From smartphones and computer monitors to cardiac implants, MRI machines, and batteries, minerals are ubiquitous in our modern lifestyle. Their demand continues to get exponentially bigger with electric vehicles, ICT, and clean technology, driving the future.
However, most extraction, processing, and refining of these minerals are concentrated in a few countries. This concentration poses significant risks to global supply chains. An overreliance on a few sources for critical minerals makes the supply chain vulnerable, especially during times of geopolitical instability, underscoring the need for more diversified and secure sources.
This is where initiatives like Ontario’s Critical Mineral Strategy are pivotal to developing a robust mineral sector, to help create more secure and resilient global supply chains, while also tapping into economic opportunities.
What is Ontario’s Critical Mineral Strategy
The Ontario Critical Minerals Strategy is a 5-year plan designed to establish the province as a trusted global producer of responsibly sourced critical minerals. This strategy aligns with other significant government plans like Driving Prosperity: The Future of Ontario’s Automotive Sector and the Made-in-Ontario Environment Plan. Together, these initiatives aim to expand advanced manufacturing supply chains and foster sustainable economic growth opportunities in the province.
Critical Minerals in Ontario
Ontario is a treasure trove of minerals, attracting miners and investors for many years. Its rich natural resources position it as a key player in the critical minerals market. The province’s mining industry is already generating over $10 billion annually and supporting 75,000 jobs, including a significant number in Indigenous communities.
A critical mineral, though not defined the same way everywhere, is generally understood as a mineral that is very important for certain industries, technologies, or strategic uses and is hard to replace. The criteria for minerals on Ontario’s critical minerals list include:
- exploration and/or potential for development
- strategic importance to the economy
- application in end-uses for technologies that support the transition to a low-carbon economy
- global market demand
Ontario’s Critical Minerals: Source
By the close of 2021, Ontario boasted over 300,000 active mining claims in good standing. The province was a hub of activity, with more than 200 companies engaged in mineral exploration, including the search for critical minerals. At present, there are about 130 early-stage exploration projects specifically targeting critical minerals in Ontario, along with 16 projects that have reached a more advanced stage. This activity reinforces Ontario’s status as a top choice for exploration companies. In the year 2020 alone, these companies invested a total of $206 million in exploring critical minerals within the province.
Pillars of Ontario’s Critical Mineral Industry
The effectiveness of Ontario’s Critical Minerals Strategy hinges on the cooperative efforts of the government, industry, Indigenous peoples, local communities, and various stakeholders. The government’s strategy contains six priorities:
- Enhancing geoscience information and supporting critical minerals exploration
- Growing domestic processing and creating resilient local supply chains
- Improving the regulatory framework to make the mining industry more globally
- Investing in innovation, research and development
- Building economic development opportunities with Indigenous partners
- Growing labour supply and developing a skilled labour force
Accompanying the strategy is a notable allocation of funds. To support prospectors and junior mining companies in discovering new mineral deposits in Ontario, the highly effective Junior Exploration Program will receive a substantial infusion of $24 million, distributed over a three-year period. Included in this investment is $12 million specifically earmarked for what the province has designated as a critical minerals funding initiative.
Ontario Advantages for Critical Minerals Growth
Ontario’s potential to become a premier critical minerals supplier is grounded in a combination of geographic, economic, social, and environmental factors:
- Geographical Advantage: Ontario’s vast mineral wealth in the north, coupled with a world-class manufacturing sector in the south, provides a unique opportunity. This geographic positioning allows for the creation of a vertically integrated, made-in-Ontario supply chain that can efficiently serve industries like electric vehicles and battery storage.
- Environmental and Social Standards: Ontario’s products are known for being sourced and manufactured in a jurisdiction with a clean electricity grid and high environmental standards. The province’s commitment to human rights and providing competitive wages for workers enhances its reputation in global markets.
- Commitment to Indigenous Collaboration: The province maintains a strong commitment to working collaboratively with Indigenous peoples, particularly in critical infrastructure and community benefit projects. This includes robust consultation processes for mineral development, ensuring respect for Indigenous rights.
- Favourable Business Climate: Ontario’s business-friendly environment and tax regime make it an attractive destination for investment and development.
- Skilled Workforce and Innovation: The province boasts world-class talent and a proven track record for innovation, which are critical for advancing in the competitive field of critical minerals.
- Responsible Regulatory Framework: Ontario is evolving its regulatory framework to be more socially and environmentally responsible, further strengthening its position as a reliable and ethical supplier.
Startup Opportunities in Critical Minerals in Ontario
Supply Chain Management: In this rapidly evolving sector, there are ample opportunities for startups to innovate in supply chain management. With the growing demand for critical minerals, efficient and sustainable supply chain solutions are essential. Startups could develop technologies or services to optimize logistics, ensure responsible sourcing, and improve transparency and traceability in the mineral supply chain.
Manufacturing: There’s also significant potential in manufacturing, especially in processing raw minerals into usable forms or creating components for the critical minerals industry. Startups can focus on developing new processing technologies that are more efficient or environmentally friendly. With Ontario’s integrated supply chain, there’s an opportunity for startups to contribute to the province’s manufacturing capabilities, particularly in areas like electric vehicle components and battery technology.
Ontario’s Government funding in critical minerals
- Deduction of Provincial/Territorial Mining Taxes and Royalties: Taxes and royalties on mineral resource income are fully deductible for corporate income tax.
- Flow-Through Shares (FTSs): FTSs allow companies to transfer certain expenses, such as mineral exploration or development, to shareholders which can reduce their taxable income.
- Mineral Exploration Tax Credit (METC): 15% credit to help exploration companies raise equity funds and an extended FTS investment tax deduction until March 31, 2024.
- Accelerated Capital Cost Allowance: Businesses can write off 100% of the cost of machinery used in specified clean energy generation/ conservation equipment.
- Canadian Exploration Expense (CEE): Expenses incurred when determining the existence, location, extent, or quality of a mineral resource in Canada are 100% deductible in the same year.
- Canadian Development Expense (CDE): Expenses such as sinking or excavating a mine shaft, and pre-production mine development expenses after 2017, are deductible at a 30% declining balance
- Northern Energy Advantage Program (NEAP): Mining companies in Northern Ontario can enjoy competitive, stable and predictable electricity price rates through this program.
- Ontario Junior Exploration Program: This program helps with the early financing of junior mining companies.
- Northern Ontario Heritage Fund Corporation: Mining companies can get financial assistance from this fund.
- Clean Tech Tax Credit: A 30% refundable credit on eligible clean tech equipment costs, available from 2023 to 2032/2034.
- Canada Growth Fund: Targets risk mitigation in natural resources and critical supply chains using tools like concessional loans. Its goal is to draw private capital for the net-zero economy, focusing on critical minerals development.
- Loss Provisions: Acknowledging the mining industry’s volatility, Canada allows net capital losses to be carried back three years or forward indefinitely, and non-capital losses to be carried back three years or forward for 20 years.
- Critical Minerals Innovation Fund (CMIF): The Critical Minerals Innovation Fund (CMIF) provides funding to projects that help strengthen Ontario’s critical minerals sector.
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