Canada’s rare earth sector held back by investment deterrents: Experts

A recent Canada-China trade deal marks a modest improvement in relations but does little to address China's dominance in the rare earth elements (REEs) market, according to a new analysis by researchers Julio Mejía and Elmira Aliakbari. Both researchers work for the Fraser Institute, a pro-market think tank.

The authors report that China produces nearly 70% of global REEs, with output estimated at 245,000 tonnes in 2024. Beijing has tightened export controls on these critical minerals, exposing vulnerabilities in global supply chains for electronics, electric vehicles, and military equipment.

Mejía and Aliakbari highlight that Canada possesses significant REE deposits, estimated at 13 million tonnes in 2024. However, they argue that Canada has yet to capitalize on this potential due to policy uncertainties deterring investment in mining exploration and production.

The researchers cite a recent survey of mining investors that illustrates these challenges. Yukon, home to rich REE reserves, ranks 8th globally for mineral endowment but 40th out of 82 jurisdictions for policy environment. The survey reveals that 76% of respondents view uncertainty about protected areas as a deterrent to investment in Yukon.

Similar issues plague other provinces. Manitoba ranks 9th for geological potential but 43rd for investment-attracting policies. British Columbia, despite ranking 4th globally for mineral endowment, falls to 32nd in policy attractiveness.

"Establishing more predictable and competitive rules is essential to unlocking mining potential across Canada," the authors state. They emphasize the urgency of addressing these challenges, noting that global demand for REEs and other critical minerals is expected to double by 2040.

Mejía and Aliakbari conclude that while the recent trade deal with China may ease some tensions, it does not resolve the underlying vulnerability created by China's control over REE supply. They argue that for Canada to emerge as a reliable global supplier of rare-earth elements, it must create a more favorable investment climate for the mining sector.

As the global race for critical minerals intensifies, the researchers suggest that Canada's ability to balance environmental concerns, indigenous rights, and economic development will determine its future role in the REE market.