PDAC: Canada eyes US-style project funding while market may replace Chinese cash

Canada is considering how to match funding opportunities by the United States for critical mineral projects while balancing national security with the need for Chinese investment, Natural Resources Minister Jonathan Wilkinson says.  

Ottawa announced plans last year to spend $3.8 billion in a critical minerals strategy to 2030 while the U.S. Inflation Reduction Act (IRA) is allocating about US$369 billion for projects promoting metals for the switch to cleaner energy. Plus, the U.S. Energy Department is looking at helping pay for the construction of some large mines, such as the US$4 billion Thacker Pass lithium operation in Nevada proposed by Lithium Americas (TSX: LAC; NYSE: LAC). 

At the same time, some mining exploration and development companies are complaining that Canada’s new investment rules introduced last year limiting participation by foreign state-owned enterprises, i.e., China, are shrinking the money pool for new projects. And it’s occurring just when companies need cash to meet rising demand for green metals. Ivanhoe Mines (TSX: IVN) founder Robert Friedland spoke out about it on Sunday at PDAC in Toronto.  

Wilkinson, speaking at PDAC on Tuesday to award innovation grants to six companies, said the market may eventually replace Chinese cash for projects. And while he said the U.S. isn’t necessarily the mining model to follow when projects there on average take longer to be built than in Canada, he noted the U.S. is thinking strategically about funding.

“Canada obviously needs to be thoughtful about ensuring there is a level playing field between the two countries. We are thinking about, certainly, responses to the IRA, in the context of the upcoming budget,” the minister said. “We are going to be looking at how we can ensure that we can enable those projects.”  

Funding could conceivably be done through tax measures, direct investments, and through the Canada Infrastructure Bank, the minister suggested. He also said manufacturers looking for zero carbon in their products will benefit from Canada’s 86% non-emitting power grid.  

“Our grid enables us — we have more to do — to actually provide them a product that the Americans cannot and will not be able to do for a substantial period of time.”  

Regarding China, the minister said critical minerals are a strategic space where it’s important Canada has control over its resources and works with like-minded countries, especially when some Chinese investment calls for 100% off take of the minerals back to China for processing. 

“This in my mind is not in the best interests of Canada or in the best interest of Canadians,” Wilkinson said. “That being said, we do need to be working to ensure that there is access to capital for junior mining companies. We are seeing an enormous interest these days in critical minerals and that’s an issue that may take care of itself.”