A subcontractor works on an excavator at the Nouveau Monde Graphite Matawinie Mine site in Saint Michel des Saints, Que.Neal Rockwell/The Globe and Mail
Ottawa will start stockpiling graphite and scandium produced domestically as part of its new $2-billion push to finance critical minerals mines and processing plants in Canada in a bid to challenge Chinese dominance and ease Western anxieties over supply shortfalls.
At the close of the G7 summit of energy ministers held in Toronto last week, the federal government announced it would begin stockpiling as part of a suite of new tools to strengthen Canada’s critical minerals sector, but the specific minerals were not disclosed.
Greg Frame, senior communications adviser for Natural Resources Minister Tim Hodgson, told The Globe and Mail on Wednesday that some of the output from Rio Tinto PLC’s RIO-N scandium plant and Nouveau Monde Graphite Inc.’s NOU-T project will be stockpiled as part of the government’s critical minerals strategy.
China is the dominant player in both graphite, which is widely used in electric car batteries and the defence sector, and scandium, which is used in the aerospace and automotive industries. Canada is making a big push to challenge China, both to satiate domestic demand and to supply the United States, which has no graphite or scandium production.
The government stockpiling will be backed by the new $2-billion critical minerals sovereign fund that was announced in Tuesday’s budget. The fund will also bankroll loans, purchase equity stakes, and agree to price floors and offtake agreements with mining companies. An offtake agreement would see the government buying a certain amount of a mine’s production. A price floor guarantees the company receives a minimum price for the output.
Crucially, the fund will help Canadian critical minerals companies move from the project stage to production.
On Friday, Quebec-based Nouveau Monde Graphite said it had secured a graphite offtake arrangement with the federal government.
Chief executive officer Eric Desaulniers in an interview on Wednesday said that the agreement also includes a price floor and stockpiling arrangement.
The pact is one of the final pieces of the puzzle that allows Nouveau Monde to move forward on the $550-million construction of its Matawinie mine near Montreal.
“It’s good for the government,” Mr. Desaulniers said. “I really believe they will make money out of this instrument, because we’ll share the profits 50-50, and it will also be good for customers, who can be assured that Canada will remain the main supplier of the G7 for graphite.”
Under the price floor, Nouveau Monde is guaranteed to receive at least the current market price of roughly US$1,500 a tonne for its large flake graphite and a minimum of about US$800 a tonne for its fine flake graphite.
In the event that the market price of graphite drops below the agreed floor price, the government would incur the losses, which would both insulate the company and allow it to maintain production. However, if the graphite price rebounds, Nouveau Monde would have to reimburse the government for those losses, and any profits over and above that would be equally split between Ottawa and the company, Mr. Desaulniers said.
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Ottawa retains the right to stockpile Nouveau Monde’s graphite for strategic defence reasons, but also has the option of selling the stored graphite into the market to book profits in a bull market.
Nouveau Monde plans to start construction in the first quarter of next year and be in production in mid-2028. In 2024, it received a $35.6-million equity investment from the Canada Growth Fund and provisional financing of up to US$430-million from Export Development Canada, as well as a similar letter of intent from the Canada Infrastructure Bank. The mine is permitted and the company has reached agreements with First Nations.
“We’re ready to go,” Mr. Desaulniers said.
Anglo-Australian mining company Rio Tinto PLC is another beneficiary of Ottawa’s new offtake and stockpiling initiative. On Friday, Rio announced that Ottawa through the Canada Growth Fund is making a $25-million royalty investment in the company’s scandium plant in Sorel-Tracy, Que., and committing to an offtake agreement. The facility is already in production.
Scandium is used in the manufacturing of high-performance aluminum alloys, and solid oxide fuel cells, which are used for generating electricity. Rio’s plant is the only one in North America.
As part of the arrangement, the government agreed to stockpile scandium from the plant. The price terms have not been disclosed.
The Rio plant could eventually produce about nine tonnes of scandium oxide a year, up from its current three-tonne level, and eventually account for about 20 per cent of the global market.