Inside Canada's Mining Boom — And What It Could Mean For China
Canada’s subsoil is among the world’s 10 richest in graphite, lithium and cobalt. Only China can say the same. A report from Quebec, home to North America’s biggest graphite mine project.
QUEBEC CITY －Even in late spring, Quebec skies can be surprising. Once past the Saint-Michel-des-Saints sign, huge snowflakes begin to fall.
“We know how to entertain!” says Julie Paquet, Vice-President of Communications and ESG Strategy at Nouveau Monde Graphite. The mining company has set up shop in the heart of a rural village of 2,500 inhabitants, a hotspot for snowmobile enthusiasts.
The village is abuzz with activity, but this time it’s not because of tourists in search of northern adventure: it’s the mine that’s bringing the crowds. “We’re doing a lot of tours at the moment. There’s been a lot of interest in graphite in the last months,” says Julie Paquet.
The spherical graphite that the company is starting to produce is used in the anode of lithium-ion batteries, those put in electric vehicles. “We talk a lot about the cathode, with cobalt or nickel. But graphite makes up 95% of the anode. It’s essential,” adds Paquet.
A long timeline for mining operations
It’s already time to climb into the pickup truck and head for the mine. The turns follow one another on the lunar-like road: the total surface area of the Saint-Michel-des-Saints operation is 21 square kilometers, slightly less than half the size of Lyon, France. “Some of the roads have just been built. We’re making progress, little by little,” says Kevin Ducharme, environmental coordinator for the company. For now, the mine is in the demonstration phase: it produces samples sent to investors to show them what the region’s subsoil holds.
The deposit promises 103,000 tons of graphite concentrate over 25 years. “The challenge for the industry is that battery production plants can be built and start operating within 18 to 24 months. Mines take longer. We need to speed up the development of mining projects if we want to be able to supply the fast-growing market,” says Paquet. Between the discovery of a deposit and the start of mining operations, it can take more than five years.
Like the whole country, Nouveau Monde Graphite is racing against time not to miss the boat of the growing demand of battery materials. It can boast of holding strategic reserves. For lithium, for which the demand is expected to increase sixfold by 2030 according to the International Energy Agency, it ranks sixth in the world behind Chile, Australia and China. Some one hundred exploration projects are underway in Quebec alone.
It also features in the global top 10 for graphite, nickel and cobalt. “Batteries are made of four or five minerals, and most of them can be produced in Canada in sufficient quantities. Volkswagen is coming here; the brand will build its first North American battery factory in Ontario, and Mercedes is positioning itself too. There’s a fair deal of interest,” says Philippe Pourreaux, mining sector transaction leader at PwC Canada.
Exploration is going well, but when it comes to production, the country is only at the foot of the mountain. Only one lithium mine is currently fully exploited. There are no refineries to process the raw material. For graphite, there is also only one mine, in Quebec. But there’s nothing to worry about, says Pourreaux. “In addition to strategic reserves, another side of Canada appeals to investors: the proximity to the sales market. The main export destination will be the United States, a huge market for electric vehicles, which is going to need these minerals enormously if they want production to match consumer needs," he says.
"It’s only a matter of time before Canada becomes a major player in the sector ... but it mustn’t drag on," he says. “The main challenge is going to be to provide a production chain that integrates all stages of battery production. But the country can do it.”
Mined lithium and graphite from Canada.
Taking advantage of the windfall
In 2035, sales of gasoline-powered vehicles will be banned in Canada. The government is sparing no expense to boost electric vehicles. To attract Volkswagen to the province of Ontario, the government has promised subsidies aligned with the US Inflation Reduction Act, to the tune of €12 billion.
“It’s very expensive indeed. Canada is showing that it really wants to control more stages in the production chain,” says Pourreaux. To sweeten the pill, Justin Trudeau claims that the agreement will bring in €138 billion for the country over the next decade.
There’s an opportunity for Canada
Canadian companies have one other lucky break: they will benefit from Joe Biden’s economic choices. “By 2027, 80% of the minerals in U.S. batteries will have to come from countries with which the U.S. have a free-trade deal. That’s good for Canada,” says Pourreaux. To continue attracting foreign manufacturers, Ottawa will have to reassure them, at the risk of seeing big names threaten to jump ship, like Stellantis this month, which was disappointed by the lack of public support.
Breaking free from the Chinese grip
According to Julie Paquet, the first phase of graphite processing is not the most complex. “The extraction and concentration phase of the ore involves drilling and crushing first and foremost. Then, using flotation cells, the graphite, which is hydrophobic, will come loose.” She plunges her hand into a crate filled with light silvery foam. Shiny graphite dust flies out. “The real challenge is the second transformation. For the moment, it’s really China that controls the market. Our main task now is to make sure that we don’t export our raw material, that we can do the valued-added transformation here. I’m hopeful, because customers are demanding high environmental standards. Less developed countries can’t do it.”
China currently controls 80% of critical minerals refining. Ottawa says it wants to break away from any dependence on Beijing, and Trudeau says he wants to reduce China’s share of critical minerals. “There are places like China and Russia, suppliers of these (strategic) metals, that are less and less reliable. There’s an opportunity for Canada to supply the resources we all need to transition to a carbon-neutral world,” he argued at the COP biodiversity conference in Montreal, Quebec in 2022.
Tensions with populations are growing.
In addition to having to call on Chinese expertise for mineral processing, the Prime Minister is well aware that he remains highly dependent on Chinese investment in the sector, even though Ottawa has restricted foreign participation in strategic minerals. Over the last 10 years, China has acquired or invested in more than 90 Canadian mining-related companies, according to Bloomberg.
The Whabouchi mine site in the Nemaska, James Bay region in Northern Quebec on Oct. 20, 2022.
Too cold and too far
Canada’s resources look promising. But the challenges of exploiting them are considerable. The problems are listed in a study by a House of Commons committee: extraction sites are far away, extreme temperatures limit their potential, environmental regulations can hold back investors and each exploration site close to Indigenous territory will require consultation. “There’s a mining boom and more and more requests for exploration rights. As a result, tensions with populations are growing. Mining projects are better accepted in remote places, but there are more and more populated areas,” explains Pierre-Olivier Pineau, Chair of Energy Sector Management at the HEC business school in Montreal.
For mining investments to be profitable, critical mineral prices must not collapse. Otherwise, the benefits expected by Ottawa could be revised downwards. While lithium prices have sharply risen in the past two years, they have fallen by 20% since January, according to the Benchmark Mineral Intelligence firm. “There is volatility. Prices should stabilize around 2030, when exploration projects are developed. Lithium went from 10,000 to 70,000 a ton in two years. Now, with the reserves we’re discovering, it’s around $40,000,” says Philippe Pourreaux.
The country is also facing a labor shortage, which may be holding back investors. Walking through the Nouveau Monde Graphite mine, several signs indicate that the company is hiring. “We’re always looking for people," says Paquet. “You must like working far from major urban centers, so it’s not always easy to find someone.” In the next decade, a quarter of the workforce employed in the mines will retire. One of the industry’s many challenges will be to recruit young rough diamonds to extract these rare minerals.
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