Canada invests $1.9B to kickstart critical minerals

What happened: Canada announced almost $1.9 billion in funding for critical minerals and mining at a G7 energy and environment meeting in Toronto.

The deals include partnerships with allied countries to build out domestic supply chains and reduce China’s dominance in the sector.

The details: The funding includes 26 projects across rare earths, graphite and other critical minerals and draws on existing pools of capital like the Canada Infrastructure Bank and Export Development Canada.

Notably, the deals include offtake agreements, price floors, and an “equity-like” royalty investment by the Canada Growth Fund to buy scandium from Rio Tinto.

The federal government also invoked the Defence Production Act to stockpile three minerals.

The context: Instruments like offtake agreements and price floors give companies the certainty they need to move forward with large, capital intensive projects. Particularly in critical minerals where prices can fluctuate in global markets.

More niche materials also benefit from these tools because, while they’re a critical component in some applications, they’re only used in very small amounts. Securing demand can help make these projects economically viable.

CGF’s investment also signals a willingness to take more equity positions in the industry in order to accelerate. The U.S. has used this to take ownership stakes in Lithium Americas, Electra Battery Materials, and others.

Why it matters: Critical minerals like graphite and rare earths are key to both clean-energy and defence supply chains. However, China dominates the sector and has imposed export controls in the past to limit access.

This new funding could help get Canada’s industry off the ground, providing guaranteed buyers to unlock investments. It also goes beyond just extraction and also invests in several value-added midstream processing projects.

Yes, but: Supply needs demand, and Canada’s EV value chain has faced a number of setbacks and plant closures. Government offtakes are a much-needed tool for the near-term, but commercial buyers are needed for long-term success.

The bottom line: Canada’s mineral funding is both industrial strategy and geopolitical positioning. If Canada can convert this funding into operational mines and plants, it may finally turn its mineral potential into climate leverage.

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