Canada Risks Losing $8.7B Annually Without Critical Minerals Action

Canada could be missing out on CA$12 billion ($8.7 billion) annually in critical minerals production by 2040, unless the government takes urgent action to de-risk investments and accelerate mining development, according to the Canadian Climate Institute’s latest report.

The report, titled "Critical Path: Securing Canada's place in the global critical minerals race," points out the risk for Canada falling behind in the intensifying global effort to source these commodities.

The report identifies six key minerals – copper, nickel, lithium, graphite, cobalt, and rare earth elements – as central to clean energy systems, such as electric vehicles and renewables. The report estimates that C$30 billion (around US$21.7 billion) in new investments will be required over the next 15 years to meet domestic demand. To position Canada as a key global supplier, that figure rises to CA$65 billion (US$47 billion) in total investments by 2040.

‘Unlock Public And Private Investment’

"Securing Canada's place in the global critical minerals race requires swift action to unlock public and private investment that can power Canada's energy transition with the building blocks of clean technologies," said Marisa Beck, director of clean growth at the Canadian Climate Institute. "Our Critical Path report offers a clear blueprint for the steps governments can take to seize this opportunity."

The Canadian Climate Institute warns that without stronger investor confidence, driven by more stable policy environments and financial backing, Canada's mining ambitions may stall. To attract the necessary capital, the report stresses that governments must share financial risk with the private sector.

With CA$65 billion in new investments, the industry would be able to align with global demand forecasts. This funding would include equity stakes in mining projects, as well as solutions through financial derivatives, such as contracts for difference (CFDs).

Risk Of Commodity Volatility

Since commodity volatility poses a risk, CFDs can provide a safety net by establishing a price floor risk for the producer. The government covers the difference below the defined price, and the producer pays the surplus back when prices rebound.

Lithium exemplifies one such commodity that saw extreme volatility, ranging from a peak of $80,000 per metric ton in 2022 to its current price of $8,415 per metric ton.

Global X Lithium & Battery Tech ETF (NYSE:LIT) is down 1% year-to-date.

"By deploying loan guarantees and other financial risk-sharing instruments to de-risk projects, federal and provincial governments in Canada can crowd-in private capital, and keep projects on track despite market uncertainty," said John Stackhouse, senior vice-president at RBC.

The Institute also recommends forming strong partnerships with Indigenous communities and ensuring their self-determination is respected throughout the mining process. Failing to do so, the report cautions, could lead to delays, opposition, and legal challenges.

To further explore the broader context, the Institute commissioned three related papers examining Indigenous participation, emissions from increased mining, and strategies to mitigate environmental impacts.

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