Canadian ownership is critical if we are to prosper from minerals strategy

TORONTO–The unfriendly bid by Switzerland-based mining giant Glencore to acquire Teck Resources, one of Canada’s last mining giants that is still Canadian-controlled, raises an important question for the Trudeau government: with a number of global mining giants to make even pricier bids beyond the $23 billion offered by Glencore, would the government use Investment Canada to block a foreign takeover? Or will our critical minerals and rare-earth mining potential become even more of a foreign-dominated sector than it already is? The Trudeau government has been pushing hard to promote Canada as a reliable world leader in critical minerals and rare earth, and there’s no doubt there is potential. But will this potential lead to the emergence and scaling up of Canadian-controlled mining companies, or will we become a country with much mining but few Canadian mining companies, with the wealth benefits captured largely by foreign corporations? There’s much reason to believe that critical minerals and rare earths will be just another branch-plant activity. While the Liberal Party once preached the importance of sustaining a high level of Canadian ownership and control in the economy, it seemingly no longer sees that as important. Late last year, the federal government published The Canadian Critical Minerals Strategy, with Natural Resources Minister Jonathan Wilkinson declaring that “critical minerals present a generational opportunity for Canada in many areas: exploration, extraction, processing, downstream product manufacturing and recycling. The federal government is committed to seizing this opportunity in a way that benefits every region in the country.” Industry Minister François-Philippe Champagne added that “Canada’s leadership in this space has never been more important,” adding that “Canada can—and will be—the solution” as the world seeks needed resources. A list of 31 minerals considered by Canada to be “critical” has been published, and Budget 2022 and Budget 2023 set aside billions of dollars for big subsidies, along with rich tax incentives, to drive projects and attract foreign corporations. At the same time, Canada has promised to speed-up environmental hearings for foreign mining and energy projects in Canada. There is much in the strategy that makes sense, such as allocating $40-million towards the $112.4-million Centre for Excellence in Mining Innovation, to accelerate the development and commercialization of Canadian innovations in the mining sector, investing much more in the geosciences to improve our knowledge of what resource reserves we actually have, and improving sustainable infrastructure to improve access resources. But there are problems of excessive expectations. For example, many rare earth and critical minerals are available in other parts of the world, while in many cases, Canada is neither a leading producer nor the location of plentiful minerals. At the same time, technologies will change, so, for example, the world could end up with a glut of lithium or cobalt as new battery technologies emerge. But a bigger challenge is the wide gap between what the government often promises and what it delivers. The minerals strategy says Canada “must ensure that value is added to the entire supply chain, including exploration, extraction, intermediate processing, and advanced manufacturing and recycling. We must create the necessary condition for Canadian companies to grow, scale-up, and expand globally in markets that depend on critical minerals.” Given that so much of the industry is foreign-controlled, what are the necessary conditions for Canadian companies to prosper, and how will the government prevent them from becoming the next takeover targets? There are some promising Canadian companies. They include Neo Performance Materials, First Cobalt Corp., Li-Cycle Holdings and Nano One Materials Corp. But will they be much bigger, Canadian-controlled companies five years from now? Over a two-year period, in 2006-07, almost all of Canada’s biggest mining and metals companies were the target of foreign takeovers and they had an easy time getting Investment Canada approval. This massive foreign takeover of much of this industry sector only raised concerns after the fact, when it was too late. In 2006, Inco was acquired by Brazil’s Vale for $17-billion, Falconbridge was acquired by Swiss mining giant Xstrata for $22.5-billion, and steelmaker Dofasco was purchased for $5.5-billion by Luxembourg-based Arcelor (in turn acquired by Indian steelmaker Mitta), for $5.5-billion. The following year, Alcan was acquired by Australia’s Rio Tinto for $32-billion, steelmaker Ipsco was bought by Sweden’s Svenskt Stol AB for US$7.7-billion, and steelmaker The Steel Company of Canada was sold to U.S. Steel for $1.7-billion. There are many exciting projects underway in Canada today, but it is interesting to see how many are foreign-led. The Nechalacho rare earths mining project in the Northwest Territories, along with its Saskatchewan-processing facility, is owned by Vital Metals in Australia. The North American Lithium mine that just opened in Quebec is jointly owned by Australia’s Sayona Mining and U.S.-based Piedmont Lithium. Australia’s Wyloo Metals acquired Noront Resources in the Sudbury region in Ontario for $133-million. And Australia’s BHP is building a massive potash mine in Saskatchewan. To ensure Canadian ownership, we will need a public entity that can be a patient or long-term investor with sufficient equity to block a foreign takeover. In a Quebec project, Nemaska Lithium, which is mining lithium, and building a refinery for battery-ready lithium, ownership is divided equally between Livent, a U.S. company, and Investissement Quebec, a public agency. We have the proposed Canada Growth Fund, to be capitalized with $15-billion and combine public and private capital, which could be used to provide equity for new or expanding Canadian companies. We have the Canada Development Investment Corp., which can hold investments in the public interest, and already does. Some degree of long-term public equity may be the only answer if we want to ensure that a reasonable share of our mining sector is Canadian-owned, and that younger Canadian companies don’t have to feel that selling is their only option. In fact, Canadian ownership will be necessary if we want to retain some of the profitable wealth from our own natural resources. David Crane can be reached at crane@interlog.com. The Hill Times