Torys on defence: securing Canada’s critical minerals supply chain

Canada released its first Defence Industrial Strategy (the Strategy), which outlines Canada’s commitment to develop a strong defence industrial base and, thereby, boost economic growth. Central to this effort will be securing a reliable supply chain of defence-related critical minerals, which will necessitate a whole-of-government approach to supporting critical mineral development. In this bulletin, we examine the details of this pillar, building on our previous coverage of the Strategy’s core elements.

Pillar IV: securing supply chains for key inputs and goods

Pillar IV of the Strategy acknowledges that a robust domestic defence sector depends on complex supply chains, including a reliable supply of critical minerals. In order to strengthen such domestic supply chains, the Strategy lays out the following priorities:

• The new Defence Investment Agency (DIA), along with the Department of National Defence, has established the Canadian Defence Industry Resilience (CDIR) program. The new CDIR will provide support to Canadian businesses to increase their production capacity for defence-related goods, equipment, services, and materials. The initial area of focus will be on supporting Canadian businesses to expand their defence-production capacity for ammunition and explosives, including materials.
• The Canadian Government will take steps to secure the domestic supply of certain critical raw materials—notably, steel, aluminum, and critical minerals, which are vital to the defence supply chain. Domestic sourcing of such raw materials will be a central part of the DIA’s procurement process.

Critical minerals

According to the Strategy, by the second quarter of 2026, the Canadian Government will publish its plan to expand production, processing, stockpiling, and procurement of defence-related critical minerals, while supporting coordinated action with various allies, including through the G7 Critical Minerals Production Alliance and NATO. The Strategy does make note that of the 12 “defence-critical raw materials” identified by NATO, Canada produces 10, namely, aluminum, gallium, germanium, graphite, and tungsten.

Steel and aluminum

The Strategy states that the Canadian Government is committed to helping steel and aluminum producers “pivot and retool” to manufacture the grades and products required by Canada’s defence sector. This aligns with the Canadian Government’s Policy on Prioritizing Canadian Materials in Federal Procurements announced in December 2025, which mandates the use of Canadian steel, aluminum, and wood products in federal defence procurements valued at $25 million or more.

Securing Canada’s critical minerals

The inclusion of the critical minerals supply chain as part of the Strategy is further evidence of the commitment by all levels of government in Canada to supporting domestic critical mineral development. These initiatives include the following:

• The Canadian Critical Minerals Strategy¹ and recently published Progress Update² thereto, which lays out the Canadian Government’s three main priorities with respect to critical minerals: (i) promoting the domestic production and processing of critical minerals in strategic areas; (ii) protecting Canada’s sovereignty and economic resilience by safeguarding critical mineral value chains; and (iii) partnering with Indigenous groups, domestic stakeholders, and international allies to develop critical minerals.
• Several measures announced in the 2025 budget, including (i) a $1.5 billion Critical Minerals Infrastructure Fund to support strategic mining and infrastructure projects that will strengthen Canada’s critical mineral value chains; and (ii) a $2 billion Critical Minerals Sovereign Fund to make strategic investments in critical mineral projects and companies through equity investments, debt instruments, and offtake agreements.
• The official designation in October 2025 of certain critical minerals to be stockpiled by the Canadian Government pursuant to the Defence Production Act in order to safeguard against possible shortages.

In recent months, we’ve also seen a number of critical mineral investments by public investment vehicles, such as Canada Growth Fund’s investment of up to US$85 million in the Thompson Nickel Complex in Manitoba and a C$156 million investment in Foran Mining for the construction of the McIlvenna Bay copper-zinc mine in Saskatchewan.

The creation of the Major Projects Office (MPO) in August 2025 is also part of the Canadian Government’s wider strategy to encourage the development of particular projects that are in Canada’s national interest. To date, five critical mineral projects have been referred to the MPO for further consideration (Foran Mining’s McIlvenna Bay Copper project in Saskatchewan, Newmont & Imperial Metals’ Red Chris mine expansion in BC, Canada, Nickel’s Crawford project in Ontario, Nouveau Monde Graphite’s Matawinie project in Québec, and Northcliff Resources’ Sisson project in New Brunswick). However, none have yet been designated a project of national interest.

Next steps

In the coming months, we anticipate that the Government of Canada will release additional guidance and follow-up measures, including legislation establishing the DIA as a standalone entity, reforms to the Industrial and Technological Benefits (ITB) Policy to ensure procurements benefit Canada’s defence industrial base, and a framework for identifying and onboarding Canadian strategic industry partners, among others. Defence sector participants, mining companies, and investors should closely monitor these developments as Canada intensifies its focus on sovereign capability and its defence industrial base, especially as it relates to expanding production, stockpiling, and processing of defence-critical minerals.

In the coming weeks, the Torys Defence team will release additional analysis detailing the Strategy’s impact across multiple sectors, including procurement, mining, infrastructure, and life sciences, with additional considerations for investors and other stakeholders.