Monday, April 05, 2021

EV'S ARE NOT SUSTAINABLE NOR ARE THEY GREEN

Mining executives warn Ottawa about dependence on China for strategic minerals amid deteriorating relations

Jesse Snyder 
POSTMEDIA
4/5/2021

OTTAWA — Mining executives and national security experts are warning the federal government about China’s domination of strategic mineral supplies, saying Ottawa needs to better protect supply chains for modern technology that relies on them like electric vehicles and smart phones.

© Provided by National Post Pierre Gratton, head of the Mining Association of Canada, is urging federal policymakers to create a framework to develop and then protect Canadian supply chains for batteries and other products, and recommended the federal government establish a $250-million program over five years to incentivize investment in demonstration projects.

In testimony before the House of Commons natural resources committee this month, experts described China’s decades-long efforts to control the market for critical minerals — including the 17 rare earth elements — by rapidly expanding its processing capacity or by acquiring foreign assets to dominate supply chains. The minerals, which include magnesium, lithium and scandium, are used to develop such strategic products as solar panels, wind turbines, electric car batteries, mobile phone components and guided missiles.

Canada sits atop an abundance of such minerals, from a large deposit of neodymium in northern Saskatchewan (used in the manufacture of magnets) to the sizeable pockets of lithium found in Quebec. That strategic advantage, experts said, makes it incumbent on Ottawa to help strengthen Canada’s supply chain and protect against China’s coercive foreign policy tactics.

The witnesses are sounding the alarm as Canada-China relations deteriorate over the detention of Canadians Michael Kovrig and Michael Spavor. The impasse has revealed China’s willingness to inflict economic pain by restricting Canadian exports.

Robert Fung, chairman of Canadian mining firm Torngat Metals, said China has over the years amassed around 80 per cent of global processing capacity for strategic minerals, and has used that position to manipulate prices as a way to punish competitors.

“We all know that is not a geopolitically acceptable situation,” he said in testimony earlier this month.

Fung and others stressed that Canada’s abundance of natural deposits of minerals like lithium, nickel and others could give Canada a significant strategic edge in coming years. Minerals used in the manufacture of magnets for electric cars, for example, are almost exclusively located in Canada and in Australia, which has already taken the lead over Canada in their development.

“This is a once-in-a-lifetime shot at being in a position to have a degree of control in a very large market,” Fung said.

Pierre Gratton, head of the Mining Association of Canada, described an “increasingly uncomfortable reliance” on China for commodities, particularly for rare earths and other critical minerals. He said China declines to “play by our rules” in the development of those minerals, effectively undercutting the free market.

“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,” he said.

Gratton urged policymakers to create a framework to develop and then protect Canadian supply chains for batteries and other products, and recommended the federal government establish a $250-million program over five years to incentivize investment in demonstration projects.

“If we can get to it and create the right conditions, we could be in a very, very strong place going forward.”

Industry Minister François-Philippe Champagne last week updated the federal government’s foreign takeover guidelines involving rare earths and critical minerals, effectively lowering the threshold for what would trigger a national security review.

Earlier this month, Natural Resources Canada released a list of 31 minerals now designated as strategic, everything from copper to cobalt to tellurium.

Ottawa more broadly has faced criticism for failing to set out clear national security thresholds to guide proposed takeovers of Canadian natural resource assets, including by state-owned Chinese enterprises.

Those criticisms effectively prompted Ottawa last year to bring “enhanced scrutiny” to proposed takeovers from Chinese and other firms. In December, the Industry Department rejected the proposed $207-million takeover of TMAC Resources, a small company developing an Arctic gold mine, by Shandong Gold Mining, a Chinese state-owned enterprise.

Committee witnesses also warned that competition to secure critical minerals will only intensify as demand for electric vehicles and electronics grows.

Simon Moores, managing director of Benchmark Mineral Intelligence, said China is likely to possess 67 per cent of global capacity to build lithium-ion batteries by 2030, due in large part to significant investments the country has made, including in so-called “mega factories.” North America, by comparison, will have just 12 per cent of the market, according to BMI research.

“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,” Moores said.

But developing strategic assets in Canada has proved challenging. Jamie Deith, chief executive of mining firm Eagle Graphite, described to the committee the struggles he has had raising capital to develop his graphite quarry in British Columbia, largely due to China’s stranglehold on the market.

China in the past has flooded markets with supply as a way to lower prices, making it less economically feasible for competitors to develop rare minerals.

“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,” Deith said. “Supply chains around the world seemed mostly content with heavy reliance on a single nation.”

The Chinese government has also restricted output in order to hike prices or to cut off foreign countries from strategic supply. China in 2010 cut Japan’s supply of rare earths in response to a dispute over the Diayou Islands, restricting its ability to manufacture hybrid cars and other products.

Witnesses pressed Ottawa to release a national strategy on the development of critical minerals and to deepen ties with Europe, the U.S. and Japan to strengthen its non-Chinese supply chains.

Nancy Concepcion, an executive manager at Vale Canada, proposed that government work with industry to develop “battery hubs” as a way to ensure Canada has a piece of the market through the entire supply chain.

“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,” she said. “The processing of the minerals, the development of the battery cells, the battery materials, all need to be brought together and incentivized.”

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