Canadian government bank has billions to back critical mineral projects

[Ben Graham]

The Canadian Infrastructure Bank, a government lender with C$18 billion ($13 billion) supporting development across Canada, is pivoting from base metals and gold to critical minerals with financing for Torngat Metals’ Strange Lake rare earths project in Quebec.

A C$55 million bridge loan approved in June is likely to be followed by a second loan for as much as C$500 million next year to help build access to the remote C$2 billion capex development, according to the bank’s managing director of trade and transportation investments, Divya Shah.

The bank wants to help feasibility-stage projects develop the country’s 34 listed critical minerals, Shah said in an interview. It’s part of the federal government’s wider push to support mining. That includes the new Major Projects Office and more collaboration among ministries such as Natural Resources and Transport, and agencies such as Export Development Canada, she said.

“We’re excited about this broader opportunity,” Shah said by phone on Friday. “It’s a big strategic economic opportunity for Canada and there’s widespread recognition of that across the Canadian government.”

Dual strategy

The CIB has a dual strategy for critical minerals investments, Shah said. One is working directly with mine developers and investing in their projects while the second is working with various levels of governments as well as Indigenous communities on shared or regional infrastructure that opens up mining regions, she said. Torngat got its loan because it has an advanced project with infrastructure needs, she said.

The bank’s financing may eventually consider equity investments for some projects, the investment manager said. There will be a learning curve as the Crown corporation immerses itself in the financial metrics of critical minerals and helps companies overcome some of the barriers to funding it identified in a new report released on Monday.

These include how debt and equity capital markets for critical minerals mining projects are relatively shallow; the limited familiarity financiers have with critical minerals projects; the difficulty assessing long-term mine profitability due to lack of credible and transparent market prices; the lack of infrastructure to access remote sites; and the perceived high risk of delays for regulatory approvals.

Solutions

Co-investing in infrastructure needed to connect mines and mining regions to transportation and electricity networks is one of the bank’s solutions to the problems outlined in the report.

Another is mitigating the revenue risk of projects by using tools such as contracts for difference, which try to protect mine owners from low metal prices, or other measures like securing offtake agreements.

“There’s a ton of collaboration that is happening in different departments on these issues,” lead author John McNally, the bank’s head of research, said in the same interview. “It’s been pretty clear that this is something that we’re taking pretty seriously.”

Access plans

The bank has three memoranda of understanding with governments in Manitoba, British Columbia and Saguenay in Quebec to study how to improve infrastructure for accessing projects, Shah said. In northern Manitoba there are consultations with Indigenous communities and on learning what kind of alignment of roads, ports, airports and rail opportunities will be needed to open up the region.

A similar approach is being done in BC’s Golden Triangle near Alaska while CIB is seeing how it can help Saguenay develop an industrial hub for processing ore at the port. The bank has also helped fund early works for small modular reactors at Darlington in Ontario.

“There’s a lot of exploration activity that’s currently happening, but there’s a big difference between exploration activity and operational and production activity,” McNally said. “The goal of any of these solutions, and the goal of reckoning with these risks is to figure out ways to capitalize more on the potential that we have.”