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Minister of Natural Resources Jonathan Wilkinson speaks at the Prospectors & Developers Association of Canada (PDAC) in Toronto on March 6, 2023.Nathan Denette/The Canadian Press

Ottawa is considering a major new round of spending on critical minerals that could help Canada become more competitive with the United States, and boost the fortunes of junior miners struggling to raise funds after the federal crackdown on Chinese investment.

As part of U.S. President Joe Biden’s US$440-billion Inflation Reduction Act, or IRA, the U.S. Department of Energy last year earmarked US$40-billion in loan guarantees for North American critical minerals companies, with some Canadian miners among the expected recipients.

The U.S. Department of Defence is also considering funding dozens of early-stage feasibility studies for Canadian critical minerals companies that could run in the hundreds of millions of dollars. The Biden administration also started offering U.S. consumers rebates of up to US$7,500 on electric cars built using predominantly North America-sourced critical minerals.

While the Canadian federal government has recently drastically increased its spending on critical minerals, the amounts pale in comparison. Ottawa in last year’s federal budget committed to spending $3.8-billion over eight years.

In a presentation at the Prospectors & Developers Association of Canada conference on Tuesday, federal Natural Resources Minister Jonathan Wilkinson said Canada needs to catch up to the big-spending United States in funding the critical minerals industry, and he signalled that a new round of spending could be unveiled.

“Canada obviously needs to be thoughtful about ensuring that there is a level playing field,” he said. “We are thinking about responses to the IRA in the context of the upcoming budget.”

The Canadian federal government has already doled out well over a billion dollars as part of its critical minerals funding package unveiled in 2022. The biggest beneficiaries so far have been large foreign-owned multinationals operating in Canada such as Rio Tinto and BHP Group.

In recent months, Ottawa has come under pressure to do more to help junior Canadian miners affected by the ban on new investment from China. Late last year, federal Industry Minister François-Philippe Champagne said Canada would not allow any more investment by foreign state-owned firms into the domestic critical minerals sector, unless there were exceptionally good reasons to do so.

China over the past decade has emerged as a huge threat to Western countries because of its dominance in critical minerals. The Asian superpower also recently interfered in Canada’s democracy, with The Globe and Mail reporting that it attempted to influence the result of two recent federal elections.

The restriction on investment has hurt small Canadian mining companies, which previously leaned on deep-pocketed China, which could uniquely afford to take bets that could take a decade or more to see a return.

In a bid to help smaller companies, Mr. Wilkinson on Tuesday announced $14-million in much-needed funding for junior miners. The recipients were Sherritt International, E3 Lithium, FPX Nickel Corp., Search Minerals, Geomega Resources and Prairie Lithium. All were all identified as having technologies that could prove to be innovative in critical minerals, and all are embarking on pilot studies that could lower the cost of production, and reduce carbon emissions.

Martin Turenne, chief executive officer of FPX Nickel, which received $3.5-million from Ottawa, said in an interview that the company will put the funds toward ramping up production of battery grade nickel.

“Funding of any kind is obviously welcome,” he said. “It’s still a difficult capital markets environment.”

Ottawa also announced further details on critical minerals spending that was earmarked last year. The federal Critical Minerals Technology and Innovation Program will receive $144-million, $79-million will go toward improving geoscience and mapping to help government scientists identify early-stage minerals projects, and $40-million will be directed toward improving Indigenous consultation and regulatory dialogue in northern Canada.

Just this week, the thorny issue of Indigenous consent came to the fore with Ontario’s Neskantaga First Nation alleging it hasn’t been adequately consulted on the Ring of Fire battery metals project. Neskantaga said the operator of the project, Australia’s Ring of Fire Metals, will have to use force if it wants to develop the project.