Yahoo Finance 'We can catch up': At PDAC, new optimism critical minerals gap with China can be closed
Like clockwork every year, mining executives, bankers, investors and politicians gather in Toronto at the largest mining conference in the world, and bemoan China’s head start in the race to build a critical mineral supply chain years before western countries caught on.
As the Prospectors & Developers Association of Canada’s conference kicks off again this week, that sentiment remains with one key difference: newfound optimism. Now, some panellists are crediting supportive government policies with putting Canada, the United States and other western nations on track to potentially closing the gap with China.
“We’re moving in the right direction,” said Ryan Latinovich, global head of Mining and Metals at RBC Capital Markets. “The good news is for both our economy and the U.S. economy. There’s a long track record of starting a little bit slower but when the pistons are firing, and everybody’s aligned in the right direction, we can catch up pretty quick.”
Time and again, this week, panelists sang the praises of the U.S. Inflation Reduction Act — passed in 2022 — and similar, if scaled-down, policies in other countries, which they said are creating powerful tax incentives for companies to invest in critical mineral supplies and processing plants.
“I want to say this: Give government credit,” Ilan Bahar, co-head of BMO Capital Markets’ Global Metals & Mining Group, said in a panel discussion titled “Peaks and valleys in mineral sector financing” on March 6. “Policy has driven the supply side, but we’ve also seen government step in, both in Canada and the U.S. with funds as well, which is great.”
As recently as a year ago, Bahar said the average mining executive, banker or investor would have been “very skeptical” that governments would pass such supportive policies.
Michael Faralla, head of Global Mining Investment Banking at TD Securities, said investments are only starting to materialize, and cited Quebec as a leader in Canada, but predicted Ontario and other parts of the country, along with the U.S., would soon see critical mineral ecosystems emerge.
“The good news is it’s happening,” said Faralla. “I’ll use Quebec as an example, in terms of what they’re trying to do with battery metals and an EV (electric vehicle) hub in Bécancour … The support they provided for domestic producers and (how it’s) attracting investments from OEMs (original equipment manufacturers), and other battery component manufacturers has been very positive.”
The good news is it's happening
Michael Faralla, head of Global Mining Investment Banking, TD Securities
The port city of Bécancour is undergoing something of a renaissance, as General Motors Co. and South Korea’s POSCO Chemical build a $500-million cathode production facility while Germany’s BASF SE builds a second cathode facility of similar scale. In addition, there are several other proposed projects connected to critical minerals and clean energy in the city.
To be sure, all three investment bankers hedged their comments and noted there is more work to be done in various areas of policy.
Bahar said that while mining companies are receiving new attention from investors, obtaining permits to actually build and operate mines and other facilities remains a lengthy process.
Last week, Ontario Premier Doug Ford proposed amendments to the Mining Act that would streamline the permitting process for new mines and to mine from waste rock.
“On the permitting, side, I think the sector will believe it when it sees it,” said Bahar.
Faralla said he thinks western countries have been slow to recognize that nuclear power needs to be part of the energy mix to meet net-zero emissions goals, but is hopeful that’s beginning to change.
There were also starkly opposing viewpoints, such as those espoused by Robert Friedland, co-executive chairman of Ivanhoe Mines Ltd., which is developing copper and platinum mines in Africa. Friedland, who spoke at the conference on March 5, said Chinese capital would be dearly missed by many mining companies.
On the other hand, Ken Hoffman, head of Battery Raw Materials at consulting firm McKinsey & Co., who also spoke on March 5 in the first of four keynotes, said the Inflation Reduction Act could end up pumping US$1 trillion into the battery value chain.
Navdeep Bains, vice-chair of Global Investment Banking at the Canadian Imperial Bank of of Commerce and former Minister of Science, Innovation and Industry, said on March 6 that the size of the incentives contained in the Inflation Reduction Act are difficult to estimate. He predicted government incentives would help unlock US$1.7 trillion in investments.
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“I barely get my head around a billion dollars, that’s a big number,” Bains said.
But like others, he said erecting a critical minerals supply chain in North America in time to meet net-zero ambitions will likely require streamlining the permitting process, and predicted that would be the next area of policy overhaul in Canada.
“It’s not happening as fast as it should,” said Bain.
• Email: gfriedman@postmedia.com | Twitter: GabeFriedz
