Yahoo Finance Opinion: Don't assume Canada will ace the mining transition
By Phil Bazel and Jack Mintz
Contemporary policy rhetoric, including last week’s presentation by the federal minister of natural resources, Jonathan Wilkinson, suggests we are on the verge of a great energy transition away from fossil fuels toward cleaner, renewable sources of electric energy. Electric vehicle mandates and fuel efficiency regulations are expected to lead to widespread adoption of electric cars in the coming decade. In addition, the growth of carbon taxes at the consumer and industrial level creates incentives to shift from coal, oil and gas to wind and solar, with increased reliance on battery technology and electric-powered vehicles and processes as a result.
Any widespread energy transition will require a super-charged increase in mining, especially of rare earths. A recent report from the International Energy Agency (IEA) highlights the minerals most needed for the coming transition. Among them are lithium, nickel, cobalt, manganese, graphite, copper, and aluminium. These seven represent the backbone of contemporary electrical technology.
The IEA estimates production of lithium will have to rise more than 13-fold to satisfy national electrification and emissions goals currently in place for 2040. For fully sustainable clean renewable energy, that number balloons to more than 42 times current lithium production. For graphite, an eight-fold increase is needed to meet stated 2040 policy goals, but 25-fold for full sustainable development, with cobalt requiring six-fold and 21-fold increases, respectively.
This need for such big shifts raises several questions about the future of mineral development. Where are critical energy transition minerals located and who currently owns demonstrated reserves? What is the risk of strategic control of critical minerals by a single nation or (in the style of OPEC perhaps) nations? And, from the Canadian perspective, does this country have the potential to be a significant producer, as it is in oil and gas? Finally, given the oil and gas industries’ outsized contribution to Canada’s economy, will it actually be possible for Canada to transition to mineral mining to sustain our economic prosperity as the world moves away from fossil fuels?
Our just-published survey of relevant national reserve and production data for the seven critical transition minerals suggests most new production will have to come from abroad: in no case does Canada have more than three per cent of world reserves. The closest we come is our 2.9 per cent of world cobalt reserves. It follows that most of the mining investment and high-value-added mining jobs from the energy transition will be found where the seven key minerals are mainly found: in Asia, Africa, Australia and Latin America.
That doesn’t preclude Canada from participating in mining growth, however. Of the US$165 billion that China invested in mining between 2005 and this year, 44 per cent was in Africa, the Caribbean and Latin America. Canadian capital, labour and know-how can participate in the coming boom in these critical minerals but much of the required effort will take place abroad.
A relatively high concentration of a given mineral among a few nations is also the norm. It is common for the top three nations to possess half or more of available reserves. For instance: Guinea, Vietnam and Australia account for 58 per cent of the world’s reserves of bauxite. Congo, Australia and Indonesia have 72 per cent of its cobalt; Turkey, China and Brazil, 73 per cent of its graphite; and South Africa, Australia and Brazil 78 per cent of global manganese reserves. As for lithium, 58 per cent of the world’s known reserves are located in the “lithium triangle” of Bolivia, Argentina and Chile.
Canada’s best bets for domestic mining growth would seem to be cobalt (in which our current share of world production is 2.6 per cent), copper (2.8 per cent), nickel (6.7 per cent) and zinc (6.0 per cent). With most of the world’s reserves of these critical minerals lying abroad, however, it’s an open question just how well positioned Canada is to compete for the massive international mining effort that will be required for the energy transition.
Given this country’s limited share of global energy transition minerals, securing Canadian participation in energy-transition mining may hinge on the friendliness of our regulatory and taxation framework for mining companies. And that needs work. Minister Wilkinson’s announcement last week at least suggests Ottawa is aware of the problem, which is progress. But fixing it will be a big job. Throwing $3.8 billion at the industry will do little if permitting for projects continues to take decades.
Given the domestic context, our primary role in energy transition may come from successful Canadian mining companies investing to develop resources abroad. After all, if we want to participate in the global mining boom, we need to go where the reserves are, and as the data shows, that’s not here.
Phil Bazel is a research associate and Jack Mintz is the President’s Fellow at the University of Calgary’s School of Public Policy. This article is based on their new report “The Coming Energy Transition: Canada’s Limited Mining Opportunities.”