Canada’s Natural Resources and the Ignorance of Canadian Politicians

by Maj (ret'd) CORNELIU. CHISU, CD, PMSC, FEC, CET, P. Eng. Former Member of Parliament Pickering-Scarborough East As the geopolitical situation in the world is rapidly deteriorating, it seems that Canadian politicians do not have any ideas on how to position Canada as a strong nation for the future. Instead they quarrel in their respective ivory towers about how to make the climate conform with their desired phantasmagoric and beyond common sense ideas. No vision for the future of Canada has been expressed even remotely. They seem eager only to attack each other over verbiage without content. Unfortunately, they are the bad actors of today, playing with the future of Canada. Instead of looking at the blessings of this great country of Canada - the largest treasure of natural resources - which are there to be put in the service our people, they find numerous excuses to block their use. They do this by a complete ignorance of science, under the influence of dark ages-like theories fomented by the World Economic Forum. In the meantime, nations with more knowledgeable and responsible leaders are doing everything they can for the benefit of their people. Ranging from the acquisition of a rare earths stockpile from a mine in the Northwest Territories to the purchasing of stakes in Canadian mines Solaris Resources and First Quantum, a recent flury of Chinese investment in Canadian mining projects has rightly sparked questions and concerns. In the past three years, many Western nations including Canada have put out critical minerals strategies to promote friendly sources of supply and mitigate Chinese dominance in the sector. Yet Canada is still falling behind. At the same time, one empathizes with Canadian mines looking to China for investment; they are not finding it anywhere else. Junior and mid-sized mines are starved for capital even as Western politicians proclaim their commitment to the sector by words only, not deeds. Fortunately, there is a solution to the challenge of both reducing dependence on Chinese-controlled exports and boosting Western investment in Canada’s own supply. It is time to establish strategic reserves for critical minerals. The concept has plenty of precedent. While many today may know about the International Energy Agency (IEA) from its efforts to stabilize the fossil fuels market, they may not realize that the organization was originally created in 1974 to mitigate oil supply disruptions. Its members include most of Europe, North America, Japan, Korea, New Zealand, and Australia. Its primary tool for managing oil supplies was the establishment of strategic reserves. IEA members are required, to this day, to hold oil stocks equivalent to at least 90 days of net imports (Canada, as one of a handful of oil exporters in the IEA, requires no such reserve). The utility of those oil reserves was demonstrated in 2022 with the conflict in Ukraine that disrupted global commodity markets, leading to price spikes. A coordinated release amongst IEA members followed, which succeeded in bringing prices down at the pump. A number of forces are currently conspiring to make Western nations collectively establish critical reserves of minerals. First, they play a key role in maintaining technological advantages in many critical and strategical fields. Ironically, Canada’s own production of critical minerals such as copper, nickel, cobalt, and zinc is actually in decline. Second, is the need to enhance Western supply chain independence.The most urgent problem is Chinese dominance in both the mining and processing of many critical minerals. In general, minerals are geographically concentrated, often in politically unstable regions, adding vulnerability to supply chains. The West must find ways to mitigate those risks by producing more of its own supply, diversifying suppliers where that’s not possible, and stockpiling for when all else fails. Canada is an ideal place to look but that means a complete change in political thinking. Third is the inability of mines to attract more investment despite expectations of growing demand. Global capital expenditures in mining peaked in 2013. While investment has risen since the market bottomed in 2017, spending levels are still only two-thirds what they were a decade ago. That figure doesn’t account for inflation and the addition of a billion people, which makes the situation look even more dire. Investors are still scared off by their losses from when the last cycle went bust, as well as a lack of public support for extraction, regulatory burdens, volatility, supply chain risks, long timelines, and other factors. Mining is struggling to compete with other sectors for capital due to incapacity of Western governments to understand science on which Canada bears the flagship. Some countries, such as Japan, already stockpile critical minerals, and commercial reserves exist across the world. The U.S. also has a National Defense Stockpile, but its current value is a rounding error compared to the height of the Cold War, and it is seeking to build it up. Canada does not seem to have any policies in this regards, and is missing in action. Minerals behave very differently in global markets than oil, and they vary from one to another too. It will not be as easy as replicating the system for oil. However, at some level, the concept of a critical minerals reserve should be to establish a floor for commodity prices that is high enough to spur development in Western and other friendly jurisdictions, perhaps in “take-or-pay” types of arrangements. The goal is not just to establish minimum reserves, but to incentivise new production. The question is: is anyone in the Canadian political environment capable of forward thinking? The devil will be in the details and thought will need to go into maximizing the security of supply without needlessly distorting market forces. However, governments should prepare to apply the one thing they have that the market currently lacks; a source of patient capital. There is no doubt that the collective security of the West is put at risk by the current state of the critical minerals market. Investment is not flowing at the rate needed to ensure balanced markets in the coming decade. Canadian foreign policy has been lacklustre of late. One area where we are still looked upon to lead—and retain some ability to do so—is in natural resources. Coming up with solutions to the problem of critical minerals supply that leverages the collective experience of our mining and investment community is an obvious place for Canada to contribute. This seems obvious for rational people, whether Canadian politicials are listening is another issue. Hope somebody wakes up soon to put Canada’s interests first.