13 Recommendations for Making Canada’s Critical Minerals Industry More Attractive to International Investment: New Report

The international need for critical minerals is huge. Global investment in the next decade will be measured in the hundreds of billions of dollars. But while returns can be substantial, mining and minerals projects are generally seen as high-risk investments since most exploration projects never generate revenue. To encourage and support this important industry, investment incentives are a necessary measure.

Canada has inherent advantages in the critical minerals space — world-leading deposits of critical minerals, good governance, clean energy and social cohesion. However, prior to the development of the Canadian Critical Minerals Strategy in 2022, Canada’s activities have been smaller than those of jurisdictions with more mature plans.

Our new report, Investment Incentives for Critical Minerals in Canada, identifies gaps in Canada’s current policy suite meant to attract investment for critical minerals, and provides recommendations to the federal government on how Canada can better compete for international investments in this important and rapidly growing sector.

Looking at mechanisms from other jurisdictions is useful as they can offer additional approaches that Canada might take to support critical minerals. As such, this report also compares investment incentives across four jurisdictions that each have their own list of critical minerals and overarching strategies: Canada, the United States, the European Union and Australia.

Investment Incentives

Governments encourage international investment in several ways:

• Fiscal incentives include tax holidays, reduced tax rates and tax deductions or credits on equipment. 
• Financial incentives include various grants and loans on new construction or mechanisms like subsidized government insurance.
• Other incentives include subsidized public infrastructure, market preferences and regulatory concessions.
  • Subsidized infrastructure: the public provision of roads, utilities and other services that help reduce costs to the investor.
  • Market preferences: preferential treatment in government procurement or other forms of preferential market access.
  • Regulatory concessions: exemptions or reductions in regulatory requirements such as environmental or labour regulations.

For the comparison of fiscal, financial and other incentives across the four jurisdictions, read the full report.

Recommendations

A subset of six of Canada’s 31 critical minerals was prioritized in the Canadian Critical Minerals Strategy. The strategy budgets around $8 billion over eight years to build on existing programs and create new mechanisms.

The Canadian Critical Mineral Strategy provides ambitious and comprehensive direction to support international investment in critical minerals in Canada. Yet, most efforts suggested are relatively new and need elaboration.

This report offers 13 recommendations categorized under three themes that build on the recommendations previously made by the Canadian Chamber in 2022.

Making Decisions

1. Create our own critical minerals goals. Plans described in the Canadian Critical Minerals Strategy urgently need goals, timelines and accountability structures. Details and commitments will bolster the confidence of international investors in Canada.
2. Obtain faster and consistent approvals for mining. There is a broad consensus that current timelines of 10–15 years need and can be shortened without losing requirements for good planning, environmental protection and Indigenous consent.
3. Build a critical minerals digital information hub for Canada. Ease of access to high quality and current information will improve the timelines for planning and permitting processes, helping stakeholders in their own assessments and investment decisions.
4. Embed Indigenous reconciliation in critical minerals development. Areas for action include building Indigenous leadership capacity in the industry and updating economic and legal frameworks in Canada’s mineral resource sector.

Leveraging Opportunity

5. Modernize our workforce for critical minerals. Our critical minerals strategy identifies the need for a new diverse and inclusive workforce, but more details are required to define and address labour challenges.
6. Support small minerals companies. Most critical minerals discovery and early-stage validation is done by junior mining companies, but junior firms are often ill-equipped for the social and environmental assessments needed for project planning and acceptance. The government can provide financial and service support.
7. Fill the midstream gap for critical minerals production. Canada can fill the midstream production gap with targeted investment stimulus.
8. Recognize equipment manufacturers and minerals service providers. Critical minerals development requires equipment, reagents and services for exploration, mining, metallurgy and processing.

Thinking Ahead

9. Fixing the existing value chain misalignment. The upstream, midstream, downstream and recycling stages of critical minerals each operate on a different schedule. The coordination and connection between stages is a role for international and domestic governments to fill.
10. Strengthen Canada’s financial institutions for critical minerals. Canadian banks are major lenders to minerals projects worldwide. The Canadian government can strengthen these institutions to advance critical minerals development and attract international financing.
11. Add demand-side incentives. Canada’s strategy currently gives scant attention to demand-side measures like direct government purchasing, mineral stockpiling, price guarantees or de-risking company offtake contracts.
12. Lead on international ESG standards. Sustainability standards programs provide an external reference of acceptability for investors, support the brand value of end products, and help authorities make approval decisions confidently and more rapidly.
13. Coordinate investment criteria with Canadian allies. Aligning incentives with like-minded nations can facilitate and encourage responsible investment. Allie nations are reaching outside their borders for new critical minerals, and Canada can follow suit.

The urgency for Canada to act on its natural advantages in critical minerals is driven by our own environmental sustainability expectations, but also by the need to compete with jurisdictions that are more advanced than us in their incentive programs. It’s important to the future of the industry and our economic prosperity that Canada develops expeditious and competitive mechanisms to secure investment for all stages of the minerals development value chain.

For information on the Canadian Chamber’s advocacy in the critical minerals space, visit our Critical Minerals Council page.