Federal Budget 2022 invests in critical minerals development in Canada

The Government of Canada’s recent budget, Budget 2022: A Plan to Grow Our Economy and Make Life Affordable (Budget 2022), proposed a number of key investments to advance the development of critical mineral mining projects in Canada¹. This bulletin highlights several of these initiatives.

What you need to know

• Budget 2022 announced a new federal Critical Minerals Strategy, with a total of $3.8 billion in proposed funding to support its launch and implementation, and a new critical mineral exploration tax credit.
• The federal government’s proposed investments focus on the development of specified priority critical mineral deposits, while indicating that the government will work closely with Indigenous groups and through existing regulatory processes.
• These investments are also aimed at contributing to the development of Canada’s zero-emissions vehicle value chain, including batteries, permanent magnets and other components.

Critical minerals in Canada

As more economies globally prepare to transition to a low-carbon future, and the global demand for critical minerals increases, the federal government has recognized that Canada is in a unique position to capitalize on this demand due to Canada’s abundance of critical minerals. In Budget 2022, the federal government noted that critical minerals mining projects “come with a unique set of challenges that can often include remote locations, changing prices, and lengthy regulatory processes”. As a result, Budget 2022 proposed investments are aimed at making critical mineral mining projects “less risky”, to encourage the development of such projects and Canada’s broader critical mineral industry.

Canada’s new Critical Minerals Strategy

As part of Budget 2022, the federal government proposed to provide up to $3.8 billion in support over eight years (commencing in 2022-2023) to launch and implement its new Critical Minerals Strategy. A key focus of this strategy is making critical mineral mining projects “a less risky undertaking”, including:

• Up to $1.5 billion over seven years, starting in 2023-24, for infrastructure investments that support the development of the critical minerals supply chains, with a focus on priority critical mineral deposits.
• $79.2 million over five years, starting in 2022-23, for Natural Resources Canada to provide public access to integrated data sets to inform critical mineral exploration and development.
• $144.4 million over five years, starting in 2022-23, to Natural Resources Canada and the Natural Resource Council to support research, development and the deployment of technologies and materials to support critical mineral value chains. These investments aim to make Canada an attractive country for investments to develop these supply chains.
• Investments aimed at facilitating existing regulatory processes, including those applicable to critical minerals projects, such as:
  • $10.6 million over three years, starting in 2024-25, to Natural Resources Canada to renew the Centre of Excellence on Critical Minerals. The Centre works with provincial and territorial governments and other partners to provide direct assistance to help developers navigate regulatory processes and existing support measures; and
  • up to $40 million over eight years, starting in 2022-23, to Crown-Indigenous Relations and Northern Affairs Canada to support Northern regulatory processes.
• $70 million over eight years, starting in 2022-23, to Natural Resources Canada to advance Canada’s global leadership on critical minerals, in particular to meet its responsibilities under the Extractive Sector Transparency Measures Act, and aim to make Canada a trusted partner in the global critical minerals supply chain.

Budget 2022 highlights that these investments will focus on “priority critical mineral deposits” and that the government will work closely with affected Indigenous groups and through existing regulatory processes.

Critical mineral exploration tax credit

In addition to proposed investments described above, Budget 2022 also proposes to introduce a new 30% critical mineral exploration flow-through tax credit for specified mineral exploration expenses incurred in Canada. Only certain expenditures will be eligible, which will be targeted at exploration of nickel, lithium, cobalt, graphite, copper, rare earths elements, vanadium, tellurium, gallium, scandium, titanium, magnesium, zinc, platinum group metals, or uranium deposits. The tax credit would apply to eligible flow-through financings entered into after the date of Budget 2022 and on or before March 31, 2027.

National Benefits-Sharing Framework for Natural Resources

Budget 2022 also proposed to provide $103.4 million over five years, starting in 2022-23, to Natural Resources Canada to develop a National Benefits-Sharing Framework for natural resources and the expansion of the Indigenous Partnership Office and the Indigenous Natural Resource Partnership program. At least $25 million of this proposed funding would be dedicated to early engagement and capacity building to support the participation of Indigenous groups in the Critical Minerals Strategy.

The development of this new benefits-sharing framework was also set out in the Minister of Natural Resources Canada’s mandate letter from December 2021, which identified that the purpose of this framework is “to ensure that First Nations and Métis Nation communities directly benefit from major resource projects in their territories, and that Inuit communities benefit from major resource projects in the Inuit Nunangat”.

Conclusion

Budget 2022 shows that critical mineral exploration and development and its intersection with Indigenous peoples continue to be an area of active government initiative. Subject to approval of Budget 2022, many mining proponents, Indigenous peoples, investors and others will be eagerly watching to see if the launch and implementation of Canada’s Critical Minerals Strategy and other related initiatives, such as the National Benefits-Sharing Framework for natural resources, facilitates the growth of Canada’s critical mineral industry.