Kickstarting Rare Earth Mining and Production Puts Canada in a Policy Bind

News Analysis

A significant payoff could be on the table for Canadas economy if it can kickstart its beleaguered rare earth elements (REEs) mining industry. The problem is that its not one of the governments priorities, such as green energy, despite the fact that the sector needs federal support to dent Chinas monopoly and eventually invite private sector investment. Recent regulatory actions further dampen the industrys prospects.

The United States is seeking a reliable partner to break Chinas stranglehold on REEs. Canada has shown it can be just that—it supplies the United States with a quarter of its uranium needs and has been a trustworthy counterparty for over 75 years. Despite Canada having about 40–50 percent of the worlds known rare earth reserves, it is not currently producing any REEs.

The Canada-U.S. Joint Action Plan on Critical Minerals Collaboration was finalized Jan. 9, and in the coming weeks experts from both countries will be meeting to discuss production and mineral security concerns.

Critical minerals include nickel, copper, uranium, zinc, and cobalt, while the rare earths are distinct group of 17 elements with similar properties. The production of batteries is a growing source of demand for these metals as electric/hybrid vehicles and electronics become ubiquitous.

What can a government do if it is decided that an industry needs to make a quantum leap forward? The only viable solutions are providing subsidies and tax advantages, says Carleton University business professor Ian Lee.

“Thats exactly what were doing with solar panels and wind,” he said, adding that the “green industry” is the best example of what the government is doing if it wants an industry to take off.

Not Considered Green

Pierre Gratton, president and CEO of the Mining Association of Canada, also suggested in an interview with BNN Bloomberg that the government could invest directly in some mining operators; however, governments in Western advanced economies have moved away from ownership stakes in the means of production over the last few decades.

Government funding for mining has been relatively meagre in recent years, but it is plentiful for anything “green.”

In the federal governments first budget in 2016, more than $1 billion over 4 years was promised for clean tech, which included forestry, fisheries, energy, agriculture, and mining. However, a government database tracking “Invest in Canada” funding showed no discernible funding allocated to mining.

Budget 2018 extending a 15 percent tax credit for one more year to support junior mining companies exploration work is about all thats been done. Budget 2017 stated that in recent years, Canada has phased out a number of tax breaks for oil, gas, and coal mining.

With the government putting a priority on clean energy and certain agricultural sectors where it feels the country has a comparative advantage and thus assistance is warranted, if it also makes mining a focus the competing ideal of environmental responsibility will act as an albatross around its neck.

“The government in Canada is holding a position that is fairly hostile to mining development,” Lee said. “This is a good example of government working at cross purposes with itself.”

“Its been very difficult for explorers to raise funds to go explore for rare earth projects and to develop them,” said Gratton. “Its not subject to natural market conditions.”

The reason is that China has monopolized the supply chain for REEs and is less concerned about losing money than about securing long-term supply, says Gratton. This is common operating procedure for Chinas state-owned enterprises.

“In our view, the reason that China has a lock on the market is not because of the supply in the ground. Its because of the processing capability,” said Tracy Moore, CEO of Canada Rare Earth, a company that acts as a value-added middleman. It sources rare earth concentrate from existing sources and sells to refineries, which could be built in Canada but currently are elsewhere.

A few decades ago, when China took on the responsibility of processing rare earth concentrate, refining virtually shut down elsewhere.

“The Chinese, particularly at that time, were turning a blind eye to environmental issues of processing,” Moore said. Eventually China began also mining REEs within its borders.

Has Not Been a Priority

A 2014 House of Commons Committee on Natural Resources report quoted industry experts pushing the government for assistance to develop a reliable rare earth supply chain.

“While we are great believers of free-market principles, in view of the poor capital market conditions for Canadas junior resource sector, we respectfully ask how Canadian rare earth developers are to compete unsupported in a market dominated by a powerful sovereign nation pursuing a calculated strategy and where other governments are spending vast sums on rapid development of rare earth deposits to support their national interests,” said Al Shefsky, president, Pele Mountain Resources Inc., in the report.

Shefsky said back then that Canada could create its own REEs supply chain and generate billions in economic activity and thousands of well-paying jobs.

Also in the report, Canadian public officialsRead More – Source

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