Mining firms say government needs to do more to drive critical minerals industry

Nearly all (98%) of the 75 mining company leaders surveyed by KPMG said they need more investment, government commitment, and favourable tax policies to support growth of the critical minerals industry.

Critical minerals are central to green and digital products, including solar panels, EV batteries, smartphones, medical devices, and military applications. Canada’s list of 31 critical minerals prioritizes six in particular: lithium, graphite, nickel, cobalt, copper, and rare earth elements.

The federal government in 2022 launched its Critical Minerals Strategy to help drive growth of the industry, pledging nearly $4 billion in that year’s budget. The strategy includes various tax credits and incentives to entice mining firms to focus on critical minerals.

Canada’s vast geography is full of large deposits of various minerals, with companies currently extracting over 60 different minerals. Canada’s historical natural resource economic dependency makes it home to nearly half of the world’s publicly listed mining and mineral exploration companies.

Though the country appears well-poised to take advantage of growing demand for critical minerals to make electric cars, computers, and missiles, Canadian mining leaders say government policy is falling short.

Though 91% of surveyed leaders are optimistic Canada can be a global leader in critical minerals, 98% said the sector requires more investment, government commitment, and favourable tax policies.

“Canada has put its stake in the ground on critical minerals, but it’s clear the industry requires much more support before Canada can be a viable and sustainable global player in the transition to a green economy,” said Heather Cheeseman, national mining leader for KPMG in Canada.

Mining firms said their top challenges are mitigating ESG risks, raising capital, reducing costs, and overcoming regulatory hurdles such as permitting delays.

Decarbonization is a particular challenge the industry faces, with only 23% of respondents saying they have made formal commitments to achieve all scope-related carbon emission reductions by 2050. Scope 1 covers greenhouse gas emissions from sources directly owned by the firm, scope 2 refers to indirect emissions from the production of the energy a firm buys, and scope 3 refers to indirect emissions throughout a firm’s value chain.

“The pace of decarbonization depends on the company’s size, carbon footprint, and resources,” said Cheeseman. “But many in the industry face substantial hurdles to reducing scope 3 emissions in particular. Because Canada has relatively little smelting or refining capacity for most critical minerals, the intermediary minerals Canada produces are shipped to smelters around the world. Until Canada has the capacity to smelt or refine what’s mined here, the miners will be limited in what they can do.”

KPMG’s survey also asked mining leaders about the Critical Mineral Exploration Tax Credit (CMETC), which provides a 30% tax credit to investors in companies exploring 15 of the 31 critical minerals in Canada’s list.

Although three-quarters (76%) of mining firms said the tax credit has helped their company attract capital for mineral exploration, 84% think the process of claiming CMETC is too complicated and has too many conditions.

Mining firms are also concerned the 15% Mineral Exploration Tax Credit, which covers the left-out critical minerals as well as others like gold and silver, may not be renewed in this year’s federal budget.