and still is. This positioning is intentional. China has been investing in electric vehicles since at least 2009 and openly seeks global dominance in the sector.

Meanwhile, project financing circles generally approached green energy as an afterthought and viewed traditional fossil fuel projects as safer long-term bets.

However, as noted by a number of your earlier witnesses, viewpoints have recently shifted rapidly and decisively. With GM and Ford the latest to fully commit to EVs, the green energy debate is seemingly over, at least as far as transportation is concerned; the question is not if but when the last fossil fuel car will roll off the line.

At the same time, there is a renewed sense of urgency for secure, localized and diversified supply chains across all industries, but especially those critical to defence and otherwise foundational to the economy. It has finally dawned on us and our allies collectively that some parts of the economy need a reliable underpinning of steady supply.

Now that this tipping point has arrived, Canada has a choice of roles. We can choose to be base-level raw material suppliers. The minerals involved are poised for exponential demand growth, and projects like my own seem likely to be slammed with more customers than we can handle. In our case, this would mean selling our natural graphite for about $1 per kilogram, based on current markets. If my hunch is correct, our economic friends and adversaries alike will gladly take all that we have to offer for that one dollar. Standing today, this is the limit of Canada's capabilities.

Canada's other alternative is for us to invest heavily and with urgency in downstream manufacturing, nurturing a viable ecosystem of second- and third-stage processing capability, where currently there is a vacuum. For graphite, this means processing that one-dollar output into advanced products like battery anodes, valued at over $5 per kilogram.

Most of us would prefer the latter role, but achieving it requires significantly increased commitment from all of us. Half measures will not buy us half an ecosystem. There are many good ideas as to the form these commitments might take, and I'm happy to be involved in that discussion, but there simply isn't enough time to list all the possibilities now.

In any event, whatever we do must be bold and so compelling that end-users and investors alike will find the effort credible enough that they will queue up to buy in. This is how we go from where we are now to a thriving ecosystem, and if we achieve this, it won't be just a happy accident.

Thank you, and I look forward to your questions.

[The Chair, Liberal, James Maloney]

Thank you, Mr. Deith.

Last to hear from is Mr. Hartland.

Mr. Hartland, you have the floor for five minutes.

[Samson Hartland]

Good morning, everybody. Thank you for the opportunity to be able to present this morning, and thank you, members, for making the time for such an important topic.

Here in the Yukon I represent the Yukon Chamber of Mines. We represent a membership of over 700 members, representing every facet of Yukon's mineral development industry. We have some of the best geology in the world in mineral occurrences, and have been quite well renowned for that ever since the Klondike Gold Rush. However, now, 100 years later, we know that the transformation and the need for our minerals are very different today than they were in yesteryear. We have some of the best geology, as mentioned, and with that in the critical minerals area we have active exploration projects related to nickel, cobalt and the platinum group of metals.

I won't spend too much time talking about our potential. I think that's the reason we're here today, and people are very familiar with our place in the world global commodities market. I think what I would spend a little bit of time on, and speak to, is what some of the challenges or barriers might be to getting to some of those critical minerals that are so highly sought after and strategically important to the people online today.

We know that one of the challenges preventing us from getting to some of these minerals is the fact that they're land-locked. Some of those investments announced by the federal government three years ago related to the Yukon resource gateway project. It has seen very little spent to date in the way of being able to develop Yukon's highway and road network to enable access to key minerals and strategically get into the Tintina Belt, which would obviously unlock strategically a significant amount of minerals.

Energy production is another significant barrier at this time. Yukon energy is 99% renewable, so we have some of the cleanest energy produced in the world. However, there's only a finite amount of it. Right now we're at capacity, and there are issues related to trying to get us connected to the B.C. grid. It is something that was presented as per our pre-budget consultations. Connecting to the B.C. grid would be transformative for our industry and for our territory, both in the way of developing projects, but also developing communities.

There's a very symbiotic relationship between the minerals in the ground and the people above it who are considered the caretakers of the land, and that's Yukon first nations. Another key component to accessing the critical minerals that exist in the great geological occurrences in the Yukon is an early, effective and meaningful engagement with Yukon first nations. There's a lot of discussion around what the permitting and regulatory regimes look like, and we're currently in the development of a mineral development strategy, which we hope will bring in renewed mineral development legislation that clarifies and incorporates some of the key tenets that are important to Yukon first nations, but also to industry in the way of corporate and social responsibility.

I'll leave my comments at that, and leave it open to questions. I know there will probably be some more pointed questions about the Yukon's position and being able to supply some of these critical minerals, and I look forward to being able to answer those.

Thank you, Mr. Chair.

[The Chair, Liberal, James Maloney]

Thank you, Mr. Hartland.

I don't ever get to say this, but we had five witnesses and all stayed within time, so I didn't have to interrupt. I take great pleasure in that, to let you know.

We'll start our questions now.

Mr. McLean, you have the floor for six minutes.

[Greg McLean, Conservative, Calgary Centre, AB]

Thank you, Mr. Chair, and thank you to all the witnesses for coming today and giving us such good presentations on this sector and where we need to go with this sector.

I'll start my questions with Benchmark Minerals, please, and Simon Moores. Mr. Moores, you talked about the costs of the batteries. We talk about 80% of the costs being from the actual supply of the raw materials themselves. Can you talk a little about the supply and demand of those raw materials as we move into more of a battery-intensive transportation network going forward, that is, the relationship to price and the relationship it's going to have on the actual cost of battery storage?

[Simon Moores]

Yes, I'd be more than happy to.

The critical materials are the ones that are produced in the hundreds of thousands of tonnes, like lithium, cobalt, graphite, and then subsequent anodes and cathodes after that. They will go through a very stressful 10 years. What I mean by that is that there will be extreme volatility. There will be moments of significant undersupply, and then moments of significant oversupply, and then continuous. We've already experienced that with lithium in the last four years.

What's happening is that the demand for these raw materials is growing at a pace that no one alive has seen. This is an order of magnitude over 10 years that could be anywhere from a four to ten times demand change within that time period, depending on the battery raw material that you're looking for.

I've spoken to the chiefs of big mining companies like Rio Tinto and Anglo American about this and asked them if they had seen it in base commodities that we're more familiar with, but not this great curve and not at this pace.

A good story in my head that I always take away is that it takes four to seven years to build and fund a lithium mine, but it takes 18 months to build a battery plant. So you can instantly see the problem with them and how the supply chain is going to build out, and that leads to the volatility that I mentioned at the start.

[Greg McLean, Conservative, Calgary Centre, AB]

If we talk about either lithium or cobalt and its pricing today versus its pricing in, let's say, five years, when we'll have, according to optimistic accounts, 10 times as many electric vehicles on the road in North America, tell me what the pricing chart would look like.

[Simon Moores]

Pricing is simply a function of supply and demand. It doesn't matter if the market is 10 times the size in the future or if it's the size it is now. Lithium, for example, is going through a period of shortage right now, so the price is going up. In the last four years, when the EV demand increased 30% for lithium, the price was coming down at that time.

What happens when lithium's price stays down, and the same for cobalt? If it stays too low for too long, you just don't get investments in new mines. There's always an incentive price to bring on a new supply. As a result, at the moment, because it's left to the capital markets, you're not getting the money for those new mines, and that's really where there could be a role for the government to play and underpin that.