Canadian battery mineral miners and explorers are sniffing around hundreds of millions of dollars in potential funding from the United States military, but there are no firm deals yet to take advantage of an alliance dating back to World War II.
The concept of the U.S. funding projects in Canada to help sidestep China’s control over lithium and rare earth element (REE) processing broke into the open this month at a conference in Washington, D.C. However, some companies say they’ve been aware of the initiative for years.
“Canada is a resource-based economy, whereas the U.S. is a manufacturing-based economy,” Christopher Grove, president of Commerce Resources (TSXV: CCE), which operates the Ashram REE project in northern Quebec, said by email. “This should be a perfect marriage.”
There appears to be a new urgency under the Biden administration as it says it faces looming threats from China to national security through minerals needed for green energy and the wider economy. In March, it used the 1950 Defense Production Act (DPA) Title III to give the Department of Defense increased powers to help miners and explorers secure supplies of battery minerals such as lithium, nickel, cobalt, graphite and manganese. They’re also seeking REEs used in much modern technology, from weapons to mobile phones.
The DPA has US$750 million to fund projects after measures approved in a law passed in August for tax breaks on electric vehicles made in North America, and a Ukraine aid package in May, Lieutenant-Commander Tim Gorman, a spokesman for the Secretary of Defense, said in an email on Wednesday.
The Ukraine assistance ties into the concerns about Russian control over resources like natural gas supplies for Europe, and how China supplies up to 80% of critical metals to the global market, according to analysts’ estimates. They forecast the demand for critical minerals needed for the global transition to clean energy will expand massively. The cost is measured in trillions of dollars.
Canada’s federal Natural Resources ministry gave the DPA a list of 70 projects in Canada that might be suitable for funding. Ontario added several projects to the list, including Ring of Fire Metals’ (TSXV: ROF) Eagle’s Nest project, located 540 km northeast of Thunder Bay, a spokesperson for the provincial mines ministry said.
Luca Giacovazzi, chief executive officer of Ring of Fire parent Wyloo Metals, says it has had initial talks with the U.S. Department of Defense, but not about dollar amounts.
Eagle’s Nest is the “best undeveloped high-grade nickel project in Canada,” Giacovazzi said by email.
“We’re already studying options to build Ontario’s only battery nickel sulphate plant,” Giacovazzi said. “Our chrome projects are also very interesting as the only source in the western hemisphere that’s large scale and very high quality.”
Still, Canadian resources in battery and critical minerals are low by global comparisons. Canada has less than 3% of world cobalt reserves while the Democratic Republic of the Congo has nearly half; Canada has 2.5% of manganese reserves compared with South Africa’s 43%, according to the U.S. Geological Survey.
Commerce Resources applied for funding under the DPA Title III program a few years ago, but has “seen little so far stemming from it of any substance,” Grove said.
The DPA hasn’t awarded any funds yet, but could fast-track some projects to decisions in a month if they meet an “urgent and compelling need” after filing a detailed submission, Lt.-Cmdr. Gorman said. Unfortunately, only 1% of filings so far come close to meeting criteria, he said.
The criteria concern how the project expands the industrial base and output of critical materials for emerging technologies and national defence; a technical description of the proposed work; bios of key personnel; and rough cost estimates, Gorman said. The program may ask some companies to submit technical and cost reports in a process that takes six to nine months for approval, he said.
Ottawa took steps this month to protect its critical minerals industry from Chinese control, barring foreign companies from investing in three Canadian projects. They involve lithium, cesium and tantalum.
Canada announced a nearly $3.8 billion critical minerals strategy in April to develop the industry. In June, the U.S. and Canada joined with other major Western economies in a Minerals Security Partnership to catalyze industry investment.
But cross-border funding of mining projects in Canada stretches back decades to defence cooperation agreements during World War II. They helped develop Quebec’s aluminum industry and companies such as Alcan.
After the war, the U.S. deemed Canada and other Western allies such as the United Kingdom and Australia as part of its National Technology and Industrial Base for defence and commercial industry development. The designation opens projects in those countries to funding from the U.S. Department of Defense.
Matthew Zolnowski, a portfolio manager for DPA, said by email the current program is in its early stages but that it’s engaging Canadian companies.
Commerce’s Grove says he’s known Zolnowski for a decade and been aware of the DPA program for years.
“This specific initiative has had a lot of life breathed into it by the current administration,” Grove said. “We are very familiar with the process to apply for this capital.”
A spokesperson for Natural Resources Canada said staff couldn’t immediately reply to requests for comment made this week.
The Ontario projects on the Natural Resources list to the U.S. are Rock Tech Lithium’s (TSXV: RCK) Georgia Lake, Avalon Advanced Materials‘ (TSX: AVL) Separation Rapids, Frontier Lithium’s (TSXV: FL) PAK, Zentek’s (NCM: ZTEK:US) Albany, Northern Graphite’s (TSXV: NGC) Bissett Creek, Canada Nickel’s (TSXV: CNC) Crawford and Electra Battery Materials’ (TSXV: ELBM) First Cobalt refinery.
Ontario added Wyloo’s Eagles Nest, Generation Mining’s (TSX: GENM) Marathon, Clean Air Metals’ (TSXV: AIR) Thunder Bay North, Magna Mining’s (TSXV: NICU) Shakespeare, KGHM International’s Victoria, and Green Technology Metals’ (ASX: GT1) Seymour.
Corrections: An earlier version of this story referred to Matthew Zolnowski as a former lobbyist. He worked with a registered lobbyist in Washington, D.C., but wasn’t one himself. Also, it was a Natural Resources Canada spokesperson who couldn’t respond with comment, not a spokesperson for the minister, Jonathan Wilkinson. The Northern Miner regrets the errors.
No mention of Giga Metals Ni + Co+Pt
The US Military has not won a war since 1945. Why should they do better picking mining investments?