Canada’s Critical Minerals Strategy: Lithium, Nickel, Graphite and the Chinese Divestment Orders

Canada has the minerals, the mining expertise and the political will to supply the West’s batteries, but the gap between policy announcements and tonnes produced is where the strategy will be judged. Since 2022 the federal government has used foreign-investment law, tax credits, direct equity, offtake guarantees and a new fast-track permitting office to pull lithium, graphite, nickel, copper and rare-earth projects towards production, while trying to exclude Chinese capital from the supply chain it is building. This article examines the divestment orders that set the tone, the Ring of Fire and its unresolved Indigenous questions, Nouveau Monde Graphite’s financing as the first real test of the model, Vale’s nickel assets, Québec’s lithium ambitions, the 2025 G7 plan and the price slump that overshadows all of it. It is part of the Canada Company Stories hub.

What were the 2022 divestment orders and why did they matter?

The divestment orders were Canada’s first use of national-security powers against portfolio-sized investments in junior miners, and they signalled that the government intended to police the ownership of exploration companies, not just producing mines. On 28 October 2022 Industry Minister François-Philippe Champagne announced a policy under which investments by foreign state-owned or state-influenced enterprises in Canadian critical-minerals companies would be approved only on an exceptional basis. Five days later, on 2 November, he ordered Sinomine (Hong Kong) Rare Metals Resources to sell its stake in Power Metals, Chengze Lithium International to sell its stake in Lithium Chile and Zangge Mining Investment (Chengdu) to sell its stake in Ultra Lithium.

The targets were deliberately small. Each of the three Canadian companies was a TSX Venture explorer with early-stage lithium projects, two of them outside Canada, and the Chinese stakes were minority positions bought in ordinary private placements. The point was not the value at risk but the precedent: any Chinese investor, state-owned or not, now had to assume that a Canadian lithium, nickel, graphite or rare-earth company was off limits, and any Canadian junior had to assume that Chinese money came with a divestment risk. The orders followed a multi-step national-security review and were accompanied by a statement that the government would act decisively when investments threatened national security and critical-minerals supply chains.

The effect on capital markets was immediate and lasting. Chinese strategic investors, who had been the most active buyers of Canadian lithium and rare-earth assets in the previous decade, withdrew from new placements; several juniors with Chinese shareholders restructured or saw financings fail; and the TSXV’s critical-minerals cohort became dependent on Canadian flow-through money, Western strategic partners and government funds. The approach was subsequently formalised in amendments to the Investment Canada Act that gave the minister wider powers to review investments in prescribed sectors, and it has been maintained through the partial thaw in Canada-China relations that followed Mark Carney’s meeting with Xi Jinping in October 2025 and the January 2026 agreement to cut tariffs on Canadian canola oil and Chinese electric vehicles.

How is the Canadian Critical Minerals Strategy funded?

The strategy published on 9 December 2022 was backed by nearly C$4 billion from the federal budget of that year and identified six priority minerals, lithium, graphite, nickel, cobalt, copper and rare-earth elements, out of a list of 31 that Canada considers critical. The money was split among a C$1.5 billion infrastructure envelope for roads, power and rail serving priority deposits, a C$1.5 billion critical-minerals stream within the Strategic Innovation Fund for processing, manufacturing and recycling, geoscience and research programmes, and the Critical Mineral Exploration Tax Credit, a 30 per cent credit for flow-through investors in eligible exploration that doubled the standard 15 per cent Mineral Exploration Tax Credit.

The November 2025 budget added a second layer. It confirmed that the 15 per cent credit would run to 31 March 2027 after technically lapsing in March 2025, widened the 30 per cent critical-minerals credit to twelve further minerals, including tungsten, tin, manganese, niobium, molybdenum, germanium and indium, and created two new funds through Natural Resources Canada: a Critical Minerals Sovereign Fund, reported at C$2 billion over five years, to take direct strategic stakes in projects and companies, and a First and Last Mile Fund to carry near-term upstream and midstream projects through to production. The flow-through mechanism that these credits amplify is explained in the article on Barrick, Agnico Eagle and Toronto’s mining capital.

A third set of instruments operates through Crown financing bodies. The Canada Growth Fund, a C$15 billion vehicle managed by the Public Sector Pension Investment Board, can provide equity, contracts for difference and offtake guarantees; the Canada Infrastructure Bank finances mine-related power and roads; and Export Development Canada manages the Canada Critical Minerals Accelerator launched in 2026. The first accelerator transaction, announced on 7 July 2026, combines up to C$400 million of equity-like investment from the Growth Fund with federal offtake rights in a Teck project worth up to C$850 million to double germanium and antimony capacity and add gallium at the Trail smelter in British Columbia, a direct response to China’s export controls on those metals. Teck’s wider transformation is covered in the article on Teck, Glencore and the Anglo American merger.

Why is the Ring of Fire still undeveloped after nearly twenty years?

The Ring of Fire is a crescent of mineralisation in the James Bay Lowlands about 540 kilometres northeast of Thunder Bay, discovered in 2007, that holds the largest chromite deposits in North America as well as high-grade nickel, copper and platinum-group metals, and it remains undeveloped because it has no road, no agreed Indigenous consent framework and no demonstrated economics at current prices. Noront Resources announced the first significant discovery on 28 August 2007; a staking rush followed; and for a decade the province of Ontario and successive federal governments promised development that did not arrive.

The current owner of the main deposits is Wyloo, the private company of Australian iron-ore billionaire Andrew Forrest, which outbid BHP for Noront in 2021 at C$0.70 a share and completed the purchase of the northern assets in March 2022 for about C$617 million. Wyloo’s Eagle’s Nest project is a high-grade nickel-copper-PGM deposit designed as a small-footprint underground mine with all tailings returned underground, and the company has said it hopes to begin construction in 2027 and production around 2030; it has awarded more than C$100 million of contracts to Indigenous-owned businesses and announced a downstream battery-materials plant in Sudbury in 2024. Chromite, the region’s largest resource, has no near-term development plan because the world market is dominated by South African and Kazakh supply and Chinese ferrochrome smelting.

Access is the binding constraint. Estimates for the three all-season roads needed, led by Marten Falls and Webequie First Nations with the Northern Road Link between them, run to C$1.1 to 1.6 billion, and in September 2025 Ontario funded only the first five kilometres. The province’s Bill 5, which received royal assent on 5 June 2025 and allows the government to designate special economic zones exempt from provincial laws, was aimed squarely at the Ring of Fire and provoked the Mushkegowuk Council to declare the area protected homeland, nine First Nations to seek a court injunction and Marten Falls to file for C$300 million in compensation over historic hydro projects; Neskantaga First Nation, under the longest boil-water advisory in Canadian history, has built a settlement on the proposed Northern Road Link route to block it. The federal Building Canada Act of June 2025 and the Major Projects Office that followed can accelerate approvals, but neither can manufacture consent, and no Ring of Fire project had been designated a national-interest project at the time of writing.

Is Nouveau Monde Graphite the model for how Canadian projects get built?

Nouveau Monde Graphite’s Matawinie mine in Québec is the first new Canadian battery-materials project to reach a financed construction decision under the current policy framework, and the way it got there shows what the model actually requires. NMG, founded by geologist Eric Desaulniers, spent a decade advancing a flake-graphite deposit at Saint-Michel-des-Saints, north of Montréal, with a plan to produce about 100,000 tonnes a year of concentrate and convert it into anode material at Bécancour, the province’s designated battery-chemicals hub. Early anchor customers were Panasonic Energy and General Motors, which signed offtake and investment agreements in 2024 together with the Japanese trading house Mitsui and the mining investor Pallinghurst.

The financing that closed in 2026 was built around the state. The Government of Canada signed long-term take-or-pay agreements for 30,000 tonnes a year of Matawinie flake graphite, under which NMG markets the volumes, shares upside above a fixed price and Canada may store product, effectively a strategic stockpile that guarantees revenue. On the back of that, NMG completed a C$427 million equity package, including a C$295 million private placement that closed on 15 May 2026 with Italy’s Eni as a new strategic investor, secured a US$335 million debt commitment, confirmed the final investment decision in May 2026 and poured first concrete in July. Québec amended the mine’s decree in August 2026 to authorise 106,000 tonnes of annual production. NMG ended June with C$461 million of cash, C$33 million spent and C$167 million committed on construction, and structural steel scheduled for early 2027.

The second phase is harder. The 13,000-tonne-a-year Bécancour anode plant, with a capital estimate of C$374 million, was targeting its own investment decision in the second half of 2026, with Panasonic indicating a possible equity investment at that point and Eni signing a letter of intent for 15,000 tonnes of concentrate or equivalent anode material. Desaulniers has argued that supply-chain security has become the customer’s priority rather than price alone, which is the premise on which every Western graphite project depends, since Chinese synthetic and natural anode material sells far below any North American cost of production. If Bécancour reaches FID, Canada will have its first integrated mine-to-anode chain; if it does not, Matawinie becomes a concentrate exporter with a government stockpile as its main customer.

What is happening to Canadian nickel and Vale Base Metals?

Canada’s nickel industry is concentrated in three districts that all belong to Vale Base Metals, the Toronto-run subsidiary of Brazil’s Vale: Sudbury in Ontario, Thompson in Manitoba and Voisey’s Bay in Labrador with its Long Harbour refinery in Newfoundland. Vale inherited the assets when it bought Inco in 2006, and in July 2023 it sold 10 per cent of the base-metals business to Manara Minerals, the joint venture of Saudi Arabia’s Public Investment Fund and Ma’aden, and 3 per cent to the activist investor Engine No. 1, in a transaction that valued the unit at about US$26 billion and installed former Anglo American chief Mark Cutifani as chairman of an independent board.

The strategic problem is Indonesia. Chinese-financed nickel-pig-iron and high-pressure-acid-leach plants in Sulawesi have taken Indonesia’s share of world nickel supply to well over half and pushed the London Metal Exchange price down to levels at which most Canadian and Australian sulphide mines barely cover their costs. Vale Base Metals has responded with a review of its portfolio that has reportedly included exploring a sale of the Thompson operations, deferral of expansion decisions and a focus on Sudbury’s copper and precious-metal by-products, while continuing to position Voisey’s Bay underground ore as among the lowest-carbon nickel available to Western battery makers. The Canadian government’s hope that Sudbury would anchor a domestic nickel-sulphate and precursor chain, feeding the battery plants described in the article on Canada’s EV battery plants, has not yet produced a committed project.

The policy response has been to classify nickel from allied countries as a strategic good. The G7’s work on standards-based markets, which would distinguish responsibly produced metal from Indonesian material through traceability and environmental criteria, is in large part an attempt to create a price premium for exactly the Canadian, Australian and Finnish nickel that is losing money at the LME price. Whether buyers will pay it is unproven, and the slowdown in North American electric-vehicle sales after the removal of US purchase incentives in 2025 has weakened demand for high-nickel chemistries just as the policy arrived.

Can Québec become a lithium province?

Québec has the best-positioned hard-rock lithium assets in Canada and the most aggressive provincial industrial policy, and it is still struggling to make the economics work at current prices. North American Lithium at La Corne in the Abitibi region, restarted in 2023 by Sayona Mining and Piedmont Lithium after two previous owners failed, is the only producing lithium mine in the country; its owners merged in 2025 to form Elevra Lithium, and the operation has spent most of its life shipping spodumene concentrate into a falling market. Further north, the James Bay region holds a cluster of deposits, including Nemaska Lithium’s Whabouchi project, half-owned by Rio Tinto since its purchase of Arcadium in 2025 alongside Investissement Québec, Winsome’s Adina and Patriot Battery Metals’ Shaakichiuwaanaan, which rank among the largest undeveloped hard-rock lithium resources in the Americas.

The provincial government’s instrument is Investissement Québec, which has taken direct stakes in Nemaska Lithium and other projects, funded the Bécancour industrial park where Ford, GM-POSCO, Nouveau Monde and others planned cathode and anode plants, and offered cheap hydroelectricity as a decarbonisation advantage. Several of those downstream plants were paused or cancelled in 2024 and 2025 as the EV market slowed, and the Northvolt battery-cell project outside Montréal collapsed with its Swedish parent, leaving the province’s mine-to-battery vision partly built. Québec’s clean-power position is examined in the article on Hydro-Québec and Canada’s clean electricity.

Price is the determinant. Lithium carbonate in China traded at about CNY 102,350 a tonne on 20 October 2026, up 38 per cent from a year earlier but down almost 24 per cent in a single month and roughly a sixth of the peak near CNY 600,000 reached in late 2022. At those levels the Australian spodumene producers that set the marginal cost are curtailing, Chinese lepidolite mines are intermittently idled by the authorities, and a new Canadian hard-rock mine with a long haul to port needs either a long-term floor-price contract or state equity to be financed. The pattern is the same as graphite: projects that reach construction do so because a government or an automaker has agreed to carry price risk.

What did the G7 agree at Kananaskis and what followed?

The G7 Critical Minerals Action Plan adopted at Kananaskis, Alberta, on 17 June 2025 committed the seven economies to diversify responsible production and supply, to encourage investment and local value creation, to promote processing, recycling and substitution research, and to deepen cooperation with mineral-rich developing countries through initiatives such as the Minerals Security Partnership and the World Bank’s RISE programme. Its most concrete element was an instruction to ministers to develop a roadmap for standards-based markets, with traceability as a minimum criterion, before the end of 2025, so that metal produced to high environmental and labour standards could be distinguished and, in time, priced differently from metal that is not.

Canada used its presidency to move from principles to projects. In the months after the summit the government promoted a production alliance among G7 partners intended to match Canadian deposits with allied financing and offtake, and the Major Projects Office, created on 29 August 2025 under former TransAlta chief executive Dawn Farrell and based in Calgary, was given the task of shepherding designated projects through a single federal approval. The office’s first national-interest designation, in October 2026, was a pipeline rather than a mine, which drew criticism from the mining industry but reflected where the political priority lay; the energy politics are described in the article on the Alberta-Ottawa energy dispute.

The United States is the essential partner and an unreliable one. American demand for Canadian nickel, cobalt, graphite and uranium is the commercial basis for most of the policy, and the Defense Production Act funding, Export-Import Bank letters and Department of Energy loans that have supported Canadian projects give Washington a share in the outcome. But the 2025 tariffs, the review of the trade agreement described in the article on the CUSMA review of 2026 and the rollback of US electric-vehicle incentives have made American offtake harder to bank. Canada’s answer has been to cultivate Japan, South Korea and Europe as alternative customers, which is why Panasonic, Mitsui and Eni appear in the Matawinie financing and why the India uranium contract mattered to Cameco, whose own story is told in the article on Cameco and the nuclear revival.

Why have prices undermined the strategy?

Every element of Canada’s critical-minerals programme was designed in 2022, when lithium, nickel, cobalt and graphite were at or near record prices, and every element has since had to operate in a market where those prices have fallen by half to five-sixths. Lithium carbonate’s collapse from around CNY 600,000 a tonne in late 2022 to roughly CNY 100,000 in October 2026 is the sharpest, but nickel’s slide under Indonesian supply, cobalt’s dependence on Congolese export quotas and the persistent discount of natural graphite to Chinese synthetic anode material have all narrowed the window for Western projects. China’s own policy of expanding processing capacity regardless of margin has turned the midstream into a loss-making business for anyone without state support.

The result is that Canadian policy has become a price-support mechanism as much as a development programme. Take-or-pay contracts, stockpiles, sovereign equity and floor-price guarantees are ways of carrying price risk that private investors will no longer carry, and the Sovereign Fund’s C$2 billion is explicitly a tool for taking stakes where the market will not. That is defensible as industrial strategy if the premise is that allied buyers will eventually pay a premium for traceable, low-carbon supply, and indefensible if they will not. The G7’s standards-based-markets roadmap is the attempt to make the premise true by regulation.

Demand is the other half. North American electric-vehicle sales slowed in 2025 after US incentives were withdrawn and tariffs raised costs, several Canadian battery and cathode projects were paused or cancelled, and the automakers that were to anchor the supply chain have delayed their own targets. Canada’s EV-mandate timetable has been softened in response. Stationary storage, defence applications and the data-centre power boom have replaced EVs as the demand story in investor presentations, and they are real, but they do not absorb lithium and graphite at the volumes the 2022 strategy assumed.

What can founders and investors learn from Canada’s critical minerals push?

The first lesson is that security of supply is a buyer’s preference only until the price gap gets large enough. Western automakers signed Canadian offtake agreements enthusiastically in 2022 and 2023 and have been quietly renegotiating or walking away from them since Chinese material became dramatically cheaper. A founder building a business on the premise that customers will pay for provenance should get the premium written into a contract with a floor, as Nouveau Monde did with the federal government, rather than assume it.

The second is that permitting and consent are the real critical path. Money has flowed into Canadian critical minerals for four years; the projects that have moved are those with settled land-rights questions, existing infrastructure and provincial support, such as Matawinie and Trail, and those that have not are those where any of the three is missing, above all the Ring of Fire. Investors should discount a project’s timeline for Indigenous consent and road access before discounting it for metallurgy.

The third is about state capital. Government funds, Crown financing agencies and sovereign stakes are now part of every Canadian project’s capital structure, which lowers the cost of capital but adds political obligations, domestic-processing conditions and foreign-ownership restrictions that outlast the money. The divestment orders of 2022 show that the state can also subtract capital, and that a shareholder register with the wrong names on it is a liability.

The fourth is for policymakers. Four years of strategy have produced a well-designed toolkit and a thin pipeline of financed projects, and the gap is explained by prices that Ottawa does not control and by a permitting and consent system that it has only begun to reform. The next phase of the policy will be judged on tonnes rather than announcements, and the comparison with Australia, whose own critical-minerals programme faces the same Chinese price competition and is examined in the Australia Company Stories hub, will be instructive.

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