Natural Resources Committee on March 12th, 2021

[Robert Fung]

Our ore body is in northern Quebec. We are pretty well on the Quebec-Labrador border.

The real issue for companies like ours is not so much the regulatory, because we can deal with the regulatory. The big issue, especially in the rare earth specific area, and because you have such a big, dominant player like China, it is extraordinarily difficult to finance from the time you get the deposit, drill the deposit and move into production. This is the time when essentially you're most vulnerable. This is where, in terms of my recommendation, we're talking of government stepping in to help to get you, between the time of defining the resource, to a point where you can get the normal financial instruments to work.

[Greg McLean, Conservative, Calgary Centre, AB]

Thank you.

[The Chair, Liberal, James Maloney]

Thanks, Mr. McLean.

Mr. Lefebvre, we'll move over to you for six minutes.

[Paul Lefebvre, Liberal, Sudbury, ON]

Thank you, Mr. Chair.

Thank you to the witnesses for joining us today.

I'm coming to you from Sudbury. Before I get to my folks at Vale, who are in my backyard, just down the street here from me, I'd like to talk to Mr. Bahar from BMO very quickly.

In your presentation you talk a lot about supplier of choice. When you talk about that you're talking about the exploration side and the extraction side, that Canada can become that by our choice in that sense.

One thing that we're trying to explore in this committee is how we can make sure that the whole value-added chain is kept in Canada. That's always a tough part, because in Canada we usually dig our minerals. We explore, extract, and process, sometimes, and then they usually leave the country. They are input somewhere else, manufactured, and then we'll buy that back from here.

From an investment point of view, what is BMO concerned about?

Do you have some quick thoughts on how we can achieve that in Canada to make sure that the value-added chain is done inside Canada?

[Ilan Bahar]

It's a great question. I wish I were better placed to actually answer it. I'm so focused on just metals and mining—my clients are metal and mining companies—that I really focus on the first part of the value chain. I recognize your limited time and I don't want to take your time to respond to that, because it's a very broad question.

[Paul Lefebvre, Liberal, Sudbury, ON]

It is a broad question, but it's an important one, right?

[Bahar IIan]

It is.

[Paul Lefebvre, Liberal, Sudbury, ON]

We can extract more, which is great, but it's going to leave the country. We've added a few jobs here on the extraction side and the exploration side, but then it's gone. That's what we're trying to say. That's why I'd like to talk to my folks at Vale.

I know that we process it here in Sudbury. What is your plan? Would you guys like to share your ideas as to how we can do this and how Vale is exploring the possibilities of creating more of a value-added chain in Canada? Obviously, I'd like it to be in Sudbury, in my backyard, but I'm very nationalistic in my approach. It could be anywhere in Canada.

How do we ensure that? What are you guys working towards to achieve that?

[Juan Merlini]

Mr. Lefebvre, thanks for the question.

I think there is a big opportunity for the North American EV industry to foster that supply chain in the country, considering all the changes going on in the world and the strategic need to make sure of the availability of the resources in all the materials required for EVs. There definitely is a big supply chain in China that has been built and will continue growing to supply the rest of the industry, but we are seeing this coming more and more in North America and in Europe as well.

What are we doing? We are in discussions with all the players in this industry to ensure there are opportunities to be explored here in the country, not only in Canada but in North America as a whole, because most of the auto producers are here. We are in negotiations. Currently, our product will require some processing, depending on the use, but I think there is a big opportunity, with the right coordination and the right support, to foster that.

The challenge, just to finish the point, is that the demand is much higher than what is available. In order to foster that additional supply of materials, we will need a lot of support and coordination in order to make that happen. Otherwise, the auto industry will find other sources to supply their needs.

[Paul Lefebvre, Liberal, Sudbury, ON]

That's a really good comment. One of the things we're all concerned with is whether that has already passed us, in the sense of whether different countries are already looking at looking at other inputs because of the supply and the time it takes to find a deposit, extract the deposit and process that mineral or metal. Is this something that is a risk as we move forward?

What are your thoughts on that, Mr. Merlini?

[Juan Merlini]

Yes, Mr. Lefebvre, it is a risk. We are seeing the automotive industry already elevating the tone particularly for some materials like nickel. There is a concern that there won't be enough nickel for their needs. This could lead to two movements if we don't react fast enough to supply that. They will find another substitute, other materials, to supply the need, or they will foster production in other regions that will be able to supply that need. The risk is real.

[Paul Lefebvre, Liberal, Sudbury, ON]

That's what happened in 2007-08 when the price of nickel skyrocketed and we had the Indonesian nickel, what we called pig nickel. They flooded the market with that to drive the price down, but the quality is completely different.

I appreciate that.

Mr. Chair, how much time do I have left?

[The Chair, Liberal, James Maloney]

You have about 40 seconds.

[Paul Lefebvre, Liberal, Sudbury, ON]

Okay.

To continue on that, Ms. Concepcion, you talked about how Canada is well positioned to play a role there, certainly on the EV side. Can you elaborate as to how Vale is thinking in the next five to 10 years in its strategic thinking with respect to their role in the EV space?

[Nancy Concepcion]

Thank you for the question. Yes, I can elaborate on that.

It's really around a short-term plan that's looking at leveraging our existing assets within Canada to satisfy the demands of the players, particularly the automakers, who are coming to us and asking for supply. Then, I think, there's a longer-term plan that says we do have some assets in Canada that would be fantastic to develop and haven't been economic to date, and that could in the long term satisfy a lot more of the demand, especially from a local and regional perspective.

We're working on both of those fronts, both in the short term to try to make immediate change, and then in the long term to look at how we move forward and how we make the financials look better for a deposit that maybe hasn't been economically viable in the past.

[Paul Lefebvre, Liberal, Sudbury, ON]

Thank you.

[The Chair, Liberal, James Maloney]

Thank you, Mr. Lefebvre.

Mr. Simard, it's over to you, sir.

[Mario Simard, Bloc, Jonquière, QC]

Thank you very much, Mr. Chair.

Like any self-respecting Quebecker, I know all about the Fonds de solidarité FTQ, having personally invested money there for my RRSP.

Mr. Brosseau, you mentioned earlier that the government may have a role to play with regard to the risks associated with the new technologies that will emerge as a result of critical mineral development, especially in the field of transportation electrification.

The Québec Plan for the Development of Critical and Strategic Minerals 2020-2025 provides for an investment of $90 million over that five-year period. Thanks to its hydroelectric resources and its proximity to major markets like the U.S. and Europe, Quebec is extremely well placed to monitor the development of transportation electrification.

You talked about the role of governments earlier. How do you see the federal government's role in this transportation electrification strategy?

[Christian G. Brosseau]

As I said earlier, developing the entire chain, from exploration to electrification, takes and will take a huge amount of capital. Governments at both the provincial and federal levels are involved in these projects. However, the amount of capital required is so massive that companies and investment funds like ours, the Fonds de solidarité FTQ, can't take on the associated risks. It's beyond our financial capacity.

Governments should know that they can intervene and support this sector in order to foster its development, as the Government of Quebec has done.

We're living in a time of major technological upheaval, a new industrial age where new technologies require huge amounts of capital and expenditure. In order for us to reach a point where the cost is fully amortized and benefits the entire economy, governments will first need to make targeted investments in exploration and, above all, in processing.

There will also need to be programs that promote recycling more strongly. For example, governments need to support new technologies for recycling batteries. It's all well and good to talk about exploration and development and how it's part of Canada's DNA. I get it. However, if we want to play a role in the overall value chain, we will have to get involved in every sector in that chain, not just the ones early in the process. That means getting involved not just in processing and development, but also in recycling and the circular economy associated with these metals.

Metals are by definition a natural resource that is unfortunately limited. That's why it's important to take the entire chain into account, and governments have a role to play. They can support us by introducing regulations or programs that would reduce the risks and capital costs associated with the massive investments we need.

[Mario Simard, Bloc, Jonquière, QC]

We know that this situation will probably open up business opportunities. The federal government will have a recovery plan. Now is the time to refocus the economy.

Electrifying transportation reduces carbon emissions. If we want a low-carbon economy, electrifying transportation is a good way to get there.

The federal government once mooted the idea of an artificial intelligence supercluster. In light of the recovery plan, isn't it time to consider creating that supercluster, which could focus on transportation electrification, among other things? That could be a great opportunity.

You didn't mention this, but you must be involved in certain projects, like the Lion Electric project in Quebec, which seems promising.

Could you tell us about other projects that the Fonds de solidarité FTQ is involved in, in the area of transportation electrification specifically?

[Christian G. Brosseau]

As you'll see in our brief, our organization is indirectly involved with companies such as Lion Electric through other investment funds. It's really part of our investment strategy.

We're addressing these issues through more than transportation electrification though. Our approach is big picture. We are trying to advance a strategy to decarbonize transportation altogether. We know that electrification is good for cars for the general population, but it is not as efficient for heavy transportation, so we need to spend more time looking at ways to decarbonize heavy transportation.

We need to do that for industrial processes too. That's a big factor because they're major greenhouse gas consumers and emitters. We're also talking about mineral exploration a lot these days. We're studying various kinds of technology and developing partnerships to find ways to electrify or decarbonize mineral exploration and development. That is part of our overall strategy to decarbonize the economy. Electrification is not the only way.

[Mario Simard, Bloc, Jonquière, QC]

Do I have any time left, Mr. Chair?

[The Chair, Liberal, James Maloney]

No, in fact, you're right on time.

Mr. Cannings, it's over to you, sir.

[Richard Cannings, NDP, South Okanagan—West Kootenay, BC]

Thank you, Mr. Chair.

I'd like to thank the witnesses for being here. It's been a very interesting discussion so far.

I'll start with Ms. Concepcion.

It seems that a couple of times you've been left at the end of a question period and haven't had time to really say what you want to say.

I'm going to pick up on the EV topic. You said we had crossed the point of no return. I saw a recent poll where it showed that 70% of Canadians were seriously considering buying an electric vehicle as their next car, and that Canada was well positioned to take advantage of that.

Earlier in this study, we heard from Eagle Graphite, which has a mine in my riding. James Deith talked about how difficult it was when you don't have that value chain within Canada to buy and sell your products, and had to sell it elsewhere, and that China controlled a key part of that chain.

Could you expand on that? How can Canada, and perhaps more specifically the government, stimulate this? How can we develop that value chain, whether it's graphite, nickel, cobalt or any of the rare earth elements we've heard about?

[Nancy Concepcion]

There are several paths that can be taken in order to develop. It's important to understand that this supply chain will develop naturally, following the automakers. As automakers transfer into production of EVs, the supply chain will build around them. It's just more convenient. It lowers emissions, It lowers carbon footprints.

There are components there saying that most of China controls the processing of our metals in our materials. I mean that across the battery of metals portfolio. Many countries mine them, but they go to China for processing.

We will definitely have to expand. Not only do we need to promote the auto industries into making EVs, which means promoting them with consumers, but we also have to support the development of that supply chain. The processing of the minerals, the development of the battery cells, the battery materials, all need to be brought together and incentivized.

What's really happening is the creation of these battery hubs. We're seeing them formed across the world, particularly in Europe, which is new, but they're also starting to form in North America.