More than minerals: Why mid-stream capacity is key to Canada's industrial future

Canada boasts of its rich history and continued success in mining, metallurgical and chemical processing, advanced manufacturing, strong trade relations north-south and east-west, access to clean energy and its commitment to sustainability.

While these strengths lay the foundation for Canada to succeed in a rapidly changing economy driven by the global energy transition, they're not enough. The looming challenge is how can industry, governments, communities and investors lever and translate these capabilities and aspirations to fulfill Canada's promise?

The energy transition depends on advancing technologies, many of which require critical material supply chains that have the confidence of consumers, investors, and society.

Emerging technologies are enabled by hardware and infrastructure, with end users purchasing cost competitive and sustainably produced assemblies, components, metals, alloys, powders and chemicals. Seldom do they purchase raw minerals. As such, Canada must establish much-needed value-adding mid-stream processing capacity to translate minerals production to meet these new industrial production demands.

Processing capacity

Building midstream materials processing capacity will enable Canada to capture value-adding energy transition applications in transportation, clean energy production and utilization, and digital and medical technologies when materials producers partner closely with their customers.

To get there, operators will need to build investor and customer confidence by scaling up material processing and component production capacities from bench through to pilot and demonstration plants to full-scale operations.

Consistent production of mid-stream materials and components, supported by domestic raw mineral and recycled material supply, can help meet Canada's requirements. That will also contribute to the world's demand for critical materials.

Ian London. Supplied

Canada has identified 34 elements critical to its economic future. The available supply of each of these critical minerals are at different stages of maturity. Each faces unique challenges. Several of these material streams are championed by well-established companies, others by much smaller and medium-sized enterprises. Some are traditional, large volume commoditized elements such as iron, copper and aluminum. Most critical materials required for next generation technologies are smaller volume and non-commoditized (e.g., neodymium, dysprosium, gallium, graphite) sold on individual customer demand via specified off-take agreements. These agreements include technical specifications (quality), pricing, volumes and increasingly, environmental and social performance criteria.

Value-added manufacturing

This demand for value added advanced manufacturing supported by Canadian critical processed material supply will ultimately contribute to Canada's re-industrialization through augmenting the attractiveness of (re)shoring manufacturing in Canada and through export.

So how do we get to advanced domestic industrialization from promising resources still in the ground? Canada knows how to mine (fully respecting the challenges of permitting, financing, and bringing economic and sustainable production into service).

Achieving our mid- to longer-term goals will however, require a concerted, whole-of-government, industry, investor and academia approach to producing critical materials. Here are a few things we could do.

Champion commercialization hubs

The economics of stand-alone facility overheads, scaling-up and staffing don't work for many start-ups or SMEs. The development of commercialization hubs would lower pre-production costs for emerging producing ventures through shared space, equipment, overhead and ready access to technical expertise. These would allow start-ups to produce material for sale without significant down-time between pilot and plant while allowing continued work on process optimization. Shared facilities could house several SMEs, who pool technical, operational and administrative resources. Government support could help to leverage capital to build the infrastructure hubs.

Emphasis on the D in 'R&D'

De-risking, scale-up and commercialization of promising research are imperatives to the future economic security of Canada and its partners. A focus on development would best align and deploy government, commercial labs and industry expertise and facilities needed to accelerate the mid-stream capabilities and capacity. Prudent yet practical technical readiness assessments balanced by commercialization/market readiness are key to setting priorities and allocating resources.

Develop human resource capacity

We need people with the right training and expertise to build and deliver tomorrow's critical materials supply network. This is especially the case given the advanced next generation supply chains and applications that are emerging, and the accelerated timelines imposed by global competition. Canada requires focused technical expertise, trades and operators, and people with business and policy acumen. Well established mining, material and chemical processors, and manufacturers, as well as educational institutions could help. They should be strongly incented to train additional technical and operating personnel in work placements with the expectation that such talent would be available to move to SME critical materials operations as they build and go into production. The education of future generations, leveraging immigrant talent, and creating career paths in the sector are key. Focused industry-developed and delivered critical materials-related lectures and project assignments built into the education system at the undergraduate and graduate levels would be a good start.

Bolster demand for Canada's critical minerals

Canada should work with its major trading partners to leverage government procurement and regulatory protocols to require that critical materials, when possible, be sourced from within North America. This would help ensure a sustained supply for today and options for expansion tomorrow. Strengthening cross-border supply chains will help to ensure there is a secure, reliable supply of critical materials for partners' industrial bases.

Kick-start mid-stream production

There is limited logic or benefit for Canada and its partners to approach building supply chains linearly starting with domestic mine development, which may be years off despite promised streamlining of permits and regulation. Establishing mid-stream capacity would serve as a catalyst to accelerate the development of more domestic feeds and serve as a confident source of supply of quality materials and components to more downstream consumers. The development of midstream operations can generally be delivered within shorter timeframes and at lower cost than establishing new mines. If done in parallel, midstream production could be kickstarted with the imported raw or recycled material feeds until local streams are available.

Establish a 'Mission Critical industry cabinet'

A cabinet comprised of respected independent industry leaders across the critical materials spectra could help governments prioritize the most likely-to-succeed critical materials-related projects and initiatives. It could also identify risk mitigation plans and define what specifically is needed to deliver on such plans. Government(s) can't deliver everything to everybody.

Incentivize investment

Credits similar to flow-through/Canadian exploration tax credits, could be introduced to encourage investment to build the critical materials mid-stream. As noted above, the midstream will increase market demand for mined materials and reduce the perils of bringing new mines online by reducing the severity of commodity super cycles.

Canada has earned the pride in its vast resource wealth, industrial capacity, and aspirations of being a global leader in the energy transition, reducing carbon footprints and ensuring our collective economic security. At the end of the day however, it's all in the delivery.

Ian M. London is executive director of the Canadian Critical Minerals & Materials Alliance (www.c2m2a.org). He is a Professional Engineer (McGill) and earned his MBA at the Schulich School of Business.