On November 27, we began a series of two bulletins on Australia's and Canada's Critical Minerals Strategies. In this second bulletin, we start by discussing Canada's approach to exploration for critical minerals; after that we move to the issues of permitting delays and reform, followed by First Nations Engagement and Impact and Benefits Agreements, and we conclude with a review of the repercussions of the U.S. Inflation Reduction Act.

A Focus on Exploration: The Canadian Approach

Similar to the Australian Strategy, the Canadian Strategy recognizes that exploration is the starting point if Canada wants to make the most of its rich endowment of mineral resources. The budget commitments from 2021 and 2022 cover different aspects of the critical minerals value chain and include C$79.2 million for public geoscience and exploration to better identify and assess mineral deposits and a 30% Critical Mineral Exploration Tax Credit for targeted critical minerals, such as nickel, cobalt, graphite, copper, rare earth elements, vanadium, and uranium.

Permitting Delays and Reform

In Australia, as in Canada, permitting delays are an issue and the Australian Strategy states that it aims to "enable fast, efficient and durable environmental approvals while upholding robust environmental protections."1

The Australian Strategy recognizes that "[n]ew mining, processing and manufacturing projects can take more than 10 years to reach production, particularly when doing so in a sustainable way supported by local communities."2 And, in that vein, under the guise of promoting Australia as a world leader in Environmental, Social and Governance (ESG) performance, the Australian Strategy states that the government will work with all levels of government to streamline environmental approvals.

In Canada, the Canadian Strategy recognizes this issue by stating that "it can presently take anywhere from 5 to 25 years for a mining project to become operational, with no revenue until production starts."3 The Canadian Strategy adds that "[w]e recognize that, although responsible regulations are vital, complex regulatory and permitting processes can hinder the economic competitiveness of the sector and increase investment risk for proponents. As such, the federal government remains committed to sustainable economic development and environmental protection, which go hand-in-hand, in collaborating with Indigenous peoples, as well as the provinces and territories."4

The revised Canadian Strategy does not envisage permitting reform in the sense of amending the existing environmental assessment laws and regulations. The 2021 and 2022 budgets include three initiatives to help accelerate project development:

  • "$1.5 billion ($1 billion in new funding, $500 million from existing funds) over six years, starting in 2024–25, for the Strategic Innovation Fund to support critical minerals projects, with prioritization given to manufacturing, processing, and recycling applications.
  • $40 million to support northern regulatory processes in reviewing and permitting critical minerals projects; and
  • $21.5 million to support the Critical Minerals Centre of Excellence (CMCE) to develop federal policies and programs on critical minerals and to assist project developers in navigating regulatory processes and federal support measures."5

It remains to be seen if these initiatives will accelerate permitting of new mines. It will be interesting to watch what the federal government will do on that front now that the Supreme Court of Canada has ruled that the Impact Assessment Act (commonly known as Bill C-69) is largely unconstitutional.6

First Nations Engagement and Benefit Sharing

Australia, like Canada, have First Nations, and Canadians reading the Australian Strategy will recognize similarities in language but also differences.

The Australian Strategy states that "more than 60 per cent of Australian resources projects, including exploration and extraction, operate on land covered by a Native Title claim or determination (...). Proponents are required to negotiate land use and access. In the Northern Territory, approximately 50 per cent of the landmass is freehold Aboriginal land where Traditional Owners have the right to refuse consent or 'veto' any land access use proposals."7

The Australian Strategy states that "[e]ngaging with First Nations communities risks being seen as simply a step in a checklist for approval, particularly where there are multiple complex approval processes. But effective engagement and consultation with First Nations communities can support meaningful negotiations for access to land and land use proposals under existing land rights legislation or the Native Title Act 1993, and provide local employment opportunities, skills development and investment in the community."8

Similarly, the Canadian Strategy explicitly states that the efforts of the Canadian government to advance critical minerals development will be based on respect for Aboriginal and treaty rights, as well as meaningful engagement, partnership and collaboration with First Nations.

Interestingly, the mining sector is the second-largest private sector employer of Indigenous peoples in Canada and the Strategy states that Indigenous leaders across the country have signalled that there is a strong interest in seeking ownership stakes in critical minerals projects and related infrastructures.

The United States' Inflation Reduction Act, the European Union's Critical Raw Materials Act and Japan's Economic Security Act

The Australian Strategy was released after the coming into force of the United States' Inflation Reduction Act of 2022 (IRA) and in her message as Minister for Resources and Minister for Northern Australia, Madeleine King encapsulates the dilemma for countries such as Australia:

"The international investment landscape is shifting rapidly as governments around the world race to incentivize investment in diversifying and expanding critical minerals supply chains. Recent announcements from the US and EU aim to drive historic investments in clean energy supply chains, turbocharge its decarbonization efforts and transform the environment for businesses globally."9

In that vein, in May 2023, the Australian and US governments have agreed to the Australia-US climate, Critical Minerals and Clean Energy Transformation Compact, underscoring the central role of critical minerals in the clean energy transformation.

The original Canadian Strategy was released in December 2022, a few months after President Biden signed into law the Inflation Reduction Act, and the original Canadian Strategy did not mention the IRA. This has changed with the last federal budget and the amended Canadian Strategy does mention the impact of the coming into force of the IRA, saying that the government wants to: "ensure that Canada remains a first-choice destination for businesses to invest and create jobs in light of investments made by other governments, such as the United States through the Inflation Reduction Act and Infrastructure Bill."10

Financial Support

The Australian Strategy states that the Australian government will focus on developing strategically important projects and that it will provide "[t]argeted, proportionate support [...] to de-risk strategically important critical minerals projects, attract private finance and ensure Australian processing and manufacturing projects can access Australian minerals."11

The Australian Strategy mentions that the government already supports strategically important projects at vulnerable points in their development, using the AU$100 million Critical Minerals Development Program and supporting projects through loans, guarantees and equity investments through organisms such as Export Finance Australia, the Northern Australia Infrastructure Facility and the Clean Energy Finance Corporation. The Strategy adds that the government will earmark AU$500 million through the Northern Australia Infrastructure Facility to support projects that align with the Strategy.

Similarly, the Canadian Strategy, which is backed by nearly C$4 billion in the 2022 budget, will "scale up support to de-risk innovations through research, piloting, and deployment to advance sustainable technologies and processes towards commercialization in identified priority value chains."12

With respect to project development, the Strategy says that the federal government will provide financial and administrative support to accelerate the development of strategic projects in mining, processing, manufacturing and waste reduction. The Business Development Bank of Canada, Export Development Canada and The Canadian Commercial Corporation will be utilized to attain that goal.

An existing program, the Strategic Innovation Fund, which is already making investments in the electric vehicle battery industries, will also be utilized.

The Workforce

The Australian Strategy devotes a chapter on "Growing a skilled workforce" and the Canadian Strategy does the same by focusing on "Growing a diverse workforce and prosperous communities." Both strategies rely on programs to address the skills shortage looming on the 2030 horizon.

Conclusion

Canada and Australia have a strategy that is largely similar and both countries now evolve in an environment that is largely shaped by the massive industrial policy initiatives of the U.S. government. Both countries have geology on their side, a solid legal environment, but can they match the U.S. efforts in terms of financial support and tax credits?

Footnotes

1. Page 5 of the Australian Strategy.

2. Page 11 of the Australian Strategy.

3. Page 21 of the Australian Strategy.

4. Page 24 of the Australian Strategy.

5. Page 11 of the Canada's Critical Minerals Strategy: Discussion Paper.

6. Reference re Impact Assessment Act, 2023 SCC 23

7. Page 31 of the Australian Strategy.

8. Ibid.

9. Page 6 of the Australian Strategy.

10. Page 34 of the Canada's Critical Minerals Strategy: Discussion Paper.

11. Page 5 of the Australian Strategy.

12. Page 20 of the Canadian Strategy.

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