From endowment to dependence: Why Canada still ships its future offshore

A mineral supply chain may begin with geology, but it ends with power. On that measure, Canada’s celebrated mineral endowment is failing to translate into strategic advantage. Canada possesses some supply of all 34 minerals identified on our government’s national critical minerals list and rank among the top five global producers of ten of these minerals. This is a base to build upon.

The next step in a mineral supply chain is to identify commercial quantities of minerals that can be extracted economically. Canada has made a start in this regard. Work has started to incentivize the search for critical minerals in Canada in a variety of ways, most notably through the Critical Minerals Exploration Tax Credit. Policymakers have made vague promises around approvals for projects if exploration bears fruit. This remains an open challenge. Promises of material financial support in the form of loans, guarantees, and price floors are, to date, even more uncertain. Ideas mooted without predictable public policy are seen in the market as background noise.

The big challenge remains beyond meaningful public engagement. If one succeeds in mining commercial quantities of critical minerals, where do they go next? Before they can be used in any project for electrification, high technology, defence, or other deployment, they must be refined. The truth here is that minerals extracted in Canada are largely shipped overseas, almost always to China, where they will be refined for sale to end users.

The dependence is not merely overwhelming; it is structural. China alone controls approximately 85% of global rare earth elements’ (REEs) processing capacity, refines 73% of the world’s cobalt, 59% of lithium, and 68% of nickel. For some minerals, the concentration is even more extreme; China processes over 90% of REEs and 91% of natural graphite. Meanwhile, Canada has 56 critical minerals mines but only 26 processing facilities. The gap between extraction and value-added processing is more than a missed opportunity; it is an ongoing transfer or economic rent and strategic control out of the country. Mineralized material shipped offshore entrenches this dependency.

Rising demand for materials increases Canada’s exposure and reliance on foreign processing and supply. Electrification, data centres, artificial intelligence, and defence onshoring all lean directly on processing capacity that Canada does not control. Looking narrowly at electric vehicles, with four anticipated battery plants to be built for electric vehicles, the government is forecasting the need for 15 new mines to supply material to 19 new mid-stream processing facilities. Absent material progress on mines and facilities, Canadian plants will import the inputs to batteries. This looks more like final assembly than an integrated, secure supply chain with robust industrial connections.

The obstacles are well-known, but their interaction is currently underappreciated. Uncertain permitting drives away capital and ultimately inflates capital costs. Energy constraints undermine location selection and increase the cost of project finance. Community opposition thrives in the absence of clear objectives and predictable processes and timelines. The result is not delay, but deterrence. The government is working to move the needle on finance constraints with $300 million in support for facilities under the Strategic Innovation Fund, $500 million under the Ontario Critical Minerals Processing Fund, and work under the Critical Minerals Research, Development, and Demonstration Program. Regulatory tinkering has, so far, been less than inspired.

Even with concerted effort now supporting a handful of new facilities, the urgent need for a broader approach is evident. A project or two does not build systemic capacity, and without systemic capacity, the commercial and national security threats persist unabated.

While Canada is floating ideas, the U.S. is starting to underwrite outcomes. Deals with price floors, stockpiles, and long dated financing priced near treasury rates reflect a recognition that critical minerals are crucial infrastructure, not just commodities. Canada has yet to make that leap.

Canada’s mineral endowment is a gift, not a strategy. Without domestic processing capacity, we are back to being hewers of wood and drawers of water. In a world of industrial policy and geopolitical competition, exporting raw materials while importing strategic dependence is not neutrality — it is a choice to fail.

Sander Grieve, K.C., and Andrew Disipio, Head of the Mining Group, are partners with Bennett Jones LLP in their Toronto office.

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