As Canada builds its battery metals industry, can it compete with the world’s behemoths?

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Canada’s battery metals sector is showing signs of life, but impediments remain to this country gaining meaningful global market share in an industry dominated by China.

Over the past few months, Canada has landed its first electric-car battery plant, and a new deep-pocketed owner has taken possession of Ontario’s Ring of Fire mining assets, which the province is hoping will supply battery-grade nickel. The federal government delivered another potential boost to the battery sector when it said in its 2022 budget that it is prepared to spend $3.8-billion to fund the critical minerals industry over the next eight years.

Despite these developments, Canada lacks much of the infrastructure it would need in order to compete with the world’s battery behemoths. Some of the metals central to the battery industry, such as nickel, are already mined in large quantities here. But other battery metals, such as cobalt and lithium, are produced domestically in much smaller amounts, or not at all. And this country currently doesn’t have any refineries capable of processing mined metals into the refined product the industry requires.

A series of planned investments by governments and mining companies could address some of Canada’s shortcomings and give it a foothold in the global battery metals trade. But, in the notoriously risky mining industry, success is far from guaranteed.

Two battery metals projects received government funding commitments in March. First, the federal and Quebec governments announced they would provide an undisclosed amount of money to General Motors Co. GM-N and South Korea’s POSCO Chemical Co. Ltd. for the construction of a $400-million battery parts plant in Bécancour, Que.

Later in the month, Ottawa and the Ontario government committed hundreds of millions of dollars to an effort by automaker Stellantis NV STLA-N and South Korea’s LG Energy Solution to build what will be Canada’s first zero-emissions vehicle (ZEV) battery plant in Windsor, Ont.

The federal government has said it is investing in battery minerals because a consumer shift to battery-powered ZEVs is essential if the country is to meet its long-term promise to achieve net-zero carbon emissions by 2050.

Quebec is by far the Canadian province with the most developed battery metals industry. Privately held Nemaska Lithium is developing a lithium mine and processing plant in Bécancour, which it hopes to have in production in 2025.

Nemaska’s path to production hasn’t been easy. A publicly traded iteration of the company was forced to seek creditor protection in 2019 amid gargantuan cost overruns. Common shareholders were wiped out, including the Quebec government, which lost $80-million.

During Nemaska’s restructuring, a British private equity firm, Pallinghurst Group, acquired the company. By the time the mine and processing plant in Bécancour are completed, Pallinghurst will have invested about $1-billion in Nemaska 2.0. (Quebec is putting in another $95-million of its own.)

Pallinghurst is under no illusions about the huge amount of time, patience and capital needed to be successful in the battery metals industry.

“There are many investors who say, ‘Let’s invest in battery materials and we’ll get a fantastic return. It’s a one-way bet and we will be in production in a couple of years,’” Arne Frandsen, Pallinghurst’s co-chief executive, said in an interview last year. “It doesn’t work like that. To build a mine, infrastructure and a processing plant will take three, four years. There’s no way around it. And if you try to take shortcuts it’s going to come and bite you.”

As Quebec inches closer to making its lithium aspirations a reality, Ontario is far behind. But there are several projects in the works that could move the needle.

Avalon Advanced Materials Inc. AVL-T, a Toronto-based lithium development company, recently announced plans, alongside India’s Essar Group, to build a lithium refinery in Thunder Bay at a cost of $500-million. The project is contingent on the companies securing both funding and mined lithium for the plant.

There are currently no lithium mines in Ontario, but several exploration companies, including Avalon itself, have projects in development. Avalon is in discussions with both the federal and Ontario governments over funding for the refinery. “Getting some support from the government will make it that much easier for us to access other capital to get everything going,” said Don Bubar, Avalon’s CEO.

Over the very long term, Ontario is betting on the elusive Ring of Fire minerals project. Despite mountains of hype over the past 15 years, the project, located in the boggy James Bay Lowlands in the province’s Far North, has never been developed. The single biggest line item related to critical minerals in the federal budget is $1.5-billion for infrastructure to support new mines. Some observers believe that money will go to the Ring of Fire.

“The first thing that comes to mind is the Ring of Fire,” said Pierre Gratton, president of the Mining Association of Canada. “It’s an area that has so much potential.”

Lack of infrastructure is a major reason the Ring of Fire hasn’t yet been developed. Located 550 kilometres northeast of Thunder Bay, the project is cut off from power, roads and rail.

Australia’s Wyloo Metals Pty Ltd. recently acquired Noront Resources, a Canadian junior miner that tried and failed to develop the Ring of Fire region. Unlike Noront, which was running out of cash, Wyloo is extremely well funded. The company has financial backing from Australian billionaire Andrew Forrest, founder and chairman of iron ore behemoth Fortescue Metals Group.

Wyloo hopes to build a nickel mine called Eagle’s Nest in the Ring of Fire. The company is also looking at building a plant in Ontario that would refine the nickel produced at the mine for the battery metals industry.

But Wyloo’s entire business plan is contingent on the company obtaining massive amounts of public funding for infrastructure. At the top of the list is a request for the provincial and federal governments to build an all-season road connecting the mining camp to the provincial highway network some 300 kilometres to the south. The price tag would be at least $1.6-billion.

The Globe and Mail reported last year that Ottawa has made it clear it is open to funding the road construction alongside the Ontario government, which has pledged $1-billion. To date, neither level of government has actually followed through with the funding.

Luca Giacovazzi, Wyloo’s CEO, is optimistic that Ottawa will eventually step up.

“In our conversations with them, they understand how important the Ring of Fire is,” Mr. Giacovazzi said. “We’re supportive and happy to see that the federal government has actually set aside so much funding for critical minerals projects.”

Amid all the uncertainty, Mr. Giacovazzi acknowledged that his company has a huge amount of work ahead of it, such as updating an out-of-date feasibility study on Eagle’s Nest. And the Ring of Fire must undergo multiple environmental studies, including two Indigenous-led assessments that will examine the impact of the road.

Greg Rickford, Ontario’s Minister of Northern Development, Mines, Natural Resources and Forestry, said he’s hopeful those studies will be finished in two years. Another assessment, ordered by the federal Environment Ministry, will look at the impact development would have on the entire Ring of Fire region. The study is still in the very early stages, and the federal government has not said how long it will take.

When asked to predict when the road and nickel mine might finally be built, Mr. Giacovazzi was unable to give even a rough estimate. But he made it clear that Noront’s previous estimate of 2026 was no longer reliable.

Brazil’s Vale Ltd., owner of major nickel mines in Ontario and Newfoundland and Labrador, is considering building a nickel sulphate plant in Quebec that would refine nickel for ZEVs. Vale has been in discussions with the Quebec government for funding, but so far has not moved forward with the project. The company declined to make a representative available for an interview, but in an e-mailed statement its spokesperson, Jeff Lewis, said Vale continues to assess all funding options.

When it comes to cobalt, another key battery input, Canada, like much of the Western world, is a bit player. While Anglo-Swiss mining giant Glencore PLC produces small amounts of the metal in Canada as a byproduct of nickel mining, 70 per cent of global cobalt production takes place in the Democratic Republic of Congo (DRC). Known for corruption, political instability and loose environmental regulation, the DRC was recently ranked by the Fraser Institute, a Canadian think tank, as the third worst mining jurisdiction in the world.

There has been a push globally to find alternative sources of cobalt supply and refining capacity. Electra Battery Minerals (formerly First Cobalt Corp.) plans to reopen a previously shuttered refinery near the town of North Cobalt, Ont., late this year, which it says will process cobalt from the DRC. The company hopes to produce about 6,500 tonnes of battery-grade cobalt a year.

With Canada still in the early stages of trying to establish itself in the battery industry, the global market is not standing still. There is no guarantee that by the time ZEV projects are finally built in this country the goalposts won’t have shifted in the interim. Technologies for electric car batteries are evolving fast. While market-leading lithium ion batteries still use both cobalt and nickel, some newer battery technologies, including lithium iron phosphate (LFP) batteries, do not use either mineral. LFP technology, which Tesla Inc. uses in some of its Model 3s, has been gaining market share.

“A shift towards LFP batteries is potentially the biggest risk to nickel and cobalt demand,” Bank of America Securities wrote in a recent research report to clients.

Bank of America also said that even newer battery prototypes that do not use nickel or cobalt, including sodium-ion batteries, could hurt the demand for both metals.

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