BMO Financial Group’s David Jacobson warns of a potential critical minerals crisis

One of the unexpected repercussions caused by the Covid-19 pandemic was the impact it had on global supply chains, pushing up the price of commodities and resources across the board, including within the mining industry. The cracks in the supply chains also highlighted broader geopolitical issues affecting world economies, including the reliance on limited means of extracting certain minerals and refining them. And at the top of the list of commodities deemed of strategic importance are critical minerals.

With most of the critical minerals being produced and refined in a handful of countries, including China, Indonesia and the Democratic Republic of the Congo, governments and industries in Canada and the United States have become more active in seeking to secure a more stable North American supply chain.

One of those who has been a vocal proponent of creating a stronger critical minerals supply chain between the two countries is David Jacobson, vice chair, BMO Financial Group and the former U.S. Ambassador to Canada in President Barack Obama’s first term (2009-2013). Ambassador Jacobson spoke to The Northern Miner about challenges, opportunities and the potential for a critical minerals crisis.

The Northern Miner: Why do you think it’s important for Canada and the U.S. to address the critical minerals issue?

David Jacobson: Well, I think that the time is right. You just had an election in Canada, the government in the United States is relatively new, so both sides are still feeling each other out as to how they’re going to relate to one another. This issue is as important as any other we’ve seen since Covid highlighted the impact of disruptions on supply chains. And perhaps the most critical of those supply chains, to coin a phrase, is critical minerals. The computers that we’re talking over, our cell phones, our cars, our batteries, our smart grids that we want to develop, everything makes use of these critical minerals.

The fact of the matter is we don’t make, we don’t mine, and we don’t refine anywhere near enough, between the United States and Canada, for our own uses. And that leaves us open to some places that may not share our values, may not have our best interests at heart, cutting us off [our supplies].

TNM: To secure self-sufficiency in critical minerals, what are some of the obstacles that need to be addressed?

DJ: Well, I think the first thing that needs to be addressed is recognizing that we have a problem. We tend to worry about the crisis of the moment. I think people are more worried about the price of used cars at the moment than they are of critical minerals. But we have to recognize that there’s a problem, and we have to have the resolve to address the problem.

Then we need a tremendous amount of investment. Some of it’s going to come from the private sector, some of it’s going to probably come from public money. And we need to think about how we can streamline regulation in a way that makes it easier not just to get the stuff out of the ground, but to refine it, while at the same time not diminishing the health and safety of people in North America. Those are some of [the obstacles]. I’m sure there are others, but those are some of the really key ones.

TNM: Do you think there’s a need for an enhanced collaboration between governments and the private sector when it comes to this issue?

David Jacobson, vice chair, BMO Financial Group. Credit: BMO Financial Group

DJ: There are very few areas where there isn’t a need for enhanced collaboration between the government and the private sector. But this is one of them. And I don’t mean to be flippant about it. This is going to be very expensive. These mines are expensive. The refining facilities are expensive. There is risk, lots of risk that’s associated with this. And I think that the more cooperation both in terms of money and in terms of working together on streamlining these processes, the more collaboration that there is, the more successful we’re going to be in avoiding what could well be a catastrophe.

TNM: Do you think the Buy American policy poses a challenge for the Canadian mining sector?

DJ: Actually, I would say it’s almost the reverse, at least when it comes to critical minerals. The whole idea of Buy American is that President Biden has said that we shouldn’t ask American taxpayers to spend their tax dollars on things that could instead be made here in the United States. Well, the problem here is we can’t make enough [critical minerals] in the United States. So, we have to get it elsewhere. And one of the things that I think our government has started to recognize, and I think the Canadian government as well, is that you have to get it from reliable sources of supply. And there is not a more reliable foreign source of supply for critical minerals for the United States than Canada.

TNM: What do Canadians need to understand about our current relationship with the U.S.?

DJ: The United States, and this won’t be news to your readers, we’re going through some tough times. We went through some very difficult times in the last administration. We are, I think, in a better position, at least from my perspective today than we were then. But we’re not in a good place. And the President, as you’ve seen with respect to what’s going on now on Capitol Hill, with the infrastructure and reconciliation pieces, doesn’t have a lot of room to maneuver. And I think that it is important for the Canadian government and the Canadian people to keep in mind with respect to its relationship with the United States.

TNM: How should the Canadian mining sector approach dealing with the U.S. about critical minerals?

DJ: With respect to critical minerals, if there was one thing that I would encourage the Canadian mining sector to focus on, it would be the idea of enhanced sustainability and environmental consciousness. And it’s for a lot of reasons. One is it’s the right thing to do. But the other big reason is that the customers of the Canadian mining sector, whether we’re talking about the end customers, the consumers, or the businesses that buy the stuff, they’re under a lot of pressure to see to it that their suppliers are behaving in an environmentally responsible way.

And not only is it the right thing to do, but it is good business for the Canadian mining sector to be extremely conscious of those sustainability issues and those environmental issues. And that’s not to say that they’re being irresponsible. But I also think it’s fair to say that they could be more responsible, we all could. And so, if there was one thing that I would encourage the critical minerals piece of the Canadian mining sector to focus on, it would be that.

It’s no secret that a lot of the stuff that makes use of these critical minerals are going to be made in the United States. It’s what we do. We make more [because] we’re a lot bigger economy. And one of the things that is very, very important for all those manufacturers is to be constantly on guard to make sure that there are sustainable, safe, responsible sources of supply that are available to them. Again, they need to be thinking about Canada in that regard. Canada should be the first place they look.

TNM: What are some of the opportunities for the mining industries in Canada and the U.S. when it comes to bolstering the critical minerals supply chain?

DJ: Well, it is an opportunity. The demand for critical minerals is going to go up, probably by an order of magnitude. Over the next decade or so we need an awful lot of batteries for cars, we need an awful lot of copper for better electric grades, we need an awful lot of all of the rare earths and the critical minerals that go into everything that we use.

The stuff is in the ground here in the United States and Canada. But people have to invest in the mines to get them out. And perhaps more importantly, they have to invest in the refining facilities, once the stuff comes out of the ground. I mean, there are critical mineral mines in North America that ship the raw material overseas so that it can be processed and then sent back here. That doesn’t make a lot of sense to me. And we’re talking about jobs, we’re talking about economic opportunity, we’re talking about prosperity for a long time to come. And so, I think that there’s an enormous opportunity here, but we’ve got to seize it.

TNM: If we don’t address this supply issue, is there a very real possibility we will face a critical minerals crisis, not unlike the 1973 oil crisis?

DJ: Absolutely, positively. Just think of what you do all day long: you get up to look at your cell phone, you sit down in front of your computer, you look at your iPad, you watch your TV, you get in your electric vehicle, whatever you do these are all dependent on critical minerals. The reason they’re called critical minerals is because they’re critical. They are critical to the future.

You know, I was reading a piece not too long ago where The Washington Post editorial page was quoted from mid-1973, about three or four months before the Arab oil embargo, making fun of Saudi Arabia for threatening to cut off our energy supplies. Well, three or four months later, they did. And it only took us 40 years to dig ourselves out of it. And you know, if you liked that, you’ll love it when we run out of critical minerals, or some major suppliers decide to turn off the spigot. We have to address that. And if we don’t address that, shame on us.

This interview has been edited and condensed.