Prime Minister Justin Trudeau recently visited the Saskatchewan Research Council’s experimental rare earth refining facility in Saskatoon to tout his government’s efforts to promote rare earth discovery, development, and extraction, along with the refining advances SRC has achieved.
He and his ministers have been ‘talking up’ this critical mineral drive for quite a while, but their efforts have shown little success thus far – for reasons they would rather not discuss.
Federal Natural Resources Minister Jonathan Wilkinson admitted that new mine permitting, review, approval and development time nearly always takes at least 10 years and could easily extend to 20 or 25. Furthermore, Ottawa’s proposed changes for more scrutiny of foreign involvement in proposed mines mean more delays and uncertainties, with projects potentially blocked.
Environmental, Social and Governance (ESG) issues and scoring, designed to discourage investment in conventional energies like oil, gas and coal, also complicate the decision-making processes for industry and government. The so-called sustainability’ green transition’ further involves meeting Diversity, Equity and Inclusion (DEI) criteria. As well, consultation with local communities, including First Nations reserves and ‘traditional lands’ stakeholders, pile on to the myriad geological commodity price and technical risks involved.
Protests, community or political opposition, and blockades involving sabotage and violent intimidation have bedevilled the construction of both the Coastal Gaslink pipeline and the TransMountain Pipeline expansion. The proposed Enbridge Northern Gateway oil pipeline to the Pacific Coast and Line 3 and Energy East proposed pipelines were ‘killed’ by political opposition – the latter largely from Quebec. Such actions give little reason for either confidence or trust in governmental approval processes – for mining as well as energy projects.
Mining exploration firms first seek to establish a Mineral Resource Estimate using drilling results and some ore body modelling. Then, assuming receipt of enough funds from speculative investors, they drill further – to create an industry-standard Preliminary Economic Assessment. More drilling, time, and cash follow to accumulate more data and refine the ore body model to create a Bankable Feasibility Study.
If cash flow projections seem attractive, institutional and corporate investors may jump in. Yet regulatory delays and uncertainties can compound the inherent risks involved. The more delays in a project’s start time, the lower its net present value.
Canada’s regulatory apparatus, ethos and behaviour do not exist in a vacuum. Canadian mining companies and investors may choose to invest abroad in a more business-friendly environment, usually after giving up on plausibly lucrative domestic opportunities. Foreign investors will also shy away from investing in Canada to avoid a protracted regulatory process that can bring the risk of a lower potential value (or no project approval at all).
The United States is not much better than Canada in these respects, but Australia and, surprisingly, Scandinavian nations are much better.
Bottom line? Government policy in Canada actively and aggressively discourages mining and critical minerals development. For Canada's rare earth sector to prosper, our politicians need to just get out of the way!
Ian Madsen is the Senior Policy Analyst at the Frontier Centre for Public Policy.